Leasing Unpermitted Units is Perfect Recipe for Landlords Who Like Insomnia

North 7th Street v. Guillermo Constante, L.A. Appellate Division Superior Court, 1/4/17

In this unlawful detainer case, the trial court granted tenant’s summary judgment against landlord. In everyday language — the trial judge threw the landlord’s eviction action out of court! The tenancy was based on an oral agreement, but the unit was built without permits and landlord never obtained a certificate of occupancy. When the tenant stopped paying rent, the landlord served a three-day notice to pay rent or quit.

Held: Trial court’s grant of summary judgment in favor of tenant upheld. An unlawful detainer is an expedited action (technically called a “special proceeding”) to recover possession and is a creature of statute. To invoke California’s unlawful detainer law, its requirements must be strictly followed. Without permits or certificates of occupancy, the lease was void and the landlord was not entitled to collect rent. The landlord’s three day notice to pay rent or quit – which claimed about $700 – was defective and could not support an unlawful detainer action in the first place.

The appellate department dismissed landlord’s reliance on Gruzen v. Henry (1978) 84 Cal.App.3d 515 (Gruzen), which posed basically the same issue, but with a different result. In Gruzen, the Court of Appeal upheld the trial court’s judgment in favor of landlord for possession, but reversed the award of damages for unpaid rent. It is difficult to square these two cases. The Gruzen court basically acknowledged that a lease for a unit without an occupancy permit is void. But it proceeded to uphold the judgment for possession because the notice to pay rent or quit was only $18 more than the amount due under the (admittedly void) lease. A missing step in the logic tree. In North 7th Street, the court used a different reference point – The amount of rent due was $0 and any amount over that can’t be justified. Gruzen didn’t consider or discuss that issue, and as North 7th Street points out, cases are not authority for propositions they don’t consider.

The tenant is probably thinking about seeking restitution of past rent that was paid for the unpermitted unit over the life of the “lease.”

For further information, please contact Ruzicka, Wallace & Coughlin, LLP at (949) 748-3600; website: www.rwclegal.com.

The law firm of Ruzicka, Wallace & Coughlin, LLP represents landlords, property management companies, institutional and private lenders, employers and insurance companies throughout the State of California in real estate, business and employment litigation. The information provided herein is for general interest only and should not be relied upon or construed as legal advice.

© 2017 Ruzicka, Wallace & Coughlin, LLP.

January 4, 2017 | Landlord-Tenant Law |