April 2019 Q&A

1. Question: How many protected classes are there in California?

Answer: In addition to the seven federal protected classes (race, color, religion, national origin, sex, familial status and disability) California has thirteen protected classes, some of which are unique to California. They are: marital status, age, ancestry, sexual orientation, source of income, medical condition, gender, gender identity, gender expression, genetic information, citizenship, immigration status and primary language spoken. California also prohibits discrimination based on the perception that someone is from a protected class or is associated with someone from a protected class. Finally, it prohibits discrimination on any arbitrary basis.

2. Question: What is a request for a reasonable accommodation?

Answer: A reasonable accommodation is a change or exception to the property’s rules, policies, practices or services that is necessary to afford a person with a disability full and equal use and enjoyment of the rental property.

3. Question: What are some examples of a reasonable accommodation?

Answer: Common examples are allowing a resident to have an assistive animal, reserving a special parking space for a resident, allowing a resident who needs to move due to a disability to terminate a lease without further obligation for rent, or modifying a rent due date to coincide with the receipt of disability payments.

4. Question: What is a request for a reasonable modification?

Answer: A reasonable modification is a physical change to the apartment or the common areas that is necessary to afford a resident with a disability full and equal use and enjoyment of the rental property.

5. Question: Who pays for a reasonable modification?

Answer: Modifications are usually at the resident’s expense unless the property receives federal financial assistance in which case the landlord must make and pay for the modifications. The other exception is that if a newer property (built for first occupancy 3/13/91 or later) wasn’t built in compliance with accessibility laws in place at the time of construction, the landlord must pay to make it accessible.

6. Question: What is an assistive animal?

Answer: According to HUD, an assistive animal “is an animal that works, provides assistance or performs tasks for the benefit of a person with a disability, or provides emotional support that alleviates one or more identified symptoms or effects of a person’s disability. Assistive animals perform many disability-related functions, including but not limited to, guiding individuals who are blind or have low vision, alerting individuals who are deaf or hard of hearing to sounds, providing protection or rescue assistance, pulling a wheelchair, fetching items, alerting persons to impending seizures or providing emotional support to persons with disabilities who have a disability-related need for such support.”

7. Question: Can I require a tenant pay a deposit for their assistive animal?

Answer: No. It is unlawful to condition the granting of a reasonable accommodation, such as allowing a resident to have an assistive animal, on that person paying a fee or deposit. However, the resident can still be held liable for any damage to the unit above ordinary wear and tear that is caused by the animal and those damages can be taken out of the regular security deposit that the resident paid for the unit.

8. Question: A tenant wants to move in with a companion dog. Our property only allows cats as pets. Can I tell the tenant to get a companion cat instead?

Answer: No. You cannot apply pet restrictions to assistive animals. An assistive animal is not a pet. You must allow the tenant to get the type of assistive animal that best meets his/her disability-related needs.

9. Question: I just received a Notice of Filing of Discrimination Complaint from the California Department of Fair Employment and Housing. What do I do?

Answer: You only have 20 days to respond to a fair housing complaint from either HUD or the DFEH. If you do not respond to the complaint in that time frame the agency will proceed with the case without your input which could result in a finding of discrimination against you. You should contact our office right away and also notify your insurance company of the complaint.

10. Question: Someone told me that a guest of a resident can file a fair housing complaint, is that true?

Answer: Yes. Guests have standing to bring a fair housing complaint or lawsuit if the guest receives discriminatory treatment while visiting a resident at your property. A common example would be refusing to allow a guest to bring his assistive animal with him when he visits your resident at the property.

11. Question: An applicant came into my office and is clearly pregnant. Do I count the baby to determine whether her household meets our occupancy standards?

Answer: No. You should not count the baby until it is born. You should also have a reasonable policy about what happens when the addition of a minor to the household during the tenancy puts the household over occupancy. A suggested policy would be that the household gets to stay through the end of their lease or a certain number of months, whichever is longer. We recommend that the number be a minimum of six months, but you may want to consider a longer period of time in order to help ensure that an enforcing agency would find the time period to be reasonable.

12. Question: What is the difference between ADA and fair housing laws? Does the ADA apply to my property?

Answer: The ADA (Americans With Disabilities Act) applies only to places of public accommodation. Fair housing laws apply to private residential rental housing (and housing sales). Only the areas of your property that are open for the public to come and do business with you are covered by the ADA, such as your rental office and future resident parking. The other areas of your property, such as the rental units, common areas and amenities are covered by fair housing laws. There are some substantial differences between the ADA and fair housing laws, so if you are unsure about which laws apply and what your responsibilities are, you should contact our office.

This article is for general information purposes only. These legal alerts are provided on selected topics and should not be relied upon as a complete report of all new changes of local, state, and federal laws affecting property owners and managers. Laws may have changed since this article was published. Before acting, be sure to receive legal advice.

© 2019 Kimball, Tirey and St. John LLP

Jobs Rebound - Give Markets Fresh Confidence

Reading Time: 4 minutes

Investors cheered the jobs news on Friday morning as March employment activity bounced back from a sour February performance, according to the monthly federal report. The news that employers created 196,000 net new jobs in March beat expectations and gives markets that had wavered a fresh indicator that job creation hasn’t lost all momentum.

The strong showing contrasts with just 20,000 net new jobs in February, although that number was revised up to 33,000 on Friday, which is still far below expectations. Those disappointing February results prompted some analysts to wonder if the now decade-long expansion in the labor markets was drawing to a close. March results suggest that’s not true just yet.

The national unemployment rates remains at 3.8%, on par with expectations. The good news in March was possible thanks to 49,000 new workers in health care, professional and technical services gains of 34,000 and restaurants and food service adding 27,000. Construction rose by 16,000 jobs, but manufacturing saw 6,000 jobs lost in March.

Wage growth was less impressive. Wages increased just 0.14% in March and is now up 3.2% over the last 12 months. Analysts expected year-over-year wage growth to hit 3.4%.

The results released Friday give new hope for continued economic growth. The Atlanta Fed is now projecting first quarter GDP to rise 2.1%, after much smaller estimates a few weeks ago.

Fed officials continue to keep a close eye on jobs as they weigh monetary policy moves. The Fed has paused its rate hikes as it awaits more economic data. Some had speculated after the disappointing jobs report in February that the Fed may be forced to reduce rates later this year. However, the good report Friday likely puts those concerns on hold. Investors will now watch other key indicators to see how long the Fed holds rates steady. No changes are predicted in the coming months, unless economic data shifts drastically.

Ten-Year Treasury yields leveled off around 2.5% in early trading Friday. Treasury’s traded off this week after bottoming out a 2.35% last Friday, ending March on a downward trend that sent the mortgage market firmly into refinance territory. While Friday’s news will likely calm the rally in bonds in the very near term, don’t expect a real rise in rates anytime soon. The refinance opportunity for many mortgage borrowers that purchased homes last year remains in place while low rates should continue to push the spring buying season into a renewed frenzy.

China trade deal?

Markets are also digesting new developments in the ongoing trade war with China. This week, a delegation from China met with President Trump and discussed a deal that could end the tit-for-tat tariffs that have roiled international trade between the two largest economies.

Trump said he expected to know whether a deal will happen over the next four weeks. A summit between Trump and Chinese President Xi Jinping has been floated but is not likely until a trade agreement has been reached. The two leaders have reportedly made progress in the ongoing talks about a comprehensive trade deal. However, lingering differences on tariffs, technology and other key point of tension still must be resolved.

The stakes are high, and investors are watching closely for developments. Over the last year, the two nations have introduced hundreds of billions of dollars in new tariffs on each other. The results have been problematic for growth in both countries and has spilled over into global markets. A solid trade deal could bring fresh momentum to economic growth, but continued impasse may eventually contribute to global recession.

Housing continues to slow

Home price gains continue to slow down as the overall housing market cool down persists. The S&P CoreLogic Case-Shiller 20-City Composite Home Price Index released this week fell 0.22% month over month in January and increased 3.58% year-over-year, below expectations of 3.8%. Home price appreciation also decelerated for the 10th consecutive month, hitting its lowest level since September 2012. The widespread and accelerating slowdown in housing has caused the S&P CoreLogic Case-Shiller US National Home Price Index to drop below 5% to 4.26% last month.

According to the Case-Shiller report, 14 of the 20 cities that make up the 20-City composite index saw home prices decline month over month. Seattle, Portland, San Diego, Chicago, Minneapolis, Cleveland and Detroit have all declined for 4 consecutive months or more. Denver, Washington and San Francisco have each declined in 5 of the last 6 months. Meanwhile, Dallas was the only city to reach a new all time high.

The slowdown in home prices is attributed to affordability concerns choking off new buyers into the marketplace. Rising property taxes in cities with more pronounced price declines is also a concern.

Still, home prices broadly remain below the highs seen in the 2007 housing crisis, and many cities with lower cost of living and population growth are still seeing home prices increase, even if at a more sustainable pace. Market watchers will be curious to see how lower interest rates, which can help with affordability, will affect the housing market in the spring and summer buying season ahead.

About the Author: Movement Staff

The Market Update is a weekly commentary compiled by a group of Movement Mortgage capital markets analysts with decades of combined expertise in the financial field. Movement's staff helps take complicated economic topics and turn them into a useful, easy to understand analysis to help you make the best decisions for your financial future.

Ten Features That Can Make a Home Sell Faster

Homeowners are spending more to spruce up their homes. They spent an average of $12,361 in discretionary funds on remodeling in 2017—the highest since 2006, according to the latest report by the Harvard University’s Joint Center for Housing Studies.

But which household projects can actually better their chances of selling their home one day?

“Any time a buyer can walk into a house and see it already has the features they want, that’s a huge bonus for the seller,” Anna Maria Mannarino, who runs a design firm in Holmdel, N.J., told realtor.com®. “If buyers feel they need to add key features or designs, they’re going to calculate how much it will cost and then lower their bid.”

Realtor.com®’s research team pinpointed home features that can help sell a home in the fastest time for the best price. They analyzed more than 1 million single-family listings on realtor.com® in February and identified the home features found in homes most often with the highest list prices and that went under contract most quickly.

The 10 most profitable home features for sellers banking on quick sales, according to realtor.com®, are:

  1. Chef’s kitchen/gourmet kitchen

  2. Theater room

  3. Home gym

  4. Three-car garage

  5. Solar panels

  6. Quartz counters

  7. Exterior lighting

  8. Tennis court

  9. Home office

  10. In-ground pool

OK, let's take a closer look at trends that could help you make bank when it comes time to cash in and sell your home.

Kitchen makeovers bring in the dough

Kitchen

Once upon a time (say, when you were growing up), most kitchens were drab, unsexy spaces that folks didn't spend much time in beyond preparing and consuming dinner. But as the open kitchen trend has exploded, they've become centerpieces of the home—way more visible, personalized, luxurious, and important to buyers. Homeowners have upgraded to chef's and gourmet kitchens (No. 1 on our list), making them glamorous showpieces where they can entertain their friends.

These days, trendsetters are choosing dark and moody color palettes, like black and navy, over the more bland white, gray, and neutral shades. They're opening the rooms to the outdoors by installing walls of windows or double doors that open to the yard. And open shelving (versus the classic kitchen cabinets) is gaining more traction.

"Even if you don’t consider yourself a big foodie or a master chef, higher-end kitchens have a huge appeal," says Jamie Novak, a Los Angeles–based professional organizer and author of “Keep This Toss That.” She works with homeowners who are planning to stay put as well as those getting ready to list their properties. "When the appliances are pretty and functional, it’s a win-win.”

Homes with chef's kitchens sell for a median $599,000—more than double the national median of $295,000. Chef's kitchens generally feature an open layout big enough to accommodate plenty of cooks in the kitchen, a large island, a gas cook range built for larger, hotter flames, a Sub-Zero refrigerator and freezer, and multiple sinks and ovens. Popular brands include Viking ovens and ranges, Bosch appliances, and Kohler and Moen faucets and sinks.

The average kitchen overhaul cost $12,300, while major kitchen overhauls usually cost upward of $40,000, according to the Harvard University study.

"People look at a kitchen, and if they don't like it—they'll often pass on the house," says Lori Wellman, owner of Lincoln Cabinet, a Lincoln, NE–based remodeler.

Quartz counters (No. 6) are also in high demand. The engineered variety (a fancy word for enhanced) doesn't chip as easily as the natural kind, doesn't require much upkeep, and is difficult to stain or damage. Plus there are hundreds of colors, patterns, and textures to choose from.

It was the material of choice for home renovators, rising from a 41% market share in 2017 to 48% in 2019, according to Houzz data.

“[Engineered] quartz is a very, very versatile material," says Nino Sitchinava, the site's principal economist. "You can control palettes and colors and textures really, really well."

Specialty rooms: Why go out when you can stay in?

Rooms

Tony Frenzel

Properties with dedicated specialty rooms, like theater rooms (No. 2) and home gyms (No. 3), showed up in only a small percentage of listings (1.5% and 1.1% respectively). And while they're not as popular as they once were, say design experts, homes that come equipped with such rooms sell for about twice as much as the national median of $295,000. They're fun to enjoy, too!

"At the high end there's real cachet in having those specialized spaces," says Jenni Lantz, manager of DesignLens, a design resource for developers, builders, architects, and interior designers. "Of course you need to have the space for them."

Folks without big bank accounts can also create these spaces on a shoestring, DIY budget. Dark basements can become theater rooms, for example, with the addition of an oversize screen, wireless speakers, and a comfy couch. Popcorn makers are a bonus!

Unlike theater rooms and gyms, mudrooms (No. 11) have been gaining in popularity in recent years, say design experts. These small rooms are where coats and dirty shoes are kept are typically located toward the front of homes, and more homeowners are retrofitting them into their abodes. They're becoming more stylish with rustic, wood benches to store those muddy boots under and fancy coat racks.

"Mudrooms are a fantastic transition from an outdoor space to your indoor living [space]," says organizer Novak.

They cost an average $12,000 to install, according to Fixr, a company that connects owners to home-related services.

Home offices (No. 9) have also become increasingly sought-after as more people work remotely or go freelance. The key is natural lighting, perhaps a window view for the desk, and doors that can shut out the clamor of the kids playing in other parts of the home.

Outdoor features are in

The trend today may be all about indoor-outdoor living. But it wasn't beautifully inlaid patios, outdoor kitchens complete with pizza ovens, or trickling fountains that came out on top for outdoor features. That honor went to three-car garages (No. 4).

"Americans love their garages," says Rick Foster, a managing broker and license partner at Engel & Völkers Annapolis, in Maryland.

Buyers aren't just looking for a place to park their cars. "Having extra storage space is a big benefit," adds Foster.

Certainly prestige comes into play—for many, bigger is indeed better.  But unlike some outdoor features, this one is difficult and costly to add after the fact. Buyers want one already in place.

Other popular outdoor features on our list include solar panels (No. 5), tennis courts (No. 8), and in-ground pools (No. 10).

Solar panels are hot (yes, really) thanks to demand from both climate-conscious buyers and those simply hoping to cut down on their electricity bills. Homes with these features sell the fastest of all of the amenities on our list, at a median 51 days. About 2% of homeowners undergoing remodels have been installing them each year from 2015 to 2017, according to Houzz data.

But be warned: They're not cheap. Installing a 5-kilowatt system, the standard system of about 20 panels, costs around $25,000 to $35,000, according to www.solarpowerauthority.com.

“Solar is a very regional preference," says Sitchinava of Houzz. They're particularly appealing in places that get a lot of sunshine but have high AC bills, such as California, Arizona, and Texas. "The long-term payoff is pretty phenomenal.”

Tennis courts are also appealing, but they can set homeowners back more than $50,000, according to Quality Court Industries, a tennis court construction firm that operates throughout the Southeast.

Even having a shared court open to residents of a community can boost property values. The same goes for in-ground pools, which can be private or shared as well.

Built-in pools are polarizing features in some parts of the country—attracting some buyers while repelling others due to maintenance or liability issues. The cardinal rule for this feature: Install it for your own enjoyment first, resale value second.

"They're consistently popular," particularly in warm-weather areas, says design expert Lantz. "People still like to lay out by the pool.”

Smart home features and other electronics can pay off

Smart home technology (No. 14) is a catchy umbrella term people use to describe everything from a few interconnected appliances or internet-controlled thermostats to fully wired homes. The expensive, built-in approach has waned a bit, but the more ad hoc approach is booming, thanks to smart devices that can be used as simple control centers, like Amazon Echo and Google Home.

"The convenience is unparalleled, and the technology is getting so easy to use," says organizer Novak.

Security systems (no. 12), often smart ones integrated with mobile and other devices, are gaining traction as must-have features. Just 10% of homeowners undergoing remodels had a security system installed in 2015, according to Houzz data. By 2017, about 15% did.

Folks used to have to hire a security company to come in, assess the property, and then install a system that could run anywhere from $600 to more than $1,000. And that doesn't include the monthly monitoring fees. Now, homeowners can pick up a simple, smart home security system from companies like Ring for around $150.

"People really like having an app on your phone and knowing if someone's at your home and being able to speak to them," says Craig Grant, CEO of the Real Estate Technology Institute, an online portal where folks can learn about real estate technology.

Classic indoor amenities have lasting appeal—and a new look

Indoor features

Tony Frenzel

Some things never go out of style. Fireplaces remain a highly sought-after amenity, although today's sleek, electronic models don't have much in common with the ashy traditional hearths. These newer fireplaces are often installed right into wall.

"No matter where your home might be, fireplaces are always welcome," says Nancy Fire, the design and trend forecasting expert behind the HGTV HOME brand.

Other timeless features that boost home values are spacious, walk-in closets. Sometimes folks will even tear down an adjacent bedroom to build that massive closet with floor-to-ceiling shoe and accessory walls, a ladder to store and fetch rarely used items, and seating to make it easier for friends and family to share their outfit opinions, says remodeler Wellman.

Walk-in closets, while still popular, aren't as in-demand as they used to be—and the decluttering movement (and its guru Marie Kondo) can partly be blamed.

"If you’re trying to pare down your clothing, then you don’t want a big walk-in closet to fill," says Novak, whose clients prefer smaller, sliding-door closets. "It just becomes a big mess.”

Is Single-Family Real Estate Still a Good Investment?

Most of us in the property management field already know that, despite occasional risks and business challenges, single-family rentals are good investments. But with the market uncertainties that are now appearing, are these still the right assets to have in your portfolio? The sentiment of high-net-worth investors suggests a resounding “yes.” According to a recent survey by financial services company Millennium Trust, a staggering 90% of people are inclined to invest in alternative assets of which real estate is the top choice. 

Single-family rental properties are at the top of real estate and of interest to a whopping 73% of high-net-worth real estate investors, as stated in the Millennium trust study. Some trends believed to be causing the interest (and continued growth) include downsizing baby boomers, as well as millennials choosing to rent longer so they can keep their options open.

What does the future hold? Some experts believe, in the long term, 13 million additional homes will hit the market by the year 2030, adding to already existing 16 million assets. And in a recent US News and World Report article, Quinn Palomino, co-founder and principal at Virtua Partners in San Diego, believes that the near future is bright.

In the article, Palomino states “demand is high, and supply is still constrained, particularly for entry-level housing. We anticipate rent increases will outpace the overall commercial real estate market, landing in the 5 to 7 percent range.” She also believes that single-family rentals will beat the stock market in 2019 due to low rates and low unemployment.

Protect Tenants from Known Discrimination

Federal appellate court determines that a landlord can be liable under the federal Fair Housing Act (“FHA”) for failing to protect a tenant from discrimination when the landlord is on notice that another tenant is targeting the tenant.

An African American individual (“Tenant”) leased an apartment in a multi-unit apartment complex (“Complex”) managed by a property management company (“Manager”). After moving onto the property, another resident (“Harasser”) began directing derogatory comments towards the Tenant, including profanity and racist comments. He also harassed the Tenant in the Complex’s parking lot.

The Tenant called the police about the Harasser’s behavior. The police came to the Complex, interviewed witnesses, and warned the Harasser to stop his behavior. The police also told the Manager about the Harasser’s actions. The Manager did not take any action.

Subsequently, the Tenant filed another complaint with the police about the Harasser and alerted the Manger directly about the alleged harassment. The Manager again did nothing. The Harasser continued his behavior, and the police arrested him for harassment. The Tenant again notified the Manager about the harassment, but nothing was done. The Tenant notified the Manager a third time, but nothing happened and the Harasser was allowed to remain at the Complex until his lease expired. The Harasser later pleaded guilty to harassment and a protective order was entered prohibiting him from contacting the Tenant.

The Tenant filed a lawsuit against the Manager, alleging violations of the FHA, New York’s fair housing laws, and various other causes of action related to the emotional trauma resulting from the harassment. The trial court entered judgment in favor of the Manager on the FHA claims, and the Tenant appealed.

The United States Court of Appeals for the Second Circuit reversed the trial court and ruled that the Manager could have a duty to intervene when it knows of tenant-on-tenant racial harassment. Since this was a novel claim, the court consulted with the U.S. Department of Housing and Urban Development (“HUD”) about its views on a landlord’s potential liability and HUD pointed to its rules, arguing that the court should recognize limited claims against landlords arising from tenant-on-tenant racial harassment.

The court examined the FHA and found that the law supported imposing a duty on landlords to prevent tenant-on-tenant discrimination. First, the court determined that the FHA was not limited to preventing discrimination during the buying or leasing of property- instead, the FHA was intended to end all forms of discrimination that interfered with an individual’s enjoyment of their housing, not just those arising from the sale or lease of property.

Next, court looked at whether the FHA imposed liability on a landlord for failing to prevent tenant-on-tenant discrimination when it is on notice that it is occurring. Only one other federal circuit had considered this issue, but HUD’s rules could impose liability on a housing provider when a third-party is creating a hostile environment for a resident that the housing provider is on notice about but fails to take prompt action.

The court accepted HUD’s interpretation of the FHA in its rules and ruled that a housing provider could be liable for failing to prevent tenant-on-tenant discrimination when it is on notice that the discrimination is occurring. Therefore, the court reversed the trial court and sent the case back to the lower court for further proceedings on whether the Manager had an obligation to stop the tenant-on-tenant discrimination in the Complex.

Read the full decision: Francis v. Kings Park Manor, Inc. (link is external)

March 2019 Q & A

Question: The non-payment of rent notice I served on the tenant has expired. The tenant is now trying to pay the rent, but I do not want to accept payment and would like to return it. How can I return their payment?
Answer: You can return the tenant’s payment by personal delivery or sending it by regular or certified mail, although you are not required to send it by certified mail. It is important to return the payment as soon as possible.

Question: I have an ongoing unlawful detainer against one of my tenant’s but he is continuing to create a disturbance at the property. Is there any way that the unlawful detainer can be expedited?
Answer: Unfortunately, no. However, a restraining order may be available in extreme cases. If the tenant is engaging in a serious or criminal disturbance, call the police.

Question: My tenant was just evicted and the majority of his/her items are still in the unit. Do I need to give him/her another notice to retrieve their belongings?
Answer: If you went through the court eviction process and the Sheriff conducted a lockout, the Sheriff would have notified your tenant of their rights to their personal property.

Question: One of my tenants attempted to tape record our conversation explaining that they have a right to do this for legal purposes. Is that true?
Answer: Your tenant has no legal right to tape record you without your express consent in places that you have an expectation of privacy, such as your business office. Further, surreptitious tape recording – tape recordings without your knowledge – is a misdemeanor under California state law. Contact your attorney if you learn that you have been surreptitiously recorded.

Question: We have a limited number of parking spots in our apartment community
so we decided to limit the parking to residents only. Is this legal?
Answer: Yes, you may restrict parking at your apartment complex to residents only. Make sure you have complied with the requirements of Vehicle Code Section 22658 so that unauthorized vehicles can be towed according to the rules of the code section. Also, be sure that your lease or rules have been appropriately modified so that this policy is enforceable as a condition of tenancy.

Question: One of my tenants has notified me that she has filed for bankruptcy. She has not paid her rent this month. Can I proceed with an eviction?
Answer: Once a tenant files for bankruptcy, he or she will be entitled to an automatic “stay” of any legal proceedings against him or her. This includes an unlawful detainer action. You will be required to file a motion for “relief from stay” before serving any notices or bringing an eviction action.

Question: I have an applicant who wants to bring her cat with her to the apartment. Can I require her to de-claw the cat before bringing it onto my rental property?
Answer: No. California law prohibits a landlord from requiring a resident to have a pet de- clawed or de-vocalized as a condition of occupancy.

Question: I have had numerous problems with residents who smoke tobacco, including complaints from neighbors, damage to the rental unit, etc... Can I institute a policy that my rental property is smoke-free?
Answer: Yes. California law permits a landlord to designate their property as smoke-free. Be sure to seek legal advice if you want to change smoking rules in a unit for an existing tenant protected by just cause or rent control.

Question: May I demand a late charge in a 3-Day Notice to Pay Rent or Quit?
Answer: No. Do not demand any other fees or charges other than the tenant’s past due rent in a 3-Day Notice. For example, do not include utility charges or interest in the notice even if a written lease or rental agreement states you are entitled to these payments. A separate 3-Day Notice for all other fees owed may be served along with the 3-Day Notice to Pay Rent or Quit.

Question: Am I entitled to use a deceased tenant’s security deposit?
Answer: You are entitled to use a deceased tenant’s security deposit to cover unpaid rent, pay for damage beyond normal wear and tear, and to perform necessary cleaning to the unit.

Question: We evicted one of our tenants and obtained a monetary judgment. Now we find that they have moved to Arizona. Can I collect against them since they moved out of state? Answer: If you have a judgment against a former tenant and they move out of state, you can have the judgment recognized by that state as a valid judgment which would allow you to proceed to levy against their bank accounts or garnish their wages in the state they now live.

Question: Can an owner/property manager require that a tenant secure renters insurance? Answer: Yes, to protect the property and assets, landlords can require the tenant obtain renters insurance as a covenant and condition of the lease. Be sure to seek attorney advice for subsidized housing, or if changing the terms of a tenant protected by just cause or rent control.

This article is for general information purposes only. Information contained in this article should not be relied upon as a complete report of all new changes of local, state, and federal laws affecting property owners and managers. Laws may have changed since this article was published.

© 2019 Kimball, Tirey and St. John LLP

New 2018 Laws Affecting Rental Properties

AB 1796 - Electric Vehicle Charging Stations

As electric vehicles become ever more popular, tenants are increasingly demanding charging stations. So, in response to this demand, and looking to the future, AB 1796 was passed. It provides that "any lease executed, extended or renewed after July 1, 2015 a lessor of a dwelling SHALL approve a written request of a lessee to install an electric vehicle charging station" (emphasis added). A tenant must provide the landlord with a complete financial analysis and scope of work regarding the required infrastructure, the tenant pays all costs of install, including permits, construction, damage, maintenance and removal, and must maintain $1M liability policy on the station. Exceptions to this new law are: if parking is not provided as part of the lease, if there are fewer than 5 parking spaces, and if charging stations are already in place for 10% or more of the existing spaces.

Although one would think that the cost of installation would be prohibitive for most, we suspect that Bay Area cities with high-paying tech jobs will feel this impact the most.

AB 1919 - Price Gouging

The wildfires of the past year destroyed thousands of homes, creating ever more demand for rental housing. Unfortunately, there are property owners who make a terrible situation worse by increasing the rent significantly, knowing that desperate families will pay such prices while they rebuild their lives and homes.

In response, when the President, Governor, local official or local governing body declares a state of emergency, it is now a misdemeanor to raise rents more than 10% to an existing or potential tenant for a period of 30 days after such declaration.

We believe this is a start but can envision a scenario where a landlord would simply keep a property vacant, wait for the 30-day period to expire, then increase the rents to the new tenant.

AB 2413 - Right to Call Police

Tenants, like the rest of us, occasionally need the assistance of law enforcement to handle an emergency. Yet some leases contained clauses which punished the tenant for just this scenario.

AB 2413 provides that any provision in a lease that limits or prohibits a tenant's or other persons rights to summon law enforcement is declared void as against public policy and prohibits a landlord from imposing penalties on a tenant who contacts law enforcement for emergency assistance. A tenant may raise this retaliation as an affirmative defense in an eviction proceeding if the landlord files the eviction within 30 days of such a call for assistance.

U.S. Economy Unshaken

Geopolitical tensions have taken center stage this week with multiple incidents affecting the markets.

President Trump visited Vietnam earlier this week to meet with North Korean dictator Kim Jong-Un in an effort to de-escalate nuclear growth in the country. In a move that was a surprise to everyone, Trump did not agree to anything. Instead, Mr. Trump walked away and then canceled a pre-planned agreement signing. President Trump pointed to North Korea’s desire to lift sanctions which he said he would not be willing to do completely, noting North Korea’s lack of desire to play ball.

Meanwhile, U.S. Trade Representative Robert Lighthizer intimated in his testimony to the House Ways and Means committee that there is still a lot of work to be done to reach a trade deal with China. Lighthizer says any agreement would hinge on a lot more than just a promise from China to purchase more U.S. goods.

In addition to that, oil prices surged on Wednesday in reaction to Saudi Arabia generally ignoring a tweet from President Trump saying OPEC needed to ease up on oil production restrictions. According to the Energy Information Administration, U.S. crude stockpiles dropped by 8.6 million barrels last week.

World markets also reacted to a clash between Pakistan and India. Two Pakistani fighter jets shot down two Indian aircraft over Kashmir while India claims airstrikes killed more than 300 terrorists at a training camp. This escalation will be closely watched by the world as this is the highest strain has been between these two countries since their war in 1971.

A CLOSER LOOK AT A SLOWING ECONOMY

The United States economy is still growing but not at the same pace we’ve seen over the last couple of years. Federal Reserve Chairman Jerome Powell confirmed as much this week in his testimony to the Senate Banking Committee. He does expect solid growth, just not as fast as it has been. “The baseline outlook is a good one,” said Powell, adding that the world markets slowing down might end up dragging us down in the process.

While that may send up red flags for some people, and world markets will certainly have an effect in the coming months, you have to take a look at the context of this slowdown in growth. Many analysts are expecting 2 percent growth this year, down from the 3 percent growth estimation for 2018. The chart below shows the US Gross Domestic Product, or GDP, over the last ten years. Currently, the United States is the world’s leading economy with regard to GDP.

It’s important to note that data this week showed the real GDP up by 2.6 percent, well above expectations. Consumer spending was up because of a strong labor market and tax cuts, as reported by the Wall Street Journal. Analysts from Goldman Sachs say private business investments also bolstered these numbers, increasing the odds that 2019’s expected slowdown should be manageable.

The chart below from Bloomberg clearly outlines where we are relative to the recession 10 years ago. The far left side of the chart shows the beginnings of growth after the 2008 recession. The far right shows where we are today. While our economy is slowing, you can see just how strong it still is and how far removed we are from the low of 2008.  The quarterly average over the last 10 years is 2.1 percent. There is nothing wrong with moderate growth rates. This means now is not a time to panic, rather it’s a time to potentially take advantage, especially in the mortgage industry where rates have moved significantly lower since the beginning of the year. This, couple with a weakening housing market, allows for more affordable financing.

RATES REMAIN LOW, WILL HOUSING MARKET REBOUND?

With rates remaining low and stable, housing inventory increasing and home prices growing at their slowest pace in nearly four years, there is potential for 2019 to be a boom for the housing market.

Fed Chair Jerome Powell continues to reiterate his stance of patience with regard to the Fed’s approach on rate hikes. It’s expected that if there is a rate hike this year, it will be singular.

That stability is translating to a spike in mortgage applications as we get into the spring buying season. According to the Mortgage Bankers Association, mortgage applications were up 5.3 percent week-to-week and were 0.4 percent higher than a year ago at this time.

Home prices are still historically high right now but are also continuing their lean toward the favor of the homebuyer. According to the S&P Case-Shiller index, home prices are growing at their slowest rate since August of 2015 (4.7 percent in December 2018 down from 5.1 percent in November 2018).

The interesting part of that is, despite rates going down and home price growth slowing, that was not enough to offset the fact that homes are still not affordable for most Americans. Wage gains simply aren’t on the same level.

December’s housing start numbers were rough, down to their lowest level in two years. According to the Commerce Department’s numbers, new home construction is at its slowest pace since September of 2016. The data shows new home starts were down 11.2 percent from November. Permits to build housing were up slightly, just 0.3 percent in December.

Another thing that might help the spring buying season is a positive with regard to tax returns. Initial reports were showing frustrated people who were getting less in their return or having to pay out instead of getting a rebate. Now, after a four weeks of filing data, people are reporting better tax returns than previous years with the average tax return up 1.3 percent from a year ago according to IRS data.

Housing Affordability: ‘It’s at a Crisis Level’

Housing affordability concerns will likely limit single-family-home building from making any significant gains in 2019, said economists at a Tuesday session during the 2019 International Builders’ Show in Las Vegas.

“This is a crisis,” Robert Dietz, chief economist at the National Association of Home Builders, told attendees about the rising costs of homeownership that are pricing many buyers out. Home price appreciation has outpaced wage gains over the last few years. Only a third of new homes are now affordable to households earning the median income, Dietz said.

With demographic shifts, more housing is needed to meet future demand. But home builders say several headwinds are limiting their ability to add greater inventories—such as labor and land shortages and tariffs on key building material costs that have increased construction costs. The rising costs for builders have forced them to cater to the higher-end buyer over the last few years.

But there’s a rising call from the housing industry and the public for more entry-level homes.

“We need to find more ways to build more with less,” Dietz said. “We have ongoing challenges with labor shortages. We need to attract more workers to the industry. This becomes part of the affordable housing challenge, too, because without enough workers, prices will continue to rise” for building. 

Still, builders are starting to make strides in entry-level housing, including an uptick in townhouse construction. Townhouse starts are up 24 percent on an annual basis over the past four quarters, Dietz noted. Townhouse construction now makes up 14 percent of all new-housing starts. “If we can find a way to zone greater density in communities, townhouses could be a good way to bridge renters into homeownership. We feel this market will continue to expand.”

Additional highlights from Tuesday’s housing forecast at the 2019 Builder Show from Dietz, Frank Notaft, chief economist at CoreLogic, and David Berson, chief economist at Nationwide Insurance, include:

New-housing starts: The NAHB projects 1.26 million total housing starts to round out 2018 and suggests production this year will inch up just 0.8 percent to 1.27 million units. Single-family starts are forecast to reach 876,000 units in 2018 and increase 2 percent to 894,000 this year. However, that is well below the 1.1 million to 1.2 million units that demographics would support, Dietz noted. "Ongoing job creation and solid household formations will keep demand firm, but builders will continue to grapple with supply-side headwinds that will dampen more vigorous growth in the single-family sector,” Dietz said.

Mortgage rates: After taking an initial breather at the start of 2019, interest rates will likely gradually rise over the year. The NAHB projects the 30-year fixed-rate mortgage to average 4.81 percent in 2019 and 5.08 percent next year.

Multifamily: The NAHB projects multifamily starts to reach 386,000 units in 2018 and fall 2 percentage points to 379,000 this year.

Remodeling activity: Residential remodeling activity is on the rise, as more homeowners stay in their homes longer and realize equity gains. The average homeowner has increased their equity wealth by $12,400 from September 2017 to September 2018, Notaft said. “That wealth effect has added $50 billion to consumer spending over the next two to three years,” he noted. More homeowners are using that equity to invest in sprucing up their homes, particularly among owners of 15 years or more.

Regions to watch: The South and West are seeing some of the biggest increases in new-home construction. ”Metros with good affordability, good job growth, and good weather have had the highest growth in new-home sales over the last year," said Nothaft. New-home sales are rising the fastest in Houston, Dallas, Atlanta, Phoenix, and Austin, Texas.

No recession yet: Berson discounted any recession fear rumblings. He said economic growth is slowing, but he sees a very low risk of a near-term recession. “It’s showing a yellow light, but it’s certainly not flashing red,” Berson said. Berson expects the Federal Reserve to tighten interest rates twice this year, which could prompt the 30-year mortgage rates to rise slightly. But he says the economy continues to post strong growth. In fact, he said, this is the second longest economic expansion in U.S. history. Should it continue to June, it will be the longest on record.

© REALTOR® Magazine