LANDLORD UNABLE TO INCREASE RENT ON TENANT

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The Appellate Court in the First District struck another ruling in favor of rent control this week.  The residential landlord was surely displeased with this pro-tenant ruling.

Mosser Companies (landlord) owns a nine-unit residential apartment building in San Francisco. The apartment at issue in this case is subject to rent control under the San Francisco Residential Rent Stabilization and Arbitration Ordinance (S.F. Admin. Code, § 37.1 et seq.; ordinance), which limits rent increases to tenants in occupancy (id., § 37.3(a)). Under Civil Code section 1954.53, which provides that “an owner of residential real property may establish the initial rental rate for a dwelling or unit,” local jurisdictions are authorized to impose rent control limiting rate increases until “the original occupant or occupants who took possession of the dwelling or unit pursuant to the rental agreement with the owner no longer permanently reside there.”

The question before the Court of Appeal here was whether the son of tenant parents who years before rented a unit in landlord’s building, and who with landlord’s consent resided with his parents when their rental agreement was entered, is an “original occupant” within the meaning of the statute.  If so, the landlord would be precluded from establishing a new unrestricted rental rate for the apartment when the son remained in the apartment after the parents  departed. The San Francisco Rent Stabilization and Arbitration Board (rent board) and the trial court concluded that the son, although a minor when the rental agreement was entered and not a signatory to the rental agreement, is nonetheless an “original occupant” entitled to the continued protection of the rent control provision.

The Court of Appeal sided with the Rent Control Board on this, protecting the right of the tenant to claim the benefits of the rent restriction when he became an adult.  The Court did seem to question the law on this issue though.  It expressly stated that it had to follow it, but wondered whether the legislature should not take another look at it.  In its concluding paragraphs, the Court writes: “Whether the application of rent control protection to occupants who begin their residency as minors is wise economic policy is a question for legislative, not judicial, determination. Local and state legislators are free to make these public policy determinations provided the rent regulation does not deprive property owners of a fair return on their investment.”  That is not a mere adoption and application of the rent control law; rather, it is a suggestion about action that might be taken in the legislative branch.  The Court was under no obligation to even mention the legislature in this opinion.  Lobbyists for landlords should take note!

CHARITABLE SOLICITATION LIMITED BY COURT OF APPEAL

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The Fifth District Court of Appeal has announced an important ruling in Donahue Schriber Realty Group v. Nu Creation Outreach, Case No. F068287. The case pertains to the right to solicit charitable donations on sidewalks near store entrances.

A number of business and real estate clients of Price, Crooke, Gary & Hammers and Stephen Hammers have inquired about this issue. This past holiday season, per inquiries to pcghlawyers.com and hammers-law.com, we were advised that more charitable organizations solicited money in front of businesses and stores than ever before. We have found that businesses have been generally tolerant of such activity. Things change, however, when potential customers are discouraged to enter a shop due to excessive solicitation or blockage of entrances. Disagreements and even altercations can erupt in front of stores and business owners understandably object to such activity.

The confrontation in the Donahue Schriber case began when two solicitors for Nu Creation Outreach collected donations on the sidewalks adjacent to the entrances of stores within plaintiff Donahue Schriber’s property. Plaintiff’s shop “policy” was to disallow charitable solicitation of donations within its property. The owners allowed other forms of expressive activity on the property, such as collecting signatures for petitions in designated areas. Plaintiff asked the solicitors to leave the premises, but they refused. When plaintiff called the police, the officers refused to arrest the solicitors without a court order.

Plaintiff hired counsel and moved for a preliminary injunction, claiming disruption of its business. The trial court granted the injunction, precluding charitable solicitation near plaintiff’s place of business. The preliminary injunction provided that solicitors would only be permitted to request donations in a designated public forum. It precluded solicitors from standing right in front of the business or the areas surrounding the entrance of the business or real estate office. The Court of Appeal found no error in that decision, specifying that the shop’s entrances, as well as its “aprons,” were not a public forum.

Business owners and real estate companies are well advised to seek counsel if they encounter problems with excessive charitable solicitation. All solicitation is not problematic, of course, and there are instances wherein solicitors are well within their rights to collect charitable donations. But when there is blockage of entrances or other such difficulties, action should be taken. In addition to retail shops, the activities can be disruptive to professional service organizations. The appellate court’s decision in Donahue Schriber demonstrates that companies such as real estate offices can obtain relief.

This ruling raises an important issue in the landlord tenant context. Who has the obligation to take action when solicitors create problems in front of a lessee’s retail store, the lessee or the lessor? The answer often lies in the allocation of risk and common area provisions of a business lease. If you are experiencing a solicitation problem, or are uncertain of your rights as lessor or lessee, contact an attorney.

Stephen G. Hammers, Price, Crooke, Gary & Hammers, Incorporated, 10 Corporate Park, Suite 300 Irvine, CA 92606 (949) 573-4910; (800) 511-6058; www.hammers-law.com