The Oakland City Council has passed the Tenant Move Out Agreement Ordinance (“Ordinance”.) This new law significantly changes the way landlords can approach and buy out tenants residing in their rental units.

It is important to note that the Ordinance applies to all rental units in Oakland, including units otherwise exempt from rent or eviction controls, like single family homes and new construction. The only exemption is for publicly-owned and operated housing units, which typically operate under different tenancy laws anyways. The law will also not be applicable to situations where there is no “tenancy”, such as giving money to a family member to move out, or paying a “squatter” to vacate property they have taken over. The Ordinance is effective May 1, 2018.

 

Before Buyout

 

Disclosure Form

 

Landlords may no longer offer buyouts to tenants informally or on the spot. Landlords must undertake a robust disclosure process and register with Oakland’s Rent Adjustment Program (RAP) before making any buyout offer. Even accidentally violating the Ordinance can incur penalties of at least $500 per violation, in addition to any violations of the overlapping Tenant Protection Ordinance.

Compliance with the Ordinance requires service on the tenant of a form developed by the RAP. The Disclosure Form is currently available on the RAP website. This Disclosure Form enumerates an extensive list of tenants’ rights in buyout negotiations, such as:

  1. The tenant can refuse to negotiate a buyout.
  2. The tenant may rescind the buyout (change their mind) up to 25 days after signing the agreement (but cannot rescind once they actually move out.)
  3. The tenant may be entitled to the relocation payments.

The landlord is required to keep careful records of the Disclosure Form. Once executed by the landlord, the form must be provided to the tenant within 3 days, with proof of service. Copies of each form and the corresponding proof of service must be retained in the landlord’s records for at least 5 years. It will be convenient for many landlords to issue this form upon the commencement of a tenancy, as part of the rental agreement.

Please note that although the form prepared by the RAP contains a space for the tenant to sign to confirm receipt, this signature appears to be for record keeping purposes only. The landlord’s obligation to disclose is complete when this form is delivered to the tenant, regardless if it is accepted – hence the landlord’s obligation to keep a record of service for 5 years.

 

Certification Form

 

In addition to disclosure to the tenant prior to negotiations, the landlord must also register with the RAP by filing a Certification Form. This form includes the owner’s name and contact information, the unit which may be subject to buyout negotiations, the date that the tenant in the unit received the Disclosure Form, and the dates of any other move out agreements “with any current or prior tenants at the property” “completed to the best of the owner’s recollection and knowledge.” The Certification Form is also available on the RAP website.

There appears to be no limit to how far back in time landlords must go when reporting prior buyout negotiations. It is also unclear what the penalty might be if the landlord incorrectly identifies or omits a buyout negotiation with a current or prior tenant, but the Ordinance does authorize the City Attorney to file civil actions against landlords who violate any provision of the Ordinance.

Landlords should note that the registration information collected pursuant to the Ordinance may be released, published, or otherwise made publicly available, which may or may not have personal information redacted. The City explicitly does not guarantee that personal or private information will not be released, including information contained within the buyout agreements themselves. Landlords should consider carefully what personal or business information they disclose on any papers filed with the City.

 

During Buyout

 

Formation

 

The Ordinance provides several steps to standardize buyout agreements.

First, the Ordinance requires all agreements be in writing, and in Spanish or Chinese if the tenant is proficient in those languages rather than English. In the case of a rental agreement not in English, the buyout agreement would be in the language of the rental agreement. If the buyout agreement is in multiple languages, all copies should be presented to the tenant at the same time, rather than a belated translation afterward.

When signed, a copy of the agreement is to be given to “each” tenant “immediately” following execution. It is unclear what giving a copy “immediately” means, especially when there may be multiple tenants involved in the buyout, but landlords may wish to arrange the signing of the agreement in a place where a copy machine is available, with all tenants present, so that there is minimal delay. Landlords are required to create and retain a proof of service of this executed copy of the agreement for an unspecified period of time.

Second, the Ordinance requires certain recitals of tenants’ rights verbatim from the Ordinance, which generally correspond to the disclosures required before the buyout negotiations. This language is to be in 14 point font above the tenant’s signature, although it would likely fill at least an entire page all by itself. See Sections 8.22.740.B.1-6 of the Oakland Municipal Code, available at the RAP website, for the precise language to use.

Third, the Ordinance requires that agreements “must be for greater than the amount of the relocation payments to which the tenant may be entitled under Oakland, state, or federal law.” This appears to impose some kind of floor on the value paid under the Ordinance, but this vague language is unclear on what the floor would be.

As of the date of this article, relocation payments are required for landlords who evict tenants to move into the unit (owner move-in), when tenants are displaced to remediate code violations, following condo conversions, or when the property is being removed from the rental market under the Ellis Act. However, because a buyout may occur without (or instead of) any of those circumstances, it is uncertain if those require payments are implicated by this Ordinance. Landlords are therefore recommended to pay at least 1 cent more than the amounts enumerated in the Uniform Relocation Ordinance to avoid a potential violation.

 

Rescission

 

Under the Ordinance, tenants have an absolute right to rescind an agreement after they sign it. By default, tenants may rescind up to 25 days after signing. However, they can agree to reduce the rescission period to 15 days.

To rescind, the tenant must notify the landlord in writing, and if there are multiple tenants, all tenants must agree. Mailed rescissions are effective if they are postmarked on or before the last day of the rescission period, and all money paid under the buyout must be refunded to the landlord.

If the tenant determines that the buyout agreement is defective in some way under the Ordinance, the rescission period is extended to six months. In the written notice of rescission, the tenant must explain the defects in the agreement. After receiving notice, the landlord has 5 days to “offer the unit back to the tenant or respond with reasons why the Move Out Agreement may not be rescinded.” However, the Ordinance also states that a tenant may not rescind a buyout after they move out, even if the buyout was defective.

The contradiction between the landlord’s stated obligation to offer the unit back to the tenant after rescission, and the tenant’s inability to claim rescission after vacating has no clear answer and may have to be resolved through further regulations or litigation. Since tenants still have civil remedies available in the case of vacating following a defective buyout agreement, landlords should consult with an attorney before allowing a tenant back into the unit following vacancy and rescission.

 

After Buyout

 

After an agreement is negotiated and completed, the landlord must file the buyout agreement with the RAP between 25-45 days. This means the landlord must wait the full statutory rescission period (25 days), and then has 20 days to file the agreement (45 days total). Landlords should mark their calendars and set a reminder to avoid missing this deadline, and remember that the information contained in the agreements may become public at a future date. Rescinded agreements are not filed with the RAP and may be discarded. However, the fact that buyout negotiations occurred in that unit must be disclosed on any certification form filed with the RAP.

 

Enforcement

 

Penalties for violating the Ordinance are steep. The City is empowered to levy fines and file civil suits against landlords who violate the Ordinance, even if no tenant complains. If a tenant does have a complaint for a landlord violating the Ordinance, the landlord is liable for any actual damages to the tenant, or $500, whichever is greater. If the landlord “willfully” violated the Ordinance, then the penalty is triple actual damages, or $1,000, whichever is greater.

Elderly or disabled tenants may always claim triple actual damages, or $1,000 or $1,500 minimum damages for each non-willful or willful violation, respectively. Catastrophically ill tenants are entitled to even more, with triple actual damages, or $1,500 or $2,000 for each non-willful or willful violation, whichever is greater.

If the landlord wishes to challenge a tenant’s claim of protected status and enhanced penalties, the landlord can challenge that status using the same procedure as for just cause evictions, and may also raise the issue in a resulting civil proceeding.

 

Other Provisions

 

As stated in the disclosure form provided to tenants, landlords should be aware that offering more than one buyout to the same tenant within six months is considered harassment under the Tenant Protection Ordinance, with concordant penalties.

Landlords are prohibited from retaliating against tenants who refuse a buyout. If a landlord is considering offering a buyout before issuing a termination notice, expect a retaliation defense if the tenant refuses to vacate following the notice.

The Ordinance is somewhat flexible when it comes to landlord/tenant communications and forms of notice. In particular, use of email is acceptable, but only if both sides agree. Landlords who favor electronic communications should consider consent to email as a term to include in rental agreements. Without any agreement, notices served under the ordinance must by registered, first class mail.

 

Conclusion

 

As of May 1, 2018, buyout negotiations in Oakland are now nearly as heavily regulated as rent increases or evictions. The RAP is involved both before and after each and every buyout, and all buyouts are now a matter of public record, including any buyouts which preceded the ordinance. All landlords in the city should immediately create a record of their past buyouts, and create an organized file for all the necessary proofs of service.

It is clear from the content of the Ordinance that the City and the RAP do not want landlords negotiating buyouts with their tenants. All of the responsibilities for deadlines and disclosures rest on landlords, who risk stiff penalties for even accidental violations. Landlords should consult with an attorney prior to any buyout negotiations to evaluate whether the landlord has fully disclosed, certified, and complied with the Ordinance.

 

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