Electronic Rent Payments and New Law Related to Third Party Rent Payments

Recently, I represented some tenants who received a letter from their new landlord demanding that they pay rent electronically. Aside from the fact that this was a change in the terms in their tenancy requiring 30-days advance written notice, the landlord gave them one choice -- electronic payment only. 

However, under Cal. Civ. Code sec. 1947.3, if the rent checks aren't returned for insufficient funds in which case the landlord can demand cash payments, the landlord MUST offer another form of payment other than cash or electronic payment.

This same statute has recently been amended and enacted into law as of January 1, 2019 as it concerns rent payments made by third-parties [C.C.C. sec. 1947.3(3)] as follows:

(3) Subject to the limitations below, a landlord or a landlord’s agent shall allow a tenant to pay rent through a third party.

(A) A landlord or landlord’s agent is not required to accept the rent payment tendered by a third party unless the third party has provided to the landlord or landlord’s agent a signed acknowledgment stating that they are not currently a tenant of the premises for which the rent payment is being made and that acceptance of the rent payment does not create a new tenancy with the third party.

(B) Failure by a third party to provide the signed acknowledgment to the landlord or landlord’s agent shall void the obligation of a landlord or landlord’s agent to accept a tenant’s rent tendered by a third party.

(C) The landlord or landlord’s agent may, but is not required to, provide a form acknowledgment to be used by third parties, as provided for in subparagraph (A), provided however that a landlord shall accept as sufficient for compliance with subparagraph (A) an acknowledgment in substantially the following form:

I, [insert name of third party], state as follows:

I am not currently a tenant of the premises located at [insert address of premises].

I acknowledge that acceptance of the rent payment I am offering for the premises does not create a new tenancy.

(signature of third party) _____

(date)

(D) A landlord or landlord’s agent may require a signed acknowledgment for each rent payment made by the third party. A landlord or landlord’s agent and the third party may agree that one acknowledgment shall be sufficient for when the third party makes more than one rent payment during a period of time.

One of the issues that landlords fear is that by accepting rent from a third party, such as a parent, that a tenancy is also created. If the third party stops rent payments, rent payments would probably revert to the occupant of the rental unit and, if that person cannot make rent payments, then the landlord may issue a 3-Day Notice to Cure or to Quit [e.g. to pay rent or to move-out.] The landlord’s ability to evict the occupant may also be complicated by whomever executed the lease agreement. This new law clarifies that the third-party payer is not a tenant and acceptance of their rent check does not create a tenancy.

Interestingly, the lawmakers included a parting word as follows:

"A waiver of the provisions of this section is contrary to public policy, and is void and unenforceable."

More Time to "Cure" a Three-Day Notice and to Answer an Unlawful Detainer Complaint Beginning Sept. 1, 2019

On September 1, 2019, two new laws will go into effect relating to Cal. Code of Civ. Proc. sections 1161 and 1167 as follows:

1) The time to "cure" a 3-day notice will exclude Saturdays, Sundays and judicial holidays providing the tenant more time to fix the issue, and 2) the time to answer a unlawful detainer complaint will be 5-days counting from the day after the notice was personally served but these 5-days will also exclude Saturdays, Sundays, and judicial holidays. See Assembly Bill 2343 for more information, the salient part which is excerpted below.

Sec. 1161 (3) of the Code of Civil Procedure is amended to read:

"3. When he or she continues in possession, in person or by subtenant, after a neglect or failure to perform other conditions or covenants of the lease or agreement under which the property is held, including any covenant not to assign or sublet, than the one for the payment of rent, and three days’ notice, excluding Saturdays and Sundays and other judicial holidays, in writing, requiring the performance of such conditions or covenants, or the possession of the property, shall have been served upon him or her, and if there is a subtenant in actual occupation of the premises, also, upon the subtenant. Within three days, excluding Saturdays and Sundays and other judicial holidays, after the service of the notice, the tenant, or any subtenant in actual occupation of the premises, or any mortgagee of the term, or other person interested in its continuance, may perform the conditions or covenants of the lease or pay the stipulated rent, as the case may be, and thereby save the lease from forfeiture; provided, if the conditions and covenants of the lease, violated by the lessee, cannot afterward be performed, then no notice, as last prescribed herein, need be given to the lessee or his or her subtenant, demanding the performance of the violated conditions or covenants of the lease."

Section 1167 of the Code of Civil Procedure is amended to read:
"1167. (a) The summons shall be in the form specified in Section 412.20 except that when the defendant is served, the defendant’s response shall be filed within five days, excluding Saturdays and Sundays and other judicial holidays, after the complaint is served upon him or her."

Judicial holidays are listed here and may differ from "typical" holidays celebrated by businesses in the Golden State.

When Sharing isn’t Necessarily Good

The lease agreement is central to the landlord-tenant relationship. A prospective tenant should always determine who pays for water, garbage and recycling, sewer, gas, electric, Internet, and cable or satellite TV services. If the utilities and/or services are shared between tenants or shared with the landlord, a written agreement is critically important since disputes can and do regularly occur concerning utility charges. Below are some actual examples that lead to disputes over shared services:

• A tenant discovered that while he paid for water services for his unit, these water services were also being supplied to the shared tenant laundry room. Water usage increased when a family of five occupied one of the units in the building. An investigation by EBMUD substantiated this water sharing which the landlord failed to disclose or to correct.

• A tenant leased a room in a single-family home. The master tenant rented out 5 bedrooms in the home, some of which were occupied by couples. The gas and electric bills increased with more occupants but, while utility sharing was disclosed, the actual PG&E invoices were not disclosed and the shared cost was based on the number of bedrooms leased versus the number of occupants.

• A landlord placed PG&E bills in his name and invoiced one tenant for the full bill but failed to disclose that her utility services were shared with an illegal unit behind her. When a new tenant moved into the illegal unit, the electricity costs rose significantly and the tenant being billed complained. The landlord also charged the tenant in the illegal unit for PG&E costs and pocketed the cash; the tenants attempted to reach an agreement between themselves when this landlord practice was discovered.

California law requires landlords to make written disclosures concerning shared gas or electric meters and to enter into a written agreement concerning how these costs are to be shared. Cal. Civ. Code sec. 1940.9. If the landlord fails to abide by this law, the tenant may sue the landlord in small claims or a higher court; potential remedies are detailed in the statute. However, realistically, if the tenant lives in a city without just cause eviction protections, a landlord can just as easily provide the tenant with a no-fault notice to terminate tenancy. Although the action may be retaliatory and while there is a law against retaliation, some landlords flagrantly violate this law with impunity.  

In jurisdictions with just cause protections, there is greater latitude for tenants to attempt a “mid-course correction.” For instance, in Oakland, various tenants filed petitions with the Oakland Rent Adjustment Board for "Decreased Housing Services" with the following results:

• Case No: T15-0137: Board affirmed hearing decision on appeal which granted restitution related to splitting of utility bills between tenants where there was only one meter.

• Case No: T11-0040: Owner is responsible for utility bill if there cannot be separate meters for each unit. Case remanded to determine if anything is owed to tenant who paid utility bill for both units.

• Case No: T08-0281: Board held that splitting a water bill among tenants is a violation of the Rent Adjustment Program Regulation 10.1.10 which prohibits splitting utility bills among tenants; hearing decision affirmed with modification that future water bills may not be passed onto tenants. (Note: Regulations may have changed since this case was decided in 2008.)

If you believe that you are sharing a PG&E meter with one or more units, contact PG&E to  inspect your meter usage. PG&E will be able to determine if your utility meter is shared. 

If your utility account is in the landlord's name, you may be considered a "submetered tenant." In this case, you may have special billing rights pursuant to Cal. Public Utilities sec. 739.5. You can contact PG&E to discuss your rights related to utility billing.

So, before you sign a lease agreement, don't rush into it without investigating your utility rights. Sharing isn't necessarily bad, but if you agree to a one-sided arrangement or the wording in your lease agreement is ambiguous, or if your landlord shares utilities without mandated disclosure, sharing could be very bad indeed.