Although the unit is illegal and without certification of occupancy the landlord does not waive all rights. Rent Control still is in effect and refusal of rent payment is still a compelling reason for eviction. That said, there is an ocean of red tape, which is why in San Francisco a Landlord Advocacy Attorney is needed in these situations. San Francisco has the most extensive laws on the records for Tenant Protection. I have copied and pasted below from the San Francisco Apartment Association; The Risks of Renting Illegal Apartment Units.
I do want to put my two cents in with the OP admitting to a verbal agreement with the unknown tenant...really? really? In San Francisco? As many have said many times over...don't ever, ever rent to anyone without doing due diligence and a written contract. Evictions in San Francisco are the priciest in the country thanks to it's "progressive" style of government.
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* Ad Rates Legal Corner Q & A The Risks of Renting Illegal Apartments by Various Authors Q. I often hear that nuisance and habitually late payments of rent are difficult to prove in an unlawful detainer action. How much of a paper trail does a landlord need in order to prevail in such an action? A. What you heard is correct. While there are no definitive rules governing the “required evidence” to prevail in such cases, I have some observations I would like to share with the general membership. For all types of landlord-tenant litigation, I have observed that landlord-tenant disputes become nastier and more expensive every year. In my seven years of practice, I have never been forced to trial more often than in the past two years. In addition, I know that tenant attorneys are really pushing the “wrongful eviction” and “malicious prosecution” lawsuits against unsuccessful landlords and their attorneys. As such, the stakes have never been higher, and even your insurance company will not cover you for any punitive damage-type judgment. As a result, my office demands that all due diligence, such as investigative work and witness interviewing, be substantially completed before any eviction notice is served. While this measure is more expensive for the client, the end result for commencing a “losing” action is so severe that I will not agree to any other type of strategy. Second, “habitual late payment” cases are the toughest type of eviction action. You need an extensive paper trail (e.g., letters) in the file telling the tenant to pay rent on time. In addition, a few Three-Day Notices to Pay Rent or Quit may also be helpful, as you need to show that you have never “waived” your right to seek timely rental payments. Moreover, the tenant’s rent must be “habitually” late, meaning the offense must be frequent (for example, four out of the previous six or seven months), and there must be a written protest from the landlord each time. Because I look at every case as though it will proceed to a jury trial, I typically insist on a solid file—very frequent late payments with ample written protests—before I advise serving the final termination notice. Remember that you may have to convince 12 San Franciscans to throw somebody out of their home, so make sure you have the facts to show that the eviction is the only remedy available to you. Third, nuisance actions should also be backed by sufficiently competent evidence before the landlord serves the eviction notice. Simply suspecting that your tenant is dealing drugs or creating loud noise is not enough. Before legal action begins, you should have all of your witnesses lined up to testify. Also, their stories should be checked out to ensure that ill will or personal bias is not a motivating factor behind their stories. A police report is also a good piece of evidence to have in the file Remember that once legal action begins (when the notice is served), the tenant will clean up his/her act, so you better be able to prove your case before the process starts. Last, never bring any action unless you are prepared, both financially and factually, to bring it to trial. Filing an unlawful detainer lawsuit or serving an eviction notice as a bluff may land you in a lot of trouble. To this end, please consult and strategize with a qualified attorney before you begin any legal process.
—David Wasserman Q. What are the risks of renting an illegal apartment? Are there chances of problems? What are the costs to legalize? A.There are many non-permitted units in San Francisco. Most of them are basement or garage level “in laws,” which do not comply with building or planning code requirements. Although these units are illegal, the city inspectors do not look for them because they are an important source of housing in our limited market. Of course, if there is a complaint, then the building department will issue a notice of violation, requiring legalization or demolition of the unit. These units cannot legally be rented since they have no permit of occupancy. Some tenants who live in them may claim that their rental agreement is an illegal contract and they do not have to pay rent. In a technical sense, they are right. The agreement is illegal and cannot be enforced in court. Any suit for back rent after a tenant vacates would be unsuccessful, and issues could arise over applying a security deposit to back rent after vacating. Fortunately, the courts have ruled that a tenant cannot claim that there is no rent due because the contract itself is illegal, and yet simultaneously stay in possession of the unit. Once a tenant claims and shows that the unit cannot legally be rented, the court is obliged to order that the unit be vacated. We recommend that any tenant initially renting a non-permitted unit be told of the lack of a Permit of Occupancy. Put it in the rental agreement. Failure to make this disclosure could result in a fraud claim later. If the city orders legalization or demolition, the law gives the owner the right to elect whether to remove the unit or try to make it legal. Often, removal amounts to no more than tearing out an illegally added kitchen and maintaining the space as legal accessory space to other permitted living space in the building. Legalization can be more problematic, since zoning issues, off-street parking, etc. may make it impractical or impossible. Recently, an alarming trend has developed at the Board of Appeals. If an owner is cited and applies for a permit to remove the illegal unit in compliance with city requirements, well-known tenant advocates often encourage the tenant to then file an appeal of the building permit to the Board of Appeals. The Board of Appeals then seeks to force the owner, at considerable and unwelcome expense, to do all the construction to create an up-to-code unit. We have had some extreme cases such as an attic on the top of an old wood building already containing the maximum permitted three floors of occupancy, and a warehouse that has no legally habitable space and contains ultra-hazardous activities right next to proposed bedrooms. We have sued the city over this practice, but no decision has been made yet.
—Andrew J. Wiege Q. With the recession in full swing, a tenant of mine wants to move from a larger unit into a smaller one to save money. What type of precautions should I take when dealing with this situation, i.e. security deposit, rent control, etc.? A. With the economy and rental rates continuing to plunge, the availability of a smaller vacant unit may be a godsend to both you and the tenant now feeling the pinch of harder times. For the tenant, switching apartments may be a way to get out from under the burden of a now too onerous rent; and for you, it is a way to fill a vacancy while at the same time making the larger unit available for someone who can pay the rent, rather than forgiving a portion of the rent for somebody who cannot pay. Nevertheless, you should always keep the tenancies in the two units separate and distinct and make the circumstances of the change clear in order to avoid having the two tenancies meld into one, to your detriment. The main concern when “swapping” apartments is to make sure that the record shows there has been a true termination of the first tenancy, surrender of the apartment, and creation of a new and different tenancy in the second apartment under a whole new rental agreement. Thus, the date of occupancy in the first unit, the security deposit, the rent charged, and all other factors pertaining to that first tenancy are now over and finished The date of first occupancy may become important in certain situations. As just one example, it may be critical to be able to date first occupancy from entry into the second unit, as opposed to the first, to avoid a long-term tenant exemption from an owner or relative move-in eviction. Consider that you are starting out with a tenant you have never met before. You can charge an agreed-upon rent and take whatever security deposit you could legally require in the absence of the first tenancy agreement. I advise you to document as fully and completely as possible several factors. First, you should record that the change in units is occurring at the tenant’s request, not yours; i.e., the tenant approached you about relinquishing possession of the larger unit in order to rent the smaller unit and save money on rent. Second, you should have the tenant sign a statement clearly stating that s/he has surrendered possession of the first unit unconditionally to you. Third, you should return the security deposit (with any past interest due) on the first unit and take a new and different security deposit for the new unit, even if partially a paper transaction. Fourth, you need to make absolutely sure that you prepare a new rental agreement for the new unit. This is the step that I observe may cause a landlord to fall on his/her face. Units are exchanged but no new rental agreement is made and executed, leaving the tenant to argue that the original tenancy continues over into the new unit, with rent reduction as the only difference. This is clearly not what you want. This switch can be easily accomplished without any detriment to your rights if you adequately document what you are doing in a way that anyone—the tenant, a Rent Board administrative law judge, or a court, if necessary—can determine exactly what happened. The extra time you take now to properly document the transaction, as in so many other instances, really pays off in the end. —Saul M. Ferster The opinions expressed in this article are those of the authors and do not necessarily reflect the viewpoint of the SFAA or the SF Apartment Magazine.Andrew J. Wiegel is with Wiegel & Fried, LLP (415) 552-8230 David Wasserman is with Wasserman & Taxman, 567-9600. Saul M.Ferster can be reached at 863-2678.The information contained in this article is general in nature. Consult the advice of an attorney for any specific problem. © Copyright 2001.
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