One common occurrence for both commercial and residential landlords is the disposal of personal property left behind after a tenant vacates.
Effective January 1, 2019, assembly bill 2173 came into law amending Civil Code sections 1193.04-07, increasing the threshold calculation for a landlord to dispose of (or retain) a tenant's personal property.
The law used to require a landlord to give written notice to the tenant if personal property remains after the end of a tenancy. The landlord would then be directed to sell the property at public sale if the property was, or reasonably believed to be, the lesser of $750 or $1 per square foot of the premises occupied by the tenant. As of 2019, if the landlord reasonably believes that the total resale value of the personal property is greater than $2,500 or an amount equal to one month's rent for the premises the tenant occupied the landlord is authorized to retain the property for his or her own use or dispose of it in any manner.
California legislature reasoned that unlike residential tenants, commercial tenants may make a deliberate business decision to abandon unwanted inventory, office equipment, or unwieldy fixtures on the premises, thereby generating higher removal and storage costs than would be expected for a residential tenant. In addition, commercial tenants are generally more likely than residential tenants to have the resources to collect and remove all their property before vacating the rental premises.
The change identified above does not change the law on conversion. The landlord who exercises wrongful dominion and control over a tenant's personal property may be liable for damages for a conversion of the property to a tenants' secured creditor. In the case of Hartford Financial Corp. v. Burns, the California court appeals held that a lien creditor may recover the full value of the property converted even though it exceeded the amount of the unpaid debt. The court reasoned that an excess amount in a potential award over the amount of the debt is owed to the tenant-owner of the personal property, not the landlord.
Residential landlords should be familiar with the following statutes as they relate to retaining a tenant's personal property: (1) Duty to return property on demand Civ. Code, § 1965; (2) Disposal of abandoned property Civ. Code, §§ 1980 -1991.; and (3) disposal of tenant's personal property after judgment in an unlawful detainer Code Civ. Proc., § 1174.
While each code section varies with specific details, essentially a tenant has a limited amount of time to demand a landlord return their property after vacating. Similarly, a landlord may have the right in most instances to demand reasonable costs to remove and store the property.
A good practice for both a tenant and landlord is to document personal property like furniture, artwork or jewelry. Disputes often arise over damaged or allegedly stolen items. However, unlike in commercial property disputes, the landlord who complies with statutory procedures may not be held liable to the owner of the personal property if it is given to another person, pursuant to Civ. Code, § 1965, subd. (d). If there are conflicting demands, the landlord can comply with the first timely request for the return of the property. Since each case may have unique facts and relics, consulting with a property manager, a real estate expert, or legal counsel is recommended.
This article is for general information purposes and is not intended to be and should not be taken as legal advice, as each specific situation needs to be evaluated based on its specific fact.
Anna Greenstin Kudla is a partner at Walsworth with offices in Orange County, Los Angeles, San Francisco and Seattle. She is the head of the real estate broker litigation department. Anna is dedicated to educating and representing business owners, including real estate professionals, in all aspects of law. She provides clients annual educational seminars across Southern California addressing changes in the legislature and the impact it has on brokers and business. | E-mail: agkudla@wfbm.com | WALSWORTH WFBM, LLP | WFBM.COM
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