Q: We recently acquired a property that has a tenant paying rent of $1,100 per month. The lease expires the day we close escrow. We want to raise the tenant’s rent to the market rate of $1,400 per month.

Obviously this is a significant increase, but we are wondering if it is possible to do so without much notice, given the tenant will be out of lease once the transaction has completed. The property-management company did not renew the lease or discuss these terms with the tenant before close of escrow.

Landlord attorney James McKinley replies: Under California law, without rent control in the city where the property is located, once the lease expires, you can raise the rent as high as you want. But you can’t do it the day you become the new owner — you will have to wait a couple of months.

As the buyer, you step into the shoes of the seller and are responsible for all obligations required of the lessor under the terms of the rental contract. Most leases automatically convert to month-to-month rental contracts upon the expiration of the fixed term. Therefore, unless your tenants are willing to sign a new lease at a higher rental rate, your tenant will be required to pay you $1,100 for the first month.

In order to increase the rent, you are required to give your tenant written notice of the new amount. If the proposed increase is 10 percent or less than any amount of rent charged in the last 12 months, you must give at least 30 days’ notice. If the proposed rent increase, combined with any previous increases in the last 12 months, is more than 10 percent, you are required to give your tenant 60 days’ written notice.

Tenant attorney Steven R. Kellman replies: Be sure to read the lease that is in force for the property you are buying. Some leases will specify different notice and procedures for what to do when a lease expires.

Without any special provision, a lease expires and the tenant should be moved out on the last day. Under the law, if the tenant pays the lease rent ($1,100 in your case) and you (the landlord) accept it, then the lease will continue on a month-to-month basis with all the other terms still applicable. If you do not accept any rent, then the lease should expire and you are not obligated to any further tenancy arrangement.

The important part of the situation will be your decision whether to accept any rent after that last day and how much to accept. If the prior owner renews the lease, either by written agreement or other actions, or accepts any rent from the tenant prior to your taking title, you will be bound by that act even if you do not agree with it.

Send questions to Rental Roundtable, 5703 Oberlin Drive, Suite 300, San Diego, CA 92121-1743, or by e-mail to rgriswold@retodayradio.com.

Source:

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2007/07/15/REG9SQVRS61.DTL