While I receive questions from my clients and potential clients about numerous issues each day, very frequently it seems like everyone has the same question. Sometimes this is provoked by a news article or pending legislation; other times it seems like pure coincidence.
The burning question the last couple weeks has been “what are the risks to renting an illegal unit?”
While we all know there are illegal in-laws being rented all over San Francisco, and it seems like it has become an accepted practice, there still are some risks involved, especially since tenants seem to be more and more savvy and informed.
Below I have included an article on the subject published by the San Francisco Apartment Association last year, as well as some quick facts.
Enjoy!
THE RISKS OF RENTING ILLEGAL APARTMENT UNITS
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, San Francisco Apartment Association