Can a Tenant be Evicted if Noncompliance with California Civil Code § 1962?

In a recent appeal in the matter of Group XIII Properties LP v. Stockman, landlord attorney Dennis P. Block & Associates litigated with tenant attorney BASTA in a case where the tenant failed to pay rent, and the Court reviewed the application of Civil Code section 1962 to the facts of the case.

Civil Code section 1962 requires owners of rental property to make certain written disclosures to their tenants including, but not limited to, the name, phone number, and usual street address at which personal service may be effectuated for all people who are managers of the premises, owners, or persons authorized to act on behalf of the owner for the purpose of service.

An owner, or the owner’s authorized representative, is required to make the disclosure within 15 days of executing the lease or, if the lease is orally made, within 15 days of the agreement.

The information to be disclosed must be kept current such that the required disclosure extends to any successor owner or manager; the successor must comply with the disclosure requirements within 15 days of succeeding the previous owner or manager.

A successor owner or manager is precluded from evicting a tenant for failure to pay rent if the tenant’s default occurs during a period of noncompliance with section 1962.

Plaintiff Group XIII Properties LP prevailed on an unlawful detainer action against defendant Michelle Stockman after defendant failed to pay rent.

Defendant raised, as an affirmative defense, plaintiff’s failure to comply with the disclosure requirements of section 1962.

Defendant argued the affirmative defense on two occasions—by moving for nonsuit (before the jury was given the case) and a directed verdict (after the jury was instructed).

The trial court ruled plaintiff “substantially complied” with section 1962 and denied defendant’s motions.

Defendant contended the trial court should have granted her motions, and the appellate court reversed the judgment because the successor owner/manager must strictly comply with section 1962; and substantial compliance with its provisions is inadequate.

Defendant moved into the property located on Challenger Way in the City of Lancaster pursuant to an oral agreement with the owner, Infinity Challenger, LLC (Infinity).

The property was subsequently sold by Infinity to plaintiff on June 28, 2019, at which time it was managed by Pama Management, Inc. (Pama).

Pama served defendant a notice of change of management (July notice), advising that IE Rental Homes (IE) was the new management company.

The July notice indicated rent was payable to IE by cashier’s check or money order only, and that payment could be remitted to an office address in Palmdale; office hours were specified at the bottom of the notice, which was signed by “agent” Michael Garcia.

Defendant was served another change of management notice (December notice), this one identifying Bridge Management Inc. (Bridge) as the new management company.

Similar to the July notice, the December notice indicated rent was to be paid to Bridge by cashier’s check or money order only, and that payment could be remitted to the same Palmdale office as the July notice; it did not, however, specify the times the office was open, and it did not identify any person as an owner, manager, or agent.

After failing to pay rent for January and February 2020, defendant was served a three- day notice to pay rent in the amount of $2,224.92, or vacate the premises. A payment ledger admitted into evidence showed defendant was current on her rent through the end of December 2019 and that no rent was paid thereafter.

There was nothing in the record suggesting defendant was served with a notice of change in ownership.

Defendant was not home when Madrigal attempted service of the July notice, so she posted it on defendant’s gate, then returned to the office and mailed a copy to her.

Defendant was home at the time Madrigal attempted service of the December notice but she refused to accept it; Madrigal posted this notice as well on defendant’s gate and then mailed her a copy. Madrigal handwrote her name and telephone number on both the July and December notices prior to serving them.

Defendant denied ever receiving or being served the July and December notices, either posted on her gate or in her mailbox. She also denied being served the three-day notice to pay rent or quit.

Defendant filed a motion for nonsuit arguing plaintiff was not in compliance with section 1962 when the defaulted rent was due because the December notice did not identify Bridge’s agent for service of process or provide the agent’s name, telephone number and “usual street address.”

Plaintiff maintained that, other than the change in management companies, the information on the July and December notices was essentially the same.

Plaintiff’s counsel pointed out the July notice identified the agent and that Madrigal testified she handwrote her name and telephone number on the December notice.

The court gave the impression the issue turned on whether the jury believed Madrigal’s testimony that she wrote information on the notice before serving it. In any case, the motion was denied.

On the following day, defense counsel renewed the motion for nonsuit, arguing that, per DLI Properties, LLC v. Hill, strict compliance with the mandatory notice provisions of section 1962 was required.

The court, apparently reading from section 1962, stated: “Disclosed therein the name, telephone number, and usual street address at which personal service may be effected of each person who is . . . ,” then asked, “Where does it say it actually has to say this is the address at which personal service may be effected?”

Concluding DLI Properties did not hold strict compliance with section 1962 was required—it just mentioned it in passing—the court ruled: The totality of the circumstances between what defendant herself knew and the circumstances involved in all of this if the jury believes that there was information written on top of the notice. There was substantial compliance, and the court denied the motion on that ground.

Shortly after the jury was given the case, Gharagozli moved for a directed verdict on the same ground as the nonsuit motion; the court denied the motion for the same reasons.

Defendant contendsed the court should have granted her motion and renewed motion for nonsuit or issued a directed verdict in her favor.

While made at different times, motions for nonsuit, directed verdict, and judgment notwithstanding the verdict (JNOV)] are analytically the same and governed by the same rules. The function of these motions is to prevent the moving defendant from the necessity of undergoing any further exposure to legal liability when there is insufficient evidence for an adverse verdict. Put another way, the purpose of motions for nonsuit, directed verdict and JNOV is to allow a party to prevail as a matter of law where the relevant evidence is already in.

A defendant is entitled to a nonsuit if the trial court determines that, as a matter of law, the evidence presented by plaintiff is insufficient to permit a jury to find in his favor.

In determining whether plaintiff’s evidence is sufficient, the court may not weigh the evidence or consider the credibility of witnesses. Instead, the evidence most favorable to plaintiff must be accepted as true and conflicting evidence must be disregarded. The court must give to the plaintiff’s evidence all the value to which it is legally entitled, indulging every legitimate inference which may be drawn from the evidence in plaintiff’s favor.

The trial court is governed by the same standard in ruling on a motion for directed verdict.

Any owner of a dwelling structure specified in Section 1961 or a party signing a rental agreement or lease on behalf of the owner shall do all of the following: Disclose therein the name, telephone number, and usual street address at which personal service may be effected of each person who is: Authorized to manage the premises. An owner of the premises or a person who is authorized to act for and on behalf of the owner for the purpose of service of process and for the purpose of receiving and receipting for all notices and demands.

In the case of an oral rental agreement, the owner, or a person acting on behalf of the owner for the receipt of rent or otherwise, shall furnish the tenant, within 15 days of the agreement, with a written statement containing the information required.

The information required shall be kept current and this section shall extend to and be enforceable against any successor owner or manager, who shall comply with this section within 15 days of succeeding the previous owner or manager.

A successor owner or manager shall not serve a notice pursuant to paragraph (2) of Section 1161 of the Code of Civil Procedure or otherwise evict a tenant for nonpayment of rent that accrued during the period of noncompliance by a successor owner or manager with this subdivision.

The plain terms of section 1962 required that the December notice advising defendant of the change in management from IE to Bridge disclose, in writing, the name, telephone number, and usual street address at which personal service may be effected of each person authorized to manage the premises and each person who is an owner of the premises or a person authorized to act on the owner’s behalf for the purpose of service of process and for the purpose of receiving all notices and demands.

In other words, at a minimum, this mandates the notice: identify each person authorized to manage the premises could only be considered if it is clear that the defect is one which could not have been remedied had it been called to the attention of plaintiff by the motion.

In other words, affirmance of an order granting nonsuit on a ground not argued to the trial court is prohibited unless the record establishes the flaw was not correctable by further proof. Respondent’s alleged defect did not pass this test and was therefore not considered by the Supreme Court.

For written leases, the requirements that the disclosures be made in the lease, and that copies be provided to the tenant when the lease is executed and on a yearly basis thereafter upon request of the tenant, indicate the disclosures are to be made in writing.

As for oral leases, the requirements that tenants be furnished a written statement containing the disclosures when the agreement is made and on a yearly basis thereafter upon request of the tenant impose a similar requirement.

With regard to keeping tenants apprised of any changes in the information to be disclosed, the requirement that any successor owner or manager shall comply with this section within 15 days of succeeding the previous owner or manager mandates that notice of the changes be made within 15 days and, in compliance with the section,” that it be made in writing.

Even crediting Madrigal’s testimony that she handwrote her name and telephone number on the December notice prior to serving it, there is nothing on the notice that explains her connection to the property, e.g., someone authorized to manage the premises, or a person authorized to act on the owner’s behalf.

Nor was there any written link between Madrigal and the street address of the Bridge office in Palmdale for the purpose of service of process (or of notices and demands) on Madrigal and/or service of process on behalf of plaintiff. In fact, the Palmdale address is preceded by the language you can remit payment to: suggesting that the sole purpose of the address is limited to receiving rental payments.

Plaintiff’s response was to follow the trial court’s reasoning and argue substantial compliance.

Plaintiff maintained the contents of the December notice (which identified Bridge as the new management company and specified the street address of its office in Palmdale), combined with Madrigal’s testimony that she handwrote her name and telephone number on the face of the notice, constituted proof that the notice substantially complied with the requirements of section 1962.

Substantial compliance means actual compliance in respect to the substance essential to every reasonable objective of the statute.

Where there is compliance as to all matters of substance, technical deviations are not to be given the stature of noncompliance.

Substance prevails over form. When the plaintiff embarks on a course of substantial compliance, every reasonable objective of the statute at issue has been satisfied.

Thus, the doctrine gives effect to our preference for substance over form, but it does not allow for an excuse to literal noncompliance in every situation.

Plaintiff argues substantial compliance buttressed by totality of the circumstances, including those beyond the four corners of the notice.

In this respect, plaintiff points not only to the contents of the notice and Madrigal’s testimony that she wrote her name and number on the notice, but to her testimony that her position as property manager had not changed with plaintiff’s purchase of the property, and that defendant had been paying rent directly to Madrigal who lived across from defendant.

Presumably the disclosures required under section 1962 may be lessened to some degree for tenants who already know the identity of the property manager and where he or she resides.

But it is difficult to excuse as “technical deviation” the failure of a successor owner or manager to make mandated disclosures where the finding of substantial compliance relies on the presumption that the information to be disclosed was already known to the person to be informed. Plaintiff has provided no legal authority to support such an understanding of substantial compliance.

Furthermore, the doctrine of substantial compliance does not apply at all when a statute’s requirements are mandatory, instead of merely directory.

A mandatory statute is one that is essential to the promotion of the overall statutory design and thus does not permit substantial compliance.

As this court wrote in DLI Properties, specifically with regard to section 1962 and the disclosures required of successor owners or managers before they can serve a three-day notice for nonpayment of rent or pursue eviction under Code of Civil Procedure section 1161(2), the legislative history makes clear the primary purpose for adding subdivision (c) to section 1962 was to ensure successor owners and/or their managers would notify their tenants where they were to send rent payments so as to avoid evictions based on nonpayment of rent.

In short, the legislative history of section 1962, specifically of subdivision (c), confirms that the provision is one that is essential to the promotion of the overall statutory design and thus does not permit substantial compliance.

Because compliance with section 1962 is effectively a jurisdictional prerequisite to an unlawful detainer action, strict compliance with its provisions is required. (See, e.g., landlord must strictly comply with the jurisdictional prerequisite of a valid three-day notice.)

The undisputed evidence demonstrates that plaintiff was a successor owner or landlord. Plaintiff purchased the property from the prior owner, Infinity, at which time defendant’s tenancy was governed by an oral agreement with Infinity.

Neither plaintiff nor defendant offered any evidence that a new and separate lease was executed or entered into by the parties subsequent to plaintiff’s purchase of the property.

The evidence further showed that Bridge succeeded IE as the property management company, as set forth in the December notice, purportedly served on defendant.

Under section 1962, plaintiff as a successor owner, and Bridge as a successor manager, were required to comply with section 1962 within 15 days of succeeding the previous owner or manager.

Where, as here, the lease agreement was an oral agreement, compliance with this section consisted of serving the tenant a written statement containing the information required.

As detailed above, however, the December notice advising defendant of the change of management from IE to Bridge did not provide the required information in strict compliance with section 1962(a)(1).

As a result, plaintiff, as a successor owner, was precluded from serving a three-day notice to pay rent or quit or otherwise evicting a tenant for nonpayment of rent that accrued during the period of noncompliance by a successor owner or manager with this subdivision.

This means plaintiff was barred from doing exactly what it did here—i.e., file a complaint in unlawful detainer premised on a three-day notice to pay rent or quit, seeking the payment of back rent that accrued during the period of noncompliance.

The court was found to have erred in denying defendant’s motions for nonsuit and a directed verdict, and the judgment was reversed.

LESSONS:

1.         Civil Code section 1962 requires owners of rental property to make certain written disclosures to their tenants.

2.         The information to be disclosed must be kept current such that the required disclosure extends to any successor owner or manager.

3.         The doctrine of substantial compliance does not apply at all when a statute’s requirements are mandatory, instead of merely directory.

4.         A mandatory statute is one that is essential to the promotion of the overall statutory design and thus does not permit substantial compliance.

5.         A successor owner was precluded from serving a three-day notice to pay rent or quit or otherwise evicting a tenant for nonpayment of rent that accrued during the period of noncompliance by a successor owner or manager with this subdivision.