Question for California multifamily landlords who have implemented RUBS to recoup utility costs. I have implemented a RUBs systems using Realpage to begin billing my tenants RUBs however several tenants refuse to pay the RUBS reimbursement despite the fact that we served them the 60 day notice updating the terms of their lease.
I do not believe that I can apply rent payments to their RUBS balances legally in California. Nor can a RUBS delinquency justify an eviction. Therefore, I can only deduct any uncollected RUBS balance from their security deposit if/when they move out or try to file a judgment in small claims court, something I'd like to avoid doing with a current tenant.
Anyone have any experience with this?
What do you mean that you updated their lease terms? I'm assuming that they are not in the middle of a year lease that you tried updating mid-lease, but instead they are month-to-month tenants.
Assuming you had the legal right to update the lease, you have the following options (when things return to normal):
1) If long term lease, file for eviction. They aren't complying with the contract. Not paying RUBS is no different than them shorting you $100 on the rent. Take the monies owed out of security deposit when they are out.
2) If MTM lease, issue non-renewal. Take the monies owed out of security deposit when they are out.
3) Take them to small claims court. This is the worst option since they are still living there.
FYI, some places have banned rent increases due to COVID. Confirm that your area did not and if it did that this change does not violate the law.
Hi Greg, Thanks for the detail response.
I meant that a proper lease addendum was served for the utility billing. The tenants were not served in the middle of a year lease.
However, I recall reading somewhere and discussing with my RUBS provider that in California RUBS balances are not treated the same as Rent Balances, nor can I apply rent checks to pay down a RUBS balance. Also specifically, I can not file for an unlawful detainer on the basis of tenants not paying RUBS. Have you heard of anything like this?
@Jason Mak There's no way for us to know if you can apply rent payments towards anything other than rent because we don't know how the lease reads. Some leases specify how rent payments are to be applied and in what order (i.e. past due charges first then current charges, at the sole discretion of the landlord, etc). And other leases are completely silent on this matter.
At a minimum, if you have an addendum to your lease that requires them to pay this as a condition of the lease, and they are not paying it, then you could always serve them with a Cure or Quit Notice (also referred to as a Perform Covenant or Quit Notice). That option is available for any breach of the lease agreement.
Hi Kyle! Thanks for you response.
I think the lease language is besides the point. What I'm trying to say is that (I believe that) even if the lease language explicitly allows for landlord to apply the rent payments towards the RUBs balance, it is against the law in CA for a landlord to apply the rent to anything besides the rent.
I remember examining this issue closely several years ago when I implemented RUBS for another property - several RUBS companies I spoke with told me that the only way I could legally collect on the RUBS balance would be to take the tenant to small claims court, not unlawful detainer.
Similar to how we aren't able to include late fees when we file for an unlawful detainer, RUBS owed to the landlord is not treated as rent owed to the landlord.
I'm hoping I'm wrong and you guys are right on this. Have you guys personally successfully evicted a tenant who was current on his rent payments but not paying their RUBS?
I think the lease language is besides the point. What I'm trying to say is that (I believe that) even if the lease language explicitly allows for landlord to apply the rent payments towards the RUBs balance, it is against the law in CA for a landlord to apply the rent to anything besides the rent.
Respectfully, the lease language is not “besides the point”. It is the main point.
First, it is not inherently illegal to apply rent to other charges besides rent if allowed per the lease. I’ll give you a couple examples.
My attorney (who has been an attorney for over 40 years and specializes in California landlord-tenant law), has a lease with the following clause (in summary) that addresses how the tenant’s rent payments can be applied: “...all payments will be first credited at the sole option of the Landlord or the Landlord’s Agent to any previous rent due or all other charges assessed against the Tenant before any credit will apply to the current rent due. Charges shall include but not be necessarily limited to, late fees, 3-Day Notice fees, dishonored check fees, charges for Tenant caused maintenance and damage to the premises, and any unpaid utility bills.”
So if you had a clause like that in your lease, you could apply the rent payments as the lease specifies (including to unpaid utility bills).
Additionally, there is another clause that states (in summary) under the Utilities section: “...Tenant shall be responsible for and shall pay when applicable directly to the appropriate supplier, for ALL utilities and services, private and public service charges and assessments, and deposits required by a utility or service company including but not limited to gas, electricity, water, sewer, garbage, phone, cable, satellite dish, internet connection etc. If the Tenant fails to pay for the costs of ALL utilities...the Landlord may elect to pay said amounts, whereupon upon demand of the Landlord for payment by the Tenant, the Tenant must immediately pay to the Landlord said amount.”
And if you had a clause like that, you could pay the utility bill on the tenant’s behalf and then have the right to immediately demand payment from the tenant.
And then you always have the catch-all, which is what I mentioned before, that if your lease requires the tenant to do something (like pay the utilities in this case) or not do something (like have a pet as an example), and then they either fail to do that thing that is required (like pay the utilities) or they do the thing that is forbidden (they get the pet they’re not supposed to have), then you can always serve the Cure or Quit notice for breaching some term of the lease agreement. Then they either fix the problem or they don’t. And if they don’t, you’ll have to decide at that point if you want to take the next step, which would be eviction (unlawful detainer).
Lastly, I’ll just say, I did my best to explain this but I apologize in advance if I didn’t do a good job or it’s still not clear. Ultimately, I always like to tell people anyway that the best thing to do is, especially if you’re not sure, consult your own local landlord-tenant attorney and get they’re advice. That’s what I do.
Hi Kyle - Thanks again for this in-depth post. What you are saying certainly makes sense and the language that you provided (thank you very much) is logical.
I'm really trying not to debate this here as I certainly hope you are right...the reason I posted to ask this question was that I several years ago when I started implementing RUBS, the company I used (NWP at the time, now RealPage) and I discussed this and I recall this conversation coming up where we I was told that rent couldn't be applied to RUBS nor could I evict on the basis of nonpayment.
I've also been consulting for an onsite manager of another of my properties (who herself is quite seasoned having managed 100+ unit communities professionally for years) and we came to a similar conclusion. Unfortunately, I've combed my emails and the internet (including the state bill) trying to find this wrinkle in the law but couldn't find anything yet. I'm fully aware that I sound awfully stupid trying to jog my memory right now...perhaps the COVID is getting to me...ha!
If anything comes up or if I'm able to get someone from Realpage or one of the RUBs companies to confirm I'll certainly post and update everyone here.
Appreciate you taking the time to post and respond!
Pivoting here a little but you may be able to offer insight here. What if I have tenants coming off a 1 year lease and are unwilling to sign a lease amendment to begin RUBs?
Pre- AB1482, I could simply serve notice to terminate the tenancy, however now, we need just cause. I’m not sure “unwilling to accept new lease terms” would constitute as just cause right?
I could also simply serve them a letter notifying them of the change in lease terms, where I do not ask for a counter signature.
Thanks again guys
Pivoting here a little but you may be able to offer insight here. What if I have tenants coming off a 1 year lease and are unwilling to sign a lease amendment to begin RUBs?
Pre- AB1482, I could simply serve notice to terminate the tenancy, however now, we need just cause. I’m not sure “unwilling to accept new lease terms” would constitute as just cause right?
I could also simply serve them a letter notifying them of the change in lease terms, where I do not ask for a counter signature.
Thanks again guys
Hi Jason! This specific question is what I am looking into right now. Did you ever find anything on this?
I don’t think I ever got a direct answer. It has been tough to get straight and comprehensive answers around the state law, even when paying attorneys.
I ended up just serving a 60 day change in terms of tenancy, most tenants complied. The ones that refused to pay their, back rubs balance, I just deduct it from their security deposit when they move out - since I am under the impression that you cannot evict someone due to rubs