BILL ANALYSIS Ó SENATE JUDICIARY COMMITTEE Senator Noreen Evans, Chair 2011-2012 Regular Session AB 2521 (Blumenfield) As Amended May 8, 2012 Hearing Date: July 3, 2012 Fiscal: No Urgency: No BCP SUBJECT Landlord and Tenant: Personal Property DESCRIPTION This bill would increase to $700, from $300, the threshold amount of determining whether the landlord must dispose of the departed tenant's unclaimed property via a public sale, with the proceeds of the sale (less storage and sale costs) held for the tenant, or whether the landlord may dispose of the property in any manner or retain it for his or her own use. This bill would, among other things: require a landlord to release the personal property to the former tenant without paying the cost of storage, if, the property remained in the dwelling and the former tenant or other person reasonably believed by the landlord to be its owner reclaims the property within two days of vacating the dwelling; and require a landlord to inform the tenant of his or her general right to recover abandoned property in the notice to terminate a tenancy, or in the notice to request an initial inspection of the property prior to termination. BACKGROUND Current law specifies a procedure for when a tenant who, whether voluntarily vacated or forcibly evicted from the proceedings, has left behind personal property upon the termination of that person's tenancy. If the property remains unclaimed after the statutory 15-or 18-day notice period, the disposition of the property depends upon whether the landlord reasonably believes the total resale value of the unclaimed property is less than (more) AB 2521 (Blumenfield) Page 2 of ? $300. If reasonably believed to be worth less the $300, the landlord may retain the tenant's unclaimed property for his or her own use or dispose of it in any manner, including selling it and retaining the proceeds. If the total value of the unclaimed property is reasonably believed to be $300 or more, then the landlord must dispose of the property through an advertised public sale open to competitive bidding. After deducting the costs of storage, advertising, and sale, any balance of the sale proceeds is held for the tenant for 30 days. If not thereupon claimed, the proceeds are turned over to the county treasury for claim by the tenant within one year from the date of payment to the county. In 2007, AB 410 (Adams, 2007) would have increased to $650 the total value of a terminated tenant's unclaimed property from that the landlord may retain for his or her own use, or to dispose of in any manner, instead of having to sell the property at a public sale and to hold any excess sales proceeds for the tenant. That bill failed twice in this committee by a vote of 2-2, and 2-3, respectively. This bill similarly would similarly increase the amount of unclaimed property a landlord may retain for his or her own use, or dispose of, to $700. This bill would require a landlord to return the property to the tenant within two days of the tenant vacating the dwelling (if the property remained in the dwelling), and revise various notices to inform tenants about their rights. CHANGES TO EXISTING LAW Existing law requires a landlord to provide written notice to a former tenant of the tenant's right to reclaim personal property left behind when the tenancy was terminated. The notice must inform the tenant whether the landlord intends to hold a public sale for the property, or to keep, sell, or destroy the property without further notice because the landlord believes the property to be worth less than $300. (Civ. Code Secs. 1984 and 1988.) Existing law provides the tenant at least 15 days to claim the property if the notice is personally delivered, and at least 18 days if the notice is mailed. If mailed, the notice must be sent by first-class mail to the tenant at his or her last known address and, if that mailing address is reasonably believed to be deficient, to another address known by the landlord where the AB 2521 (Blumenfield) Page 3 of ? tenant may reasonably be expected to receive the notice. (Civ. Code Sec. 1983.) Existing law authorizes a landlord to retain or dispose of personal property left on the premises and unclaimed by the former tenant if the landlord reasonably believes that the property has a total resale value of less than $300. (Civ. Code Sec. 1988.) Existing law requires the landlord to hold a public sale with competitive bidding for unclaimed personal property left by a former tenant if the value of the property is believed to be worth $300 or more. (Civ. Code Sec. 1988.) Existing law generally defines "reasonable belief" as the actual knowledge or belief a prudent person would have without making an investigation. (Civ. Code Sec. 1980(d).) This bill would increase the above monetary threshold value from $300 to $700, thereby allowing a landlord to keep, sell, or destroy a tenant's unclaimed personal property if the total resale value of the property is reasonably believed to be less than $700. This bill would require a landlord to release the personal property to the former tenant without paying the cost of storage, if the property remained in the dwelling and the former tenant or other person reasonably believed by the landlord to be its owner reclaims the property within two days of vacating the dwelling. This bill would revise the notice of the tenant's right to reclaim personal property so as to include language informing the tenant that if he or she claims the property by a specified date (not less than 2 days after the tenant vacated the premises), the tenant may minimize the costs of storage. This bill would also require the landlord to inform the tenant of his or her general right to recover abandoned property in the notice to terminate a tenancy, or in the notice to request an initial inspection of the property prior to termination. This bill would further allow the landlord to provide to the former tenant by email, in addition to personal delivery or first class mail, written notice describing personal property left behind by the former tenant and how to reclaim such property, but only if the former tenant had provided the AB 2521 (Blumenfield) Page 4 of ? landlord with his or her email address. COMMENT 1. Stated need for the bill According to the author: AB 2521 would provide a one-time inflation adjustment in the threshold for the handling of abandoned tenant property by landlords to $700. The bill also requires a change in the notice to tenants consistent with the threshold adjustment so tenants will be informed that "Żb]ecause this property is believed to be worth less than $700, it may be kept, sold, or destroyed without further notice if you fail to reclaim it within the time indicated above." AB 2521 would provide a reasonable adjustment in the dollar value of abandoned tenant property that triggers a public sale, which has not been increased since 1983. Using the Consumer Price Index as a measure for inflation, the proposed adjustment would raise the threshold to $700. This legislation reflects the compromise we worked out with the apartment owners and Western Center on Law and Poverty to ensure that this bill not only benefits landlords but tenants as well. It would, for the first time, allow tenants who act promptly to reclaim abandoned personal property without charge. Additionally, AB 2521 propels the process into the 21st Century by allowing landlords to contact tenants by e-mail about abandoned property found - in addition to the current mailed notification process. AB 2521 would also give tenants earlier notice of their rights to reclaim abandoned property. The bill does not change requirements that a landlord act reasonably in removing and storing the tenant's abandoned property. The bill does not change requirements that a landlord act reasonably in removing and storing the tenant's abandoned property. The landlord still must take specified steps to notify a former tenant who abandoned property at the rental unit and store the property at the tenant's expense if the property is reclaimed. The current costs of advertising, storage and sale paid by a landlord may far AB 2521 (Blumenfield) Page 5 of ? exceed the value of the abandoned property. According to the Apartment Association of Greater Los Angeles, tenants often do not reclaim abandoned property valued at under $300. Los Angeles County reports receiving $26,149 as of January 31, 2012 from the public auction of abandoned tenant property with few claims filed for proceeds from the sale of their property. AB 2521 would provide a much-needed update that reflects today's economic realities. 2. Additional tenant protections justify proposed increase This bill seeks to increase the amount of unclaimed property that a landlord may keep, sell, or destroy from $300 to $700. As noted above, while that increase is $50 greater than the increased proposed by AB 410 (Adams, 2007), this bill also contains tenant protections that arguably help reunite tenants with their property. Proponents of the increase, the Apartment Association, California Southern Cities, East Bay Rental Housing Association, NORCAL Rental Property Association, and the Apartment Association of Orange County assert: The current law was established in 1983. Updating the law to allow for property worth less than $700 to be dealt with expeditiously makes sense. Under the outdated current law, landlords have been required to sell all property worth $300 or more at public auction, pay for a legal advertisement to notice the sale, and pay for all costs of moving, storage, and junking unclaimed property. These expenses make it impossibly expensive for the tenant to reclaim the property, and often end up costing the landlord much more than the value of the property. Although the proposed increase arguably reflects inflation, as this Committee noted with respect to AB 410, any increase must also be evaluated from a policy perspective, taking into account the potential impact on tenants. Regarding those policy implications, this Committee's analysis of AB 410 observed: However, inflation does not in itself justify an increase in a monetary threshold amount, even one that has not been adjusted since 1982. . . . Thus, other public policy considerations, not just inflation, factor into determining whether to adjust a monetary threshold figure for inflation. In this case, one primary consideration is the hardship on the terminated tenant losing his or her ability to reclaim his or her property or the value of it. Unlike the examples AB 2521 (Blumenfield) Page 6 of ? presented . . ., many tenants will not have designer jeans and trendy running shoes that will readily bust the $300 threshold. Rather, because some of them will have been forcibly evicted and will not have found replacement housing, those affected tenants need a fair and reasonable law that will allow them to continue with what they have as opposed to rebuilding from scratch. Proponents of this bill assert that the proposed tenant protections discussed below make this bill a different and much-improved bill over AB 410. The author's office further observes that the actual cost of conducting a sale of property is likely to exceed the $300 threshold (largely due to the cost of publication), thus, even if a sale were required, the former tenant would not receive any proceeds. a. Two-day right to recover This bill would specifically require a landlord to release a former tenant's personal property, and to not require the tenant to pay the costs of storage, if: (1) the property remained in the dwelling; and (2) the former tenant or person reasonably believed by the landlord to be its owner reclaims the property within two days of vacating the dwelling. While that provision would give a former tenant the right to recover property free of charge, it is unclear how many tenants will take advantage of that right after mistakenly leaving items behind when quickly moving out. First, the provision would apply only if the property remained in the dwelling. In cases where the property must be turned around within 24 to 48 hours to accommodate an incoming tenant (a not-uncommon scenario for apartments), it is unclear if the property could remain in the apartment for the full two-day period. As a result, this provision would most likely apply in a circumstance where the items left behind are heavy, awkward, or otherwise of a nature where the landlord does not wish to take the time or expense of removing them from the unit. Second, while the bill provides a two-day period in which the tenant may recover his or her property without being required to pay storage costs, it is unclear how many tenants quickly discover that their property was left behind. It should be noted that while the bill would also augment the statutory "Notice of Right to Reclaim Abandoned Property" to inform AB 2521 (Blumenfield) Page 7 of ? tenants that they can minimize the costs of storage if they claim their property by a specified date, that notice would likely not reach the tenant within two days of vacating the property. Despite those limitations, the two-day window could be helpful to those tenants who quickly discover that an important, valuable item was left behind (or who just are not able to move everything out by the move-out date). It should be noted that this bill would allow a landlord to additionally email the "Notice of Right to Reclaim Abandoned Property," if the former tenant provided the landlord with the tenant's email address. While that email could provide a quick way of delivering the notice, emailing of the notice is not required, and it is unclear whether the average tenant would have access to his or her email when moving from apartment to apartment due to delays in setting up Internet service or the simple lack of a computer. b. Additional notices In addition to augmenting the "Notice of Right to Reclaim Abandoned Property." discussed above, this bill would also require the notice to terminate a tenancy and the notice to request an inspection of the property to include the following statutory notice: State law permits former tenants to reclaim abandoned personal property left at the former address of the tenant, subject to certain conditions. You may or may not be able to reclaim property without incurring additional costs, depending on the cost of storing the property and the length of time before it is reclaimed. In general, these costs will be lower the sooner you contact your former landlord after being notified that property belonging to you was left behind after you moved out. Although this notice seeks to inform tenants of their ability to retrieve forgotten property while they are still living in the dwelling, that information is only useful if the tenant actually realizes that property was left behind. 3. Practical impact of the threshold increase for unclaimed property The proposed threshold increase would allow a landlord to keep or dispose of up to $700 worth of a tenant's property, but the AB 2521 (Blumenfield) Page 8 of ? effect of that increase depends on how landlords value the abandoned property. Staff notes that the value of the property left by a tenant is determined by the landlord's reasonable belief as to the total resale value. That standard makes is somewhat difficult to evaluate the actual impact of the proposed change. For example, if a tie is left behind in good condition that has a retail value of $50, should a landlord reasonably value that tie at the retail price ($50), e-bay price ($20), thrift store price ($5), or garage sale price ($1)? Absent concrete valuation standards it is unclear how the proposed increase from $300 to $700 would actually play out in an actual situation - in other words, would a $700 threshold be met by 14 ties ($50 valuation) or 700 ties ($1 valuation). In response to an inquiry by Committee staff, the author provided the following examples of the impact of the threshold: Joe the Tenant asks his friends to help him move, and after a long day of moving, Joe and his friends decide to abandon an adjustable metal bed frame, an old, heavy sofa bed couch, a desk with chipped paint and a working 1992 Toshiba television. These items together exceed the $300 value threshold Żand] Sarah the Tenant is moving and leaves: a wicker bed frame; an old, heavy sofa bed couch; a desk with chipped paint; a refrigerator; crusty, unwashed pots and pans; a dusty vacuum; a washer that doesn't drain and a weak dryer; and a working 1992 Toshiba television. These items together exceed the $700 value threshold proposed in AB 2521. It should be noted that AB 2521 has no opposition and reflects a compromise with tenant groups. Furthermore, according to the supporters, it appears as though the vast majority of the abandoned items left behind when a tenant moves out are never actually recovered by the former tenant, thus, either implying that they are not aware of the property left behind, or, that they actually did not want those abandoned items. Support : Apartment Association, California Southern Cities; Apartment Association of Greater Los Angeles; Apartment Association of Orange County; East Bay Rental Housing Association; NORCAL Rental Property Association; San Diego AB 2521 (Blumenfield) Page 9 of ? County Apartment Association; Santa Barbara Rental Property Association Opposition : None Known HISTORY Source : Author Related Pending Legislation : None Known Prior Legislation : AB 410 (Adams, 2007) See Background and Comment 2. Prior Vote : Assembly Judiciary Committee (Ayes 10, Noes 0) Assembly Floor (Ayes 76, Noes 0) **************