BILL ANALYSIS Ó
SENATE JUDICIARY COMMITTEE
Senator Noreen Evans, Chair
2011-2012 Regular Session
SB 1055 (Lieu)
As Introduced
Hearing Date: May 8, 2012
Fiscal: No
Urgency: No
SK:rm
SUBJECT
Landlord and Tenant - Payments
DESCRIPTION
This bill would prohibit a landlord from demanding or requiring
online Internet payments as the exclusive form of payment of
rent or deposit of security, as specified. This bill would
require any landlord who offers the option of payment of rent or
deposit of security online to also accept payment of rent or
deposit of security by check or money order.
BACKGROUND
Existing law governs the relationship between landlords and
tenants, and generally prohibits a landlord from requiring a
tenant to pay cash for his or her rent or security deposit. SB
115 (Torlakson, Chapter 76, Statutes of 2004) enacted that
prohibition in response to concerns that some landlords in the
Los Angeles rental housing market were demanding cash from
tenants as the exclusive form of paying rent. As noted in this
Committee's analysis for SB 115, the sponsor of that bill,
Western Center on Law and Poverty, asserted that legal services
attorneys had seen cases involving cash payments in rent control
areas where "a landlord seeking to force a tenant to
'voluntarily vacate' so that the unit can be rented to a new
tenant at a higher rate may claim the rent was never paid or
offered in order to evict the tenant for nonpayment. ÝT]his
would result in a 'he said, she said' situation before a judge.
In such cases, the tenant typically loses in the absence of some
documentary proof of payment (such as a rent receipt), which the
unscrupulous landlord will not provide."
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This bill seeks to respond to a related issue of landlords
requiring their tenants to make rental payments online. Similar
to the above issues regarding cash payments, the Los Angeles
Times' March 7, 2012 article entitled L.A. Tenants Battle
Landlord's Online-Only Rent Payment Rule reported:
Tenants and a state senator are battling a requirement by a
Los Angeles landlord that residents pay their rent online,
alleging that a "green" initiative introduced by the company
is actually a pretense to evict low-income, elderly renters
benefiting from rent-stabilization provisions.
Elderly renters living in the Woodlake Manor Apartment
building in South Los Angeles have sued their landlord,
Jones & Jones Management Group Inc., alleging that their
digital shortcomings could leave them vulnerable to eviction
under the Woodland Hills company's new requirement that they
make all their payments online. . . . "I am 86 years old
and I am computer illiterate," said Margaret Beavers, a
resident in the apartments since 1963 and a plaintiff in the
suit against the landlord. "I'd have to buy a computer and
learn how to use it; at 86 I want to travel and do other
things."
Dedon Kamathi, a 12-year resident of Woodlake Manor and an
organizer with the Woodlake Manor Tenants Assn., said the
move by Jones & Jones was as an attempt to exploit a
"digital divide" between the lower-income, largely African
American long-term residents in the building and the
higher-income renters that the company is actively courting.
. . . The company in its statement denied that the refusal
by residents to pay online would be used as grounds for
eviction proceedings and said the purpose of the policy was
to save paper. The company expressed confidence that the
situation would get "worked out." "The objective was to 'go
green' and make it easier for residents to pay rents by
having an online method," the company said in its statement.
"Indeed, the majority of their residents are not unhappy
using the online process."
To address concerns raised about the practice of requiring
tenants to pay rent online, this bill would expressly prohibit
landlords from demanding or requiring online payments as the
exclusive form of rent or deposit of security. Any landlord
who offers the option of online payments would be required to
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also accept payment by check or money order.
CHANGES TO EXISTING LAW
Existing law generally regulates the relationship between
landlords and tenants, including the terms and conditions of the
tenancies. (Civ. Code Sec. 1940 et seq.)
Existing law prohibits a landlord from demanding or requiring
cash as the exclusive form of payment of rent or deposit of
security unless the tenant has previously attempted to pay the
landlord with a check drawn on insufficient funds, or the tenant
has stopped payment on a check or money order, as specified.
(Civ. Code Sec. 1947.3.)
Existing law permits a landlord to commence unlawful detainer
proceedings against a tenant for failure to pay rent upon
providing a three-day notice to pay rent or quit (vacate).
(Code Civ. Proc. Sec. 1161(2).)
This bill would prohibit a landlord or landlord's agent from
demanding or requiring online Internet payments as the exclusive
form of payment of rent or deposit of security in any lease or
rental agreement that is first effective on or after January 1,
2013. Any landlord or agent that offers the option of payment
of rent or deposit of security online shall also accept payment
of rent or deposit of security by check or money order.
This bill would provide that the above provision does not
enlarge or diminish a landlord's or landlord's agent legal right
to terminate a tenancy.
This bill would provide that a waiver of the above provisions is
contrary to public policy and is void and unenforceable.
COMMENT
1. Stated need for the bill
According to the author:
SB 1055 would make it clear that while landlords may receive
rental payments online, they cannot require online rental
payments as the only way to pay rent.
. . . This issue came to light late in 2011 when hundreds
of tenants in apartment complexes in Los Angeles objected
when the property-management group notified residents of a
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300-unit complex that the only way they could soon pay rent
was online. Many residents of the rent-controlled complex
said they were elderly, lived on fixed incomes and knew
nothing about computers. They said they preferred to
continue paying rent via checks or money orders.
While trends may show more and more renters are paying their
bills online, landlords risk creating the impression that
they want those most reluctant to pay online feel they are
being pressured to either adopt a lifestyle for which they
don't feel ready or that the landlord is pressuring them to
move elsewhere.
The author further notes the Los Angeles City Housing
Department "issued a recent warning to at least one
apartment-management group, telling the firm to cease and
desist the practice," and that SB 1055 would provide
flexibility by "enabling landlords to still offer the option
of paying rent or a security deposit online but also ensuring
that rental payment by check or money order is also allowed."
2. Issues regarding online payment of rent
Under this bill, a landlord would not be permitted to demand or
require a tenant to make rental payments or security deposits
online. Although there are various definitions, the digital
divide generally refers to the gap between various individuals
and groups with respect to knowledge of, and access to,
information technology. With respect to the scope of the
digital divide, the U.S. Department of Commerce's November 2011
report entitled Exploring the Digital Nation: Computer and
Internet Use at Home noted that "Ýb]roadband Internet adoption,
as well as computer use, varied across demographic and
geographic groups. Lower income families, people with less
education, those with disabilities, Blacks, Hispanics, and rural
residents generally lagged the national average in both
broadband adoption and computer use." By prohibiting landlords
from requiring tenants to make rental payments online, this bill
would ensure that those tenants without access to, or knowledge
of, information technology are still able to make rental
payments and avoid eviction due to non-payment of rent.
Although landlords may not intend to target specific groups for
eviction, the practical effect of requiring a tenant who does
not have Internet access to pay online would appear to be to
substantially increase the likelihood of nonpayment of rent
(which results in eviction).
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It should be noted that SB 1055 would not ban online payment of
rent, but merely require that if online payment of rent is
offered, the landlord must also accept payment of rent or
deposit of security by check or money order. Those additional
allowances also ensure that tenants do have a choice if they do
not feel comfortable paying their rent online. Some tenants may
not feel comfortable divulging credit card or bank account
information to a private third party over the Internet due to
privacy or security concerns. These privacy and security
concerns are further exacerbated if the tenant must use an
unsecured computer in a public Internet café to make the payment
- the tenant may have no way of knowing if the third party
computer itself contains any malicious software or other
eavesdropping device that could steal sensitive financial
information. Furthermore, tenants who do not have a bank
account or credit card by which to make an online payment could
face further difficulties in attempting to find a way to pay
their rent in a timely fashion in order to avoid eviction.
From a public policy standpoint, this bill would appear to both
ensure that tenants who wish to pay rent are not forced from
their homes due to lack of technology, or, required to send
sensitive financial information across the Internet in order to
avoid eviction from their home.
3. Exceptions
As noted above, the provisions of existing law that prohibit a
landlord from requiring cash as an exclusive form of payment
contains an exception for circumstances where a tenant
previously attempted to pay with a check drawn on insufficient
funds or stopped payment on a check or money order. This
exception was added to SB 115 (Torlakson, Chapter 76, Statutes
of 2004) to address concerns raised by the California Apartment
Association (CAA) that a landlord would have been prohibited
from requiring a cash payment in those circumstances.
While this bill primarily deals with the requirement of online
payments, it does require the landlord to accept a check or
money order in circumstances where the tenant has the option of
providing an online payment. That provision could potentially
require a landlord who does offer online payment to also accept
checks (and not demand cash) from tenants who have written
several bad checks. Despite that potential impact, it should be
noted that landlords already have recourse for bad checks under
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existing law, and that those who elect to accept online payment
may face other related difficulties, such as a tenant contesting
a charge made on a credit card.
Accordingly, the Committee may wish to consider whether this
bill should conform to existing law by striking the requirement
that the landlord accept check or money order if the tenant has
an option to pay rent or a security deposit online. That
amendment would retain the proposed prohibition on requiring
online payment as the exclusive form of payment and allow
existing law to govern the other forms of permissible payment.
Suggested amendment:
On page 1, line 6, strike "Any" and, on page 2, strike out
lines 1 through 3, inclusive.
4. Bill does not apply to pending litigation
It should be noted that the provisions of this bill apply to any
lease or rental agreement that is first effective on or after
January 1, 2013. This language applying the bill prospectively
ensures that the bill does not impact pending litigation by
changing the law that applies to the above-mentioned litigation.
It should also be noted that the author maintains that existing
law is "ambiguous, if not silent," thus, the provisions of this
bill should not be construed to imply that the prior practice of
requiring only online payment was clearly permitted by state
law.
Support : American Federation of State, County and Municipal
Employees (AFSCME), AFL-CIO; BASTA, Inc.; California Apartment
Association (CAA); City of Santa Monica; City of West Hollywood
(if Amended); Santa Monicans for Renters' Rights
Opposition : None Known
HISTORY
Source : Western Center on Law & Poverty
Related Pending Legislation : None Known
Prior Legislation : SB 115 (Torlakson, Ch. 76, Stats. 2004) See
Background; Comment 3.
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