BILL ANALYSIS Ó AB 969 Page 1 Date of Hearing: May 7, 2013 ASSEMBLY COMMITTEE ON JUDICIARY Bob Wieckowski, Chair AB 969 (Ammiano) - As Introduced: February 22, 2013 SUBJECT : LANDLORD AND TENANT: UNLAWFUL DETAINER KEY ISSUES : 1)IN AN UNLAWFUL DETAINER CASE, SHOULD DETERMINATIONS OF FACTUAL QUESTIONS OF HABITABILITY BE MADE BY THE TRIER OF FACT, WHETHER A JUDGE OR JURY? 2)SHOULD IT BE CLARIFIED THAT EXISTING LAW PROVIDES TENANTS THE RIGHT TO PRESENT EVIDENCE OF RETALIATION IN UNLAWFUL DETAINER CASES, WHETHER OR NOT THE LANDLORD HAS ALLEGED NON-PAYMENT OF RENT? FISCAL EFFECT : As currently in print this bill is keyed non-fiscal. SYNOPSIS This bill, sponsored by the East Bay Community Law Center, seeks to clarify two sections of law that help protect tenants facing eviction where habitability or retaliation are possible defenses in the case. First, this bill would establish that habitability determinations, which are questions of fact, shall be made by the trier of fact in an unlawful detainer case. In other words, the bill simply clarifies that the jury, if there is one, shall consider factual questions of habitability in the case, if any such questions arise. If there is no jury, then the judge as the trier of fact shall make such determinations. Second, this bill would clarify that under Civil Code Section 1942.5 (c), tenants have the right to present evidence of retaliation in an unlawful detainer case, whether or not the landlord has alleged non-payment of rent. In addition, this bill seeks to clarify the meaning of the term "in default" of rent under Section 1942.5(a), to distinguish lawful instances of non-payment of rent from true cases of default where the tenant has no justification for failing to pay rent. The bill is supported by tenant advocates and legal aid providers, who contend that the bill's proposed clarifications are necessary to ensure consistent application of landlord-tenant laws that are often AB 969 Page 2 misread or misapplied to the detriment of tenants. The bill is opposed by a number of apartment associations and landlord groups, who contend that these clarifications are unnecessary and create unfair presumptions in the law. Opponents also contend that the bill encourages jury trials in cases where habitability is a defense, which will add months of delay to what are supposed to be summary proceedings and will increase costs and burdens upon the courts. SUMMARY : Clarifies existing law regarding unlawful detainer where retaliation or habitability of the premises may be an issue in the case. Specifically, this bill : 1)Provides that, in an unlawful detainer proceeding involving residential premises after default in payment of rent and in which the tenant has raised as an affirmative defense a breach of the warranty of habitability, the jury, or the court, if the proceeding is tried without a jury, shall determine whether a substantial breach of these obligations has occurred. 2)Clarifies that the retaliation defense available to tenants in subdivision (c) of Civil Code Section 1942.5 is not limited by any provisions of, or conditions that apply to, the limited presumption of retaliation described in subdivision (a) of Section 1942.5. 3)Clarifies the meaning of "default" with respect to the limited presumption of retaliation described in subdivision (a) of Section 1942.5, which applies only if the tenant is not in default on the payment of rent; specifically, that the tenant is not in default as to payment of rent when either of the following conditions are met: a) The tenant has made all rent payments due or has exercised his or her right to deduct an amount from or withhold the payment of rent pursuant to Section 1942. b) The landlord is prohibited from collecting rent pursuant to Section 1942.4. EXISTING LAW : 1)Provides, generally, that a landlord must keep residential premises in a condition fit for human occupation. (Civil Code AB 969 Page 3 Section 1941.) 2)Provides that the breach of any warranty of habitability (implied or express) is a defense to an unlawful detainer action filed to recover possession or residential premises based on nonpayment of rent. (Green v. Superior Court (1974) 10 Cal. 3d 616.) 3)Provides that in an unlawful detainer proceeding in which the tenant has raised as an affirmative defense a breach of the landlord's obligations under Section 1941 of the Civil Code or of any warranty of habitability, the court shall determine whether a substantial breach of these obligations has occurred. (Code of Civil Procedure Section 1174.2.) 4)Provides that whenever an issue of fact is presented by the pleadings, it must be tried by a jury, unless the jury has been waived. (Code of Civil Procedure Section 1171.) 5)Provides that if the lessor retaliates against the lessee because of the exercise by the lessee of his rights under this chapter or because of his complaint to an appropriate agency as to tenantability (also known as "habitability") of a dwelling, and if the lessee of a dwelling is not in default as to the payment of his rent, the lessor may not recover possession of a dwelling in any action or proceeding, cause the lessee to quit involuntarily, increase the rent, or decrease any services within 180 days from the date the tenant has exercised certain rights, including, among other things: a) In good faith, having given notice or made an oral complaint to the lessor regarding tenantability. b) In good faith, having filed a written complaint, or registered an oral complaint, with an appropriate agency, of which the lessor has notice, for the purpose of obtaining correction of a condition relating to tenantability. (Civil Code Section 1942.5(a).) 6)Prohibits a lessor from increasing rent, decreasing services, causing a lessee to quit involuntarily, bringing an action to recover possession, or threatening to do any of those acts, for the purpose of retaliating against the lessee because he or she has lawfully organized or participated in a lessees' association or an organization advocating lessees' rights or AB 969 Page 4 has lawfully and peaceably exercised any rights under the law. Further provides that in an action brought by or against the lessee pursuant to this provision, the lessee shall bear the burden of producing evidence that the lessor's conduct was, in fact, retaliatory. (Civil Code Section 1942.5(c).) COMMENTS : This bill is sponsored by the East Bay Community Law Center (EBCLC), a non-profit law office that provides legal services to low-income people, including defending tenants in eviction cases. EBCLC states: In representing tenants in unlawful detainer actions, we find landlord attorneys regularly file motions to exclude all evidence of retaliation on the theory that retaliation can never be a defense in an unlawful detainer based on alleged non-payment of rent. Although this argument is based on a misreading of Civil Code 1942.5, it all too frequently succeeds. When these motions are granted, tenants are deprived of one of their most important defenses. In addition, landlord attorneys regularly file motions to have the question of whether there is a breach of the warranty of habitability decided by the judge, even when the case is being tried by a jury. While these motions contravene Section 1171 of the Code of Civil Procedure (which provides: "[w]henever an issue of fact is presented by the pleadings, it must be tried by a jury?"), considerable court time is wasted in arguing these motions and, when the motions are successful, tenants are deprived of their right to have their cases decided by juries. AB 969 eliminates ambiguities in these statutes and brings them into closer alignment with the intent and policy considerations underlying their original codification. Are questions of habitability questions of fact or questions of law? As a preliminary matter that is central to this analysis, it is important to ascertain whether the question of the habitability of the premises (or more precisely, whether there was a breach of the warranty of habitability) is a question of fact or a question of law. On the surface, it may seem obvious that habitability determinations--whether an apartment is infested with vermin or mold, whether a ceiling leaks or the plumbing is broken--pose questions of fact. There is a great AB 969 Page 5 deal of evidence, including legal authority and judicial practice, to support the conclusion that habitability questions are questions of fact, not law. First, case law establishes that whether a breach of the warranty of habitability has occurred is a question of fact. (Lehr v. Crosby, (1981) 123 Cal. App. 3rd Supp. 1, 6; Hall v. Municipal Court, (1974) 10 Cal. 3rd 641, 644.) When it has been determined that a breach has occurred, trial courts must "use all available facts to approximate the fair and reasonable damages under all of the circumstances." (Green v. Superior Court (1974) 10 Cal. 3d 616, 638.) Secondly, the Judicial Council, recognizing that habitability is a question of fact, has provided a detailed jury instruction, CACI 4320, setting forth standards by which the jury shall make a determination regarding habitability. Jury verdict forms established by the Judicial Council also provide for the jury's determination of the question of habitability. Furthermore, the California Supreme Court has held that failure to provide the jury with instructions regarding the warranty of habitability and the relevant standards for determining whether a breach had occurred constitutes prejudicial error. (Knight v. Hallsthammer (1981) 29 Cal. 3rd 46, 58.) Several apartment associations and landlord groups oppose the bill, but they generally do not contest that questions of habitability are questions of fact, not law. Both supporters and opponents agree that in various trial courts across the state, questions of habitability are often sent to the jury in those rare unlawful detainer cases where there is a jury, notwithstanding the current wording of Section 1174.2. Proponents contend that this confirms the soundness of the public policy that they would now like to codify, while some opponents contend that this represents the erroneous application of the law. Assuming that questions of habitability are indeed questions of fact, this bill seeks to ensure that that such questions go to the trier of fact, whether judge or jury. Existing law, CCP Section 1174.2, provides that in an unlawful detainer case in which the tenant has raised as an affirmative defense a breach of the landlord's obligations under Section 1941 of the Civil Code or of any warranty of habitability, it is "the court" that shall determine whether a substantial breach of these obligations has occurred. Supporters of this bill contend that AB 969 Page 6 in its current form, this reference to "the court" creates ambiguity as to whether the judge or the jury, if there is one in the case, should determine whether a breach of the warranty of habitability has occurred when the tenant is raising breach as an affirmative defense. According to one practicing EBCLC attorney, the wording of the statute leads to lengthy arguments before virtually every trial in which habitability is at issue. To reduce ambiguity, this bill seeks to clarify that determinations of factual questions of habitability should go to the trier of fact in the trial, whether judge or jury. It would revise Section 1174.2 to instead read that "the jury, or the court, if the proceeding is tried without a jury," shall determine whether a substantial breach of the warranty of habitability has occurred. Supporters and opponents of the bill both concede that under existing law, tenants have a statutory right to a jury trial in an unlawful detainer case if they so elect. (There is some disagreement as to whether the right is constitutional, but that is not an issue here.) Nevertheless, it is important to note that this bill does not require a jury in any eviction case or mandate the expansion of jury trials in such cases; it clarifies that the jury, if there is one, shall consider factual questions of habitability in the case, if any such questions arise. Legislative history of Section 1174.2. Current Civil Code Section 1174.2 was enacted by AB 3920 (Roos), Ch. 805, Stats. 1986, and included language stating "the court" shall determine whether breach of habitability obligations has occurred. The key issue presented by AB 3920 was specific criteria for determining who the prevailing party was in an unlawful detainer where breach of warranty of habitability is proven. A review of the legislative history of this statute did not yield any evidence that the Legislature specifically intended determination of breach to be withheld from the jury, or for that matter reserved to the court. In short, the legislative history of AB 3920 is inconclusive on the reason why "the court" is so designated. Competing concerns for jury determination. Supporters cite a number of arguments for jury-determination of habitability questions. First and perhaps most persuasively, Section 1171 of the Code of Civil Procedure plainly states "Whenever an issue of fact is presented by the pleadings, it must be tried by a jury, unless such jury be waived as in other cases." Section 1174.2 AB 969 Page 7 appears to be in direct conflict with Section 1171. Secondly, they note that juries are perfectly capable of handling this task because, as reported, they already do in some cases, as evidenced by the Judicial-Council-developed jury instruction forms that currently provide juries with guidance on these questions. Finally, proponents contend that the bill promotes fairness by helping to ensure that tenants who have not waived a jury trial are assured of having the jury consider and determine factual questions of habitability that may be central to their defense in the unlawful detainer case. Opponents contend that this bill will encourage jury trials, and that jury-determination of habitability questions will lengthen what should be a summary proceeding, and will impose undue cost on both the courts and landlords. For example, the California Apartment Association (CAA) states "While a jury trial may be a landlord's and tenant's right in certain circumstances, encouraging more jury trials in eviction cases throughout the state will add months of delay to what is supposed to be an expedited process. Bottom line, AB 969 will result in significant lost rent due to court delays and will add substantial costs to the courts." Finally, proponents counter these arguments raised by the opposition by noting that courts have consistently found that such concerns are substantially outweighed by the interest of justice. In Green v. Superior Court (1974) 10 Cal. 3d 616, 636, the California Supreme Court explained: [W]hile the state does have a significant interest in preserving a speedy repossession remedy, that interest cannot justify the exclusion of matters which are essential to a just resolution of the question of possession at issue.... Certainly the interest in preserving the summary nature of an action cannot outweigh the interest of doing substantial justice. To hold the preservation of the summary proceeding of paramount importance would be analogous to the 'tail wagging the dog." The defense of retaliatory eviction ("retaliation"): a quick background. Civil Code Section 1942.5 codifies the common law defense of retaliatory eviction established by the California Supreme Court in Schweiger v. Superior Court (1970) 3 Cal. 3d 507. AB 969 Page 8 Subsection (a) provides that a landlord may not increase rent, decrease services, or terminate a tenancy within 180 days of the tenant making a complaint about habitability if the landlord is retaliating against a tenant and if the tenant is not in default of the rent. (Emphasis added.) Subsection (c), on the other hand, more broadly prohibits landlords from increasing rent, decreasing services, or evicting a tenant for the purpose of retaliating against the tenant for participating in a tenants' association or because the tenant "has lawfully and peaceably exercised any rights under the law." Under both subsections, the tenant has the burden of proving retaliation and the landlord can overcome the defense by pleading and proving a non-retaliatory good-faith reason for the adverse action. (Civil Code §1942.5(e).) This bill seeks to address problems created by a reportedly common misreading of the statute, to the detriment of tenants. Although subdivisions (a) and (c) are distinct provisions, the sponsor contends that landlord attorneys regularly seize upon the limitations imposed in subsection (a) to argue that retaliation is not a defense in any unlawful detainer action based on alleged non-payment of rent. According to EBCLC and others, these landlord attorneys typically file motions to prevent the tenant from introducing evidence of retaliation at trial. Because non-payment of rent cases make up the majority of unlawful detainer cases before the court, proponents contend that much court time is wasted in hearing and considering these motions, and when they are successful, tenants who may truly be the victims of retaliation are deprived of one of their most important (and in some cases, only) affirmative defenses. It is important to note that the Judicial Council recognizes that the two subdivisions are distinct by providing two separate jury instructions on retaliation. CACI 4321, based on subsection (a), requires a tenant to prove retaliation and that he or she is not in default of rent. CACI 4322, based on subsection (c), requires the tenant to prove only that the landlord is retaliating against the tenant for lawfully and peaceably exercising a right, without any reference to rent. To clarify that limitations that apply to subdivision (a) are not misread to negate the ability to present evidence of retaliation pursuant to subdivision (c), this bill would simply insert the phrase "Notwithstanding subdivision (a)" into the AB 969 Page 9 beginning of subsection (c), thus eliminating any ambiguity without changing the law. Importantly, this bill does not seek to relieve the tenant from his current burden of proving the elements of retaliation in order to successfully employ the defense. This bill also seeks to clarify the meaning of the term "in default" in subdivision (a), affecting when the limited presumption of retaliation applies. Finally, this bill seeks to clarify the meaning of the term "in default" as it is used in subdivision (a) of Civil Code Section 1942.5. According to proponents, some courts have been broadly interpreting Section 1942.5 to preclude tenants from raising the retaliatory eviction defense when the landlord has alleged non-payment of rent. This potentially prejudices some tenants who may appropriately wish to raise the defense, they contend, because not all instances of non-payment of rent should be considered to be "in default." For example, a tenant may be lawfully entitled to withhold a certain amount of rent because a landlord has failed to make necessary repairs pursuant to Civil Code Section 1942, and a landlord may be barred from demanding or collecting rent if certain substandard conditions exist rendering the property uninhabitable pursuant to Civil Code Section 1942.4. Both of these examples are proposed in the bill as examples where lawful non-payment of rent should be distinguished from more apt cases of "default" where the tenant simply breaches his obligation to pay rent in violation of the lease. Importantly, this bill does not seek to relieve the tenant from his current burden of proving the elements of retaliation in order to successfully employ the defense. It simply preserves the ability of tenants to demonstrate to the court or jury what circumstances, if any, justify the non-payment of rent that has been alleged by the landlord. Opponents of the bill contend that no clarification of "in default" is necessary because existing law already provides a defense to tenants who are justifiably withholding rent in true cases of breach of habitability. The Apartment Association of Greater Los Angeles writes: As long as tenants are able to demonstrate to the court that habitability claims are meritorious, the withholding of rent is protected by the law and honored by the court. Adding retaliation as a defense to AB 969 Page 10 non-payment of rent, as AB 969 would do, is unnecessary, and unfair. If AB 969 were to pass, withholding rent for any reason would lead to a trial about whether the owner is retaliating by seeking to collect rent and could result in the owner being forever unable to collect it. Indeed, it creates a presumption that any action undertaken by a property owner to recover past-due rent is retaliatory. In addition, the California Apartment Association states: If the tenant justifiably withholds the rent to make repairs because the unit was untenantable as defined in law, then the tenant can use that as a defense in court where the landlord is pursuing an eviction for the tenant's failure to pay the rent. By including language that provides a tenant is not in default on rent if he or she claims to have exercised the right to deduct an amount from or withhold the payment of rent, this bill assumes the tenant is justified in that withholding. CAA agrees the tenant may have the right to withhold the rent. However, if the landlord disagrees with that rent withholding, the court is left to decide the dispute. Unlawful "retaliation" by the landlord should not be an automatic assumption within the statute just because the tenant claims to have [exercised his right to deduct and repair.] In response, proponents counter that the automatic assumption of retaliation that landlords claim is unfair when a tenant claims justifiable withholding of rent under this bill is essentially no different than the automatic assumption of default that tenants claim is unfair when a landlord alleges nonpayment of rent under existing subdivision (a) of Section 1942.5. Proponents contend that a simple allegation of default of rent at an early stage in the proceeding is often enough to cut off the protections of Section 1942.5(a) because the statute, as currently worded, treats the allegation as something that is presumed to be true. These tenant advocates even contend that it is not unheard of for some landlords to refuse to accept rent, even when it is proffered, so as to artificially create circumstances of "default" that can then be used against the tenant under Section 1942.5(a). In short, proponents assert that current law allows presumption of default based on a landlord's allegation, and does not treat "default" as a AB 969 Page 11 question of fact that would require both sides to justify their respective positions. ARGUMENTS IN OPPOSITION : The East Bay Rental Housing Association, NORCAL Rental Property Association, and Apartment Association of California Southern Cities submitted a joint letter reflecting additional bases of opposition to the bill questioning the propriety of juries to make habitability determinations. These associations state two different sets of concerns: Habitability determinations are delegated to the court for several important reasons: (1) Because UDs are summary proceedings, delegating the task of determining the habitability defense to judges assures the legal process will not be delayed or abused. (2) Judges have the experience and knowledge to understand the complex legal issues involved in assessing housing and building code standards, and whether a substantial breach materially affects health and safety. (3) Unlike jury members who often misunderstand the difference between habitability and maintenance, judges can effectively differentiate between a habitability issue such as a lack of heating, versus a maintenance issue like a drippy faucet. (4) Judges are in the best position to determine whether a claim is frivolous or whether rent reduction is warranted. Allowing juries to determine the habitability issues opens the door for egregious abuses of the summary proceeding of unlawful detainers: (1) In courts that have erroneously allowed juries to determine habitability defenses, defendants and tenant defense legal aid groups are incentivized to bring meritless habitability claims because they have been able to delay evictions by 4 to 6 weeks, and force free rent-based settlements, including free rent for the entire duration rent has been unpaid. (2) Tenant-defendants merely need to claim a drippy faucet as the reason for failing to pay rent to force a settlement. AB 969 Page 12 (3) Landlords are forced to settle because even though a drippy faucet is a frivolous habitability claim, losing rental income from the delay of going to trial, and paying attorney fees averaging $10,000-$15,000, makes going to trial extremely expensive. This is how the system is being abused. (4) Because meritless habitability claims may be allowed before juries, tenant defense groups use the threat to demand settlements ranging from 3-6 months free rent. Again, landlords are forced to settle because of the expense and delay of trial, even though most claims are completely meritless and frivolous. As previously noted, research of the legislative history of Section 1174.2 did not reveal any evidence that the Legislature delegated habitability determinations to the court for any of the reasons cited above by these opponents. In addition, the opponents' second set of concerns appears to be with alleged litigation practices by tenants and their attorneys that are outside the scope of the language of the bill itself. REGISTERED SUPPORT / OPPOSITION : Support East Bay Community Law Center (EBCLC) (sponsor) Eviction Defense Center Los Angeles Center for Law & Justice National Housing Law Project Tenants Together Opposition Apartment Association, California Southern Cities Apartment Association of Greater Los Angeles California Apartment Association East Bay Rental Housing Association NORCAL Rental Property Association San Diego County Apartment Association Santa Barbara Rental Property Association Analysis Prepared by : Anthony Lew / JUD. / (916) 319-2334 AB 969 Page 13