Three Day Notice to Pay Rent or Quit Cannot Include Portion Of Rent Subsidized By Section 8

Scott v. Kaiuum, decided 1/4/17 (Fresno Superior Court Appellate Department)

In January 2015, a landlord leased a rental unit to a low-income tenant for a term of one year with rent set at the market rate of $700 per month. A portion of the rent was subsidized under the HUD Section 8 Housing Choice Voucher Program (the “Program”). Under the Program, the local public housing authority (“PHA”) agreed to pay $684 per month of the rent with the tenant paying the remaining $16 per month. 

In accordance with the Program, the landlord entered into the required housing assistance payment contract (commonly known as a “HAP contract”) with the PHA. A HAP contract expressly obligates the landlord to comply with HUD’s Housing quality standards (“HQS”). 

On October 27, 2015, the Housing Authority sent the landlord and tenant a letter stating that the rental unit had failed a recent inspection, and listing multiple violations of the federal habitability standards, all but one of which were deemed to be caused by the landlord. The letter warned that there would be another inspection on November 17, 2015, and that, if the defects were not cured by the time of that inspection, the Housing Authority would abate all further Section 8 payments effective December 1, 2015, and the HAP contract would be canceled effective December 17, 2015. 

On November 18, 2015, the PHA sent the landlord a second letter stating that the rental unit flunked the second inspection, that all further Section 8 payments would be cancelled effective December 1, 2015, and that the HAP contract would be terminated effective December 17, 2015. The letter also informed the respondent that it was “not permitted to recover monies from the resident.”

Nevertheless, when rent came due on December 1, 2015, the landlord demanded that tenant pay the entirety of the $700 rent under the rental agreement. When rent became past due on December 4, 2015, respondent served appellant with a three-day notice to pay or quit, again demanding the full $700 rental payment. When the tenant failed to cure the notice, the landlord filed an unlawful detainer action against the tenant. The eviction was filed on December 16, 2015.

The trial court found that, because the deficiencies were not cured by the deadline, the Section 8 contract had terminated and thus the tenant was required to pay the full amount of rent under the rental agreement. Therefore, the court granted the unlawful detainer judgment in favor of the landlord.

The appellate court reversed. It pointed out that the tenant is not responsible for payment of the portion of the rent covered by the PHA. Furthermore, during the term of the lease, the landlord may not terminate the tenancy due to nonpayment of the PHA housing assistance payment.  Because the landlord’s three day notice to pay rent or quit demanded a portion of the rent covered by the PHA, it overstated the amount of rent owed and hence was defective.  The Court also pointed out that, under California Civil Code section 1941.2, landlord was not entitled to demand rent until the repairs were made and the premises were habitable.

For further information, please contact Ruzicka, Wallace & Coughlin, LLP at (949) 748-3600; website: www.rwclegal.com.

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