Hidden Alligator for Palo Alto Residential Landlords: The One-year Written Lease Offer Requirement

By March 15, 2010 Blog, Real Estate Law

Though ownership of rental housing in Palo Alto, California, is a dependable investment, managing such property is complicated by the Palo Alto Rental Housing Stabilization Ordinance (Chapter 9.68 of the Palo Alto Municipal Code).
Established in 1980, the Rental Housing Stabilization Ordinance is a trap for unwary landlords.  The stated purpose of the Ordinance is to offer tenants “some assurance of stability under the terms of a written lease so as to minimize displacement”.  But this well-meaning purpose is embodied in a confusing set of rules.  And failure to follow those rules may result in the inability to evict or collect rent.
In a nutshell, the Ordinance requires most residential landlords to offer a minimum one-year written lease agreement to prospective tenants, and again annually to renewing tenants.  Sounds simple enough.  But the devil’s in the details, and Chapter 9.68 is not an example of well-drafted municipal legislation.  The Ordinance doesn’t anticipate all scenarios, and can be rather confusing.
Confused or not, landlords had better do their best to comply.  According to the Tenant’s remedies section of the Ordinance (section 9.68.040), failure of a landlord to comply with any of the Ordinance’s provisions provides the tenant with “a defense in any legal action brought by the landlord to recover possession of the rental unit” as well as “a defense in any legal action brought by the landlord to collect rent.”
The Ordinance makes certain exceptions to the definition of “rental unit”, such as single-family dwellings.  Nevertheless, the vast majority of Palo Alto rental housing falls under the auspices of Chapter 9.68, and therefore the Palo Alto residential landlord community would be well advised to pay careful attention to it.
Later we will take a look at another Palo Alto Ordinance residential landlords would be wise to pay careful attention to:  Chapter 9.72, the “Mandatory Mediation Ordinance”.
Scott M. Toussaint, Real Estate Group