New Oakland Ordinance Exposes Landlords to Potential Liability for Discussing Move-Out Agreements

On March 15, 2018, the City of Oakland passed a new “Tenant Move-Out Agreement Ordinance” regulating the contracts between landlords and tenants for the return of a rental unit to the landlord’s possession.  The new ordinance applies to most rental units, except those exempted from rent control or those that are owned or operated by a public entity.  According to the ordinance:

The main purposes of [the] Ordinance are to improve the fairness and transparency of move out negotiations and move out agreements, to ensure that tenants who enter into move out negotiations for move out agreements are aware of their rights, to prevent property owners from contracting around the legal rights and remedies available to tenants under existing law, and to equip the City with useful tools for monitoring the impacts of move out agreements on Oakland’s residents and housing market.

Among the obligations of the ordinance, a landlord is now required to provide a city-created form that lays out the tenant’s rights before entering into any negotiations for a move out agreement.  In addition, the owner is also required to file a form with the Oakland Rent Adjustment Program before entering into negotiations letting the City know that the parties are going to discuss a move-out agreement.  The ordinance also regulates the contents of move-out agreements, requiring six separate statements related to the right of the tenants.  For example, one of the potentially onerous required statements in all move out agreements is that the tenant must be informed of their right to rescind the agreement for any reason within 25 days.

A landlord that violates the ordinance is subject to an administrative citation or a civil action by either the tenant or the City of Oakland.  Penalties can range from actual damages, to attorney fees and a potential trebling of damages.  Available damages are increased for tenants who are catastrophically ill or disabled.

If any landlord wants to challenge Oakland’s new ordinance, they will have to come up with a creative argument.  San Francisco previously passed a similar ordinance which was challenged in federal court by local apartment associations only to have the San Francisco ordinance upheld as part of the City’s plenary power over zoning.  (See San Francisco Apartment Association v. City and County of San Francisco, No. 15-17381 (9th Cir., 2018).)

In our view, there are a number of potential issues with the ordinance from the landlord’s perspective. First, there is a significant cost associated with preparing new agreements and the administrative burden of being required to inform the City before the landlord begins to engage in relocation talks.  Thankfully, there is no timetable as to when the notices are required be provided to the City or the tenant.  If a landlord has a cordial relationship with the tenants he or she might be able to provide the required forms to the tenant immediately prior to beginning negotiations—possibly in person—as long as the landlord has notified the City.  The thrust of the ordinance is that any discussions of moving out are likely to take a on a much more formal tone, for better or worse.

Second, there are damages potentially available against a landlord and their insurance carrier, if any.  For example, if there is a violation of the ordinance and the tenant moves out based on a faulty rental agreement, but does not realize until later that the agreement is faulty, the tenant can potentially allege a cause of action for a wrongful eviction. 

Third, there is also a question of materiality: if an able bodied tenant enters into an agreement, but the landlord does not include the required language regarding catastrophically ill provisions of the ordinance, is the omission material and enforceable?  If the tenant rescinds a non-compliant agreement before move out, are there any damages?  Given the current housing market in the City of Oakland, any claim for wrongful eviction or violation of the ordinance can carry with it a substantial damages component.  Attorneys who draft these agreements should be especially careful to analyze the terms proposed by the landlord and ensure that any agreement checks all the boxes prescribed by the ordinance, or there could potentially be liability for their clients under the ordinance.

In summary, the new ordinance adds complexity to an already convoluted negotiation process that can be very charged in the current Bay Area housing market.  In all likelihood, this is likely to result in more potential avenues for a landlord to be exposed to significant exposure to possible civil suits by former or current tenants or even the City of Oakland itself.

Joseph J. Minioza is the managing partner of the Oakland/East Bay office. He can be reached at 510.832.7770 or jminioza@ericksenarbuthnot.com.