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To Avoid Problems, Be Careful Wording Lease Termination


Question: I have been having many problems with the house I am renting. We suffer with inadequate heating, leaking pipes and poor insulation. Because these problems were so severe, my landlord actually sold the house a few months ago.

Now I have new landlords, and I asked them to allow me to break my lease. Finally they agreed to let me.

What should I do as the tenant to legally break this lease without having problems in the future? I was told by a friend to write a letter to my landlords and have them sign it. But what should I say in the letter?

Attorney Steven Kellman replies:

The documentation to "break" the lease, as you put it, can be fairly simple. You need merely put in writing that you and the landlord mutually agree that the lease termination date is changed from the stated date in the lease to the agreed upon new termination date.

It gets a little trickier if you cancel or rescind the lease, because you may be giving up valuable rights given to you by that lease. On the other hand, you may have incurred liabilities under the lease that could be removed by cancellation or rescission.

Be careful about rent incentives that apply only when you stay for a minimum number of months. Terminating the tenancy early could forfeit such benefits. If you are unsure about drafting the document, consult an attorney experienced in such matters.

Benefits of Owning Rentals Are Many

Q: Besides the tax implications, what are some of the benefits of owning rental property?

Property manager Robert Griswold replies:

There are many benefits. For most owners, real estate allows for diversification of investments. Though the stock market recorded some excellent returns until this year, real estate remains an excellent part of an asset allocation strategy.

There also can be pride of ownership and even appreciation--although until very recently many owners of rental property might not have agreed. Historically real estate has also been an excellent hedge against inflation as it typically will hold its value in real terms in an inflationary economy. And don't forget about the equity build-up as part of a retirement income or estate planning strategy.

A discussion of real estate as an investment must involve potential tax benefits. Those typically include depreciation deductions that provide for tax deferral and the potential to use a limited amount of losses to shelter other earned income. Also, a new tax law provides for an investment strategy to generate tax-free income by moving into a rental property for a minimum of two years before selling at a gain.

You need to have a thorough understanding of any local ordinances, such as rent control, before purchasing investment real estate.

Attorney Ted Smith replies:

As an attorney who represents landlords in the eviction process, I often remind clients not to get too frustrated with the legal aspects of rental property ownership. Although California's eviction laws are fraught with legal traps for the unwary, you won't be faced with this problem too often, provided you're doing adequate screening of prospective tenants.

I'm convinced that the tax and wealth building concepts of rental property ownership far outweigh the occasional legal hassles in dealing with tenants.

Board Raises Concern in Withholding Papers

Q: I own a rental condominium and have a great renter. Unfortunately, a neighbor who is conducting business activities out of his unit is disturbing my renter. I have verified my tenant's allegations but have been unable to find out the names of the owners and/or renters of the offending unit.

I believe my rights of access are confirmed by my association bylaws as well as by civil code sections under the Davis-Sterling Act. But the management company refuses to cooperate unless the board of directors approves, and the board refuses to release any documents for review other than the basic invoices for association operating expenses. The board claims all other documents are exempt based on attorney-client privilege.

Is the management agent for my homeowners association required to share the accounting records even though the board of directors won't authorize their release?

Griswold replies:

The association management company is the agent for the board of directors and may be in a very uncomfortable position based on the facts you present. Though you definitely have rights of access to records, these rights are subject to limitations.

Under California Civil Code 1363 and the California Corporations Code sections 8330 to 8338, all members have the right to inspect the records of the association upon reasonable notice during normal business hours, as long as the request is for a purpose reasonably related to the person's interests as a member.

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