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Cash For Keys. Illegal Renter Buyouts

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Category: City News
Published on Saturday, 21 April 2018 17:13
Written by Tenants Union
Mike just bought a 10-unit apartment building in Echo Park from the Garcias, owners since 1988. All 10 of the rent-stabilized, one-bedroom units were occupied at the time of sale by long-term tenants carrying over existing leases, most of who’ve been living there for over a decade. But Mike wants new tenants. His agent told him that a one-bedroom in the area could fetch $1,900–$2,100 per month at market rate. His highest paying tenant pays $985.

APRIL18RENTERBecause Mike’s units fall under the city’s Rent Stabilization Ordinance (RSO), though, there is only one legal action he can take to evict the tenants for no fault of their own. He’d have to use the 1985 Ellis Act, but after the evictions, he would have to take the building off of the market for at least five years (or permanently, by converting to condos). Even though some landlords will illegally re-rent units right away, Mike would still have to pay relocation fees. Since his tenants have all been in residence for over three years, Mike is looking at a minimum of $10,550 per unit, and $20,050 for those occupied by seniors. 

But, if a tenant leaves voluntarily, Mike can raise the rent as high as he likes on the next person’s lease. A friend tells him to convince the tenants to sign Voluntary Vacate Agreements and offer them $5,000 each. 

Otherwise known as cash-for-keys, Voluntary Vacate Agreements are illegal buyouts that happen when a landlord offers money to a tenant to voluntarily end a lease and leave an apartment without informing the tenants of their rights and protections from eviction. 

The tenants in Mike’s building have NO legal obligation to sign such an agreement or to accept his offer.

If they refuse, however, landlords like Mike often coerce tenants into accepting, taking advantage of those who don’t know the details of the law and feel like they have no choice, even though the amount of money is less than they’re entitled to. In the worst cases, landlords harass tenants: knocking on doors at night, shutting off utilities, threatening to call ICE. What recourse would there be for Mike’s elderly tenant of 14 years, entitled to $20,050, who takes the $5,000 offer and leaves? Very little.

This is why LA established the Tenant Buyout Notification Program in 2016. Now, if attempting to convince a tenant to leave, a landlord MUST: (1) Present tenants with written disclosure of their rights under RSO, outlining eviction and relocation assistance and including contacts for the city’s housing department (HCID); (2) Allow tenants to rescind buyout agreements up to 30 days after fully executed; (3) Allow tenants to rescind agreements at any time if the landlord fails to hold up their end; (4) Require that landlords file copies of all buyouts with HCID. Residents are also allowed to seek civil remedies against landlords who don’t comply. However, this only applies to RSO units (multi-family buildings inhabited before 1978). 

Still, there are landlords illegally pursuing cash-for-keys arrangements today.

Legally or illegally offered, struggling tenants are tempted by these offers. Here are things to consider: you’ll have to pay federal and state taxes on the cash; the lump sum may affect your tax bracket, impacting next year’s refund, access to public healthcare, Section 8, financial aid, of food stamps; if you sought legal counsel, some of that amount will go to fees. Also consider renting a new place: many landlords require you to earn twice the rent in order to qualify ($2,000/month rent requires that you earn $4,000/month), and the one-time buyout will not count as monthly earned income; you might even have to live in a hotel while trying to find a new apartment, spending more. Finally, your new rent may now be double, triple or quadruple than before.

Consider how much you need in order to move out without hurting financially. How far will you have to move in order to afford a place? What from your community would you no longer have access to? How much will it cost in gas to drive the additional distance? Once you’ve determined how much money you really need, account for taxes and legal fees, and you will then have a more accurate sense of the buyout’s value. If you break no rules, RSO units come with the right to stay for a long time. Take your current rent with the controlled increases you’d receive in the next 20 years, then estimate what you'd pay if you have to rent at market rate for the same time. The difference shows the monetary value of your place. Using this, tenants in L.A. have begun to refuse easy buyouts. 

The local L.A. Tenants Union meets  1st and 3rd Wednesdays at UNION, 4067 W Pico Blvd, L.A. 90019, 7-9PM.
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Established in August of 2008 by writer, artist Dianne V. Lawrence, The Neighborhood News covers the events, people, history, politics and historic architecture of communities throughout the Mid-City and West Adams area in Los Angeles Council District 10.

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