Let’s assume you manage or own an apartment building in Los Angeles that is subject to the Rent Stabilization Ordinance (RSO). You hired a resident manager, but he is just not working out the way you had hoped, and you want to replace him. The only problem, of course, is that he is living in the apartment unit you need for his replacement. So what can you do?
Oddly enough, the answer depends on several factors, including how you have been paying him or, more specifically, whether he is a plain old “resident manager” or also qualifies as an “employee manager” under the Rent Adjustment Commission Regulations. A plain old “resident manager” receives all the eviction protections provided to regular tenants under the RSO, and his unit must be registered with the City. An “employee manager,” on the other hand, is not subject to the RSO’s eviction protections (unless he was already a tenant before you decided to employ him), and so removing him from his unit is far easier. He can be evicted without cause, along with anyone living with him (unless you have approved them as actual tenants). Be careful, though. If you allow an employee manager to remain in his unit after you terminate his employment, you have effectively turned him into a regular tenant subject to the RSO.
When does a resident manager qualify as an “employee manager”? It all depends on how you are paying him. To qualify as an “employee manager” – which is a specific kind of “resident manager” – the individual (1) must live on the premises (as is true of most resident managers), and (2) receive a free apartment plus wages that meet California’s minimum wage standards. In other words, if you want your resident manager to qualify as an employee manager, you cannot credit any rent towards his minimum wages, nor can you engage in what is sometimes referred to as a “check exchange.” He gets a completely free apartment and he gets paid.
Now let’s assume the resident manager you want to replace does not qualify as an employee manager. You still can evict him to replace him with a new resident manager – even if there is a comparable rental unit available. However, you likely are going to have to pay him a relocation fee (which you would not have to do if he were an “employee manager.”) Also, beware, because you cannot evict a resident manager to replace him if he or any tenant in his unit is terminally ill or has lived there for ten years or more and is older than sixty-one or disabled.
Now let’s assume you start eviction proceedings but, like many savvy tenants, your resident manager knows how to cause delays in the eviction process. You are in a tough spot because, on the one hand, you need a resident manager at the building (and, if you have 16 or more units, are required by law to have one) and, on the other hand, you have no apartment unit in which to put your new resident manager. So you decide to bite the bullet and try to buy off your terminated and troublesome manager, offering him a cash settlement in exchange for his vacating his unit. Simple, right? Not so fast.
The Los Angeles City Council recently approved an amendment to the RSO that requires landlords to provide certain disclosures to any tenant (including resident managers) with whom they want to enter into a “cash for keys” agreement. These disclosures must inform the tenant (1) the amount of relocation assistance that must be offered to the tenant; (2) that he is not required to accept a buy-out agreement; and (3) that if he enters into a buy-out agreement, he can rescind it within 30 days (or at any time if these requirements were not met). You must also file this disclosure with the City.
This disclosure requirement is cumbersome with respect to any tenant; it is downright unworkable when it comes to a resident manager. After all, you need a resident manager on the premises; if a terminated resident manager can change his mind on the 29th day after signing a buyout agreement, where are you supposed to put the new resident manager who has since moved in?
I do not have any good answers to this conundrum. In a situation in which you are required by law to have a resident manager at your building but expect your resident manager to fight to try to delay his eviction – and assuming you do not have reason to believe he will cause actual harm – the best course of action might be to discuss a buy-out with him before you actually terminate him. This way, you can keep him at least nominally employed during the RSO’s rescission period, and move a new manager in immediately thereafter.
Gary Ganchrow is a shareholder at Parker Milliken Clark O’Hara and Samuelian. He regularly advises on, litigates and write about a variety of employment, property management, and business matters, and is a regular contributor to AAGLA magazine. He can be reached at 213-683-6535 and email@example.com. This article is for informational purposes only, and should not be considered legal advice or establishing an attorney-client relationship.