BILL ANALYSIS
SB 115
Page 1
Date of Hearing: June 1, 2004
ASSEMBLY COMMITTEE ON JUDICIARY
Ellen M. Corbett, Chair
SB 115 (Torlakson) - As Amended: May 27, 2004
SENATE VOTE : 24-12
SUBJECT : LANDLORD-TENANT: PAYMENT OF RENT OR SECURITY DEPOSIT
KEY ISSUE : SHOULD LANDLORDS BE PROHIBITED FROM REQUIRING
TENANTS TO PAY THEIR RENT EXCLUSIVELY IN CASH, WITH SOME LIMITED
EXCEPTION, IN ORDER TO PROTECT TENANTS WHO WOULD OTHERWISE HAVE
TO CARRY AROUND LARGE AMOUNTS OF CASH AND WHO MAY HAVE
DIFFICULTY DEMONSTRATING THAT THEY PAID THE RENT IF A LANDLORD
REFUSES TO GIVE THEM A RECEIPT?
SYNOPSIS
This bill, sponsored by the Western Center on Law and Poverty
(WCLP), seeks to address a reported practice where some
landlords demand cash from tenants as the exclusive form of
paying rent by providing that a landlord may not demand or
require cash as the only form of payment of rent or security
deposit except in the case where a tenant has tendered a bad
check or has stopped payment on a check, cashier's check or
money order. In that case, the landlord may require the tenant
to pay his or her rent in cash for the following three-month
period after notifying the tenant that he or she must pay cash
during that period and giving the tenant a copy of the
dishonored check or money order.
The author and his supporters indicate that tenants face several
problems when managers demand that rent payments be made in
cash. For example, such a requirement forces tenants to carry
large sums of cash which can be lost or stolen. In some cases,
landlords or their managers do not issue receipts for these cash
payments, and tenants then possess no proof that they paid the
rent. They may then face eviction for non-payment of rent. In
other cases, dishonest managers keep the cash payment and then
tell the landlord that the rent was never paid or they charge
the tenant a higher cash rent than the landlord is aware of,
keeping the difference.
The California Apartment Association (CAA) indicates that recent
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amendments address its concern that the bill would not allow
landlords to demand cash payment under any circumstance, as
described in more detail below. As a result, CAA has removed
its opposition to the bill. The California Association of
Realtors (CAR) is opposed to the measure unless it is amended.
The bill was recently amended, however, to contain provisions
that would appear to address CAR's concerns, as described in
more detail in the analysis. At the time of the writing of the
analysis, it is unclear whether the amendments remove CAR's
opposition.
SUMMARY : Seeks to address a reported practice where some
landlords demand cash from tenants as the exclusive form of
paying rent. Specifically, this bill :
1)Provides that a landlord or a landlord's agent may not demand
or require cash as the exclusive form of payment of rent or
deposit of security, except as noted in (2), below.
2)Provides an exception to the above requirement as follows:
a) Provides that a landlord or a landlord's agent may
demand or require cash as the exclusive form of payment of
rent or deposit of security if the tenant has previously
attempted to pay the landlord or his or her agent with a
check drawn on insufficient funds or the tenant has
instructed the drawee to stop payment on a check, draft or
order for the payment of money.
b) Provides that the landlord may demand or require cash as
the exclusive form of payment only for a period of three
months following an attempt to pay with a check on
insufficient funds or following a tenant's instruction to
stop payment.
c) Provides that if the landlord chooses to demand or
require cash payment, the landlord must give the tenant a
written notice stating that the payment instrument was
dishonored and informing the tenant that he or she must pay
in cash for the next three months. The landlord must also
attach a copy of the dishonored instrument. The bill
requires that the notice must comply with existing law if
demanding or requiring payment in cash constitutes a change
in the terms of the lease.
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3)Provides that, for purposes of the bill, the issuance of a
money order or a cashier's check is direct evidence only that
the instrument was issued.
4)Provides that a waiver of these provisions is contrary to
public policy and is void and unenforceable.
EXISTING LAW :
1)Sets forth the rights and obligations of landlords and tenants
in the hiring of residential rental property. (Civil Code
section 1940 et seq.)
2)Requires a receipt for cash transactions in general (Civil
Code section 1499 and Code of Civil Procedure section 2075),
but does not contain specific requirements regarding form of
payment in landlord-tenant law.
FISCAL EFFECT : The bill as currently in print is keyed
non-fiscal.
COMMENTS : In support of the measure, the author writes that
when "landlords or their property managers demand that rent
payments be made in cash" several problems are created for
tenants. Specifically, the author notes that such a requirement
forces "tenants to carry large sums of cash which can be lost or
stolen" and "[u]pon occasion, landlords or their managers do not
issue receipts for these cash rent payments; tenants then
possess no proof of rent payments and may face eviction for
non-payment of rent." The author further explains:
To remedy these problems, SB 115 prohibits landlords
from requiring cash payments. Tenants could thus make
rent and security deposit payments with money orders or
cashier's checks. Money orders and cashier's checks
come with documentation of to whom they were issued,
relieving a landlord of the requirement in state law to
issue a receipt. In addition, money orders and
cashier's checks provide a landlord with the payment
certainty of cash, because they do not depend on
sufficient funds in a tenant's bank account.
According to the sponsor, the Western Center on Law and Poverty
(WCLP), the bill helps to address "several problems faced by
tenants, especially lower income tenants in less expensive
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housing." WCLP writes:
Some landlords or apartment managers require the rent
to be paid in cash. The cash can be stolen or lost en
route, creating a security problem for both the tenant
and landlord. When a tenant is required to pay with
cash when the rent is due, an unscrupulous landlord or
manager may promise to provide a receipt later, and
then refuse to do so, claiming the rent was never paid.
WCLP notes that while current law requires a receipt for all
cash transactions, "a tenant who asserts this right on the
day the rent is due may face an eviction action for
nonpayment of rent. In court, the tenant could claim the
rent was offered, but the landlord or manager can deny it,
leading to a 'he said, she said' situation." WCLP explains
that managers or landlords require that rent be paid in cash
for several reasons and write "Legal Services attorneys have
seen several types of cases. Typically the manager is
simply stealing the money. He or she pockets the cash and
tells the landlord the rent was never paid. Or the manager
charges the tenant a higher cash rent than the landlord is
aware of, keeping the difference. Either way, both the
landlord and the tenant are being defrauded."
Supporters, such as JERICHO: A Voice for Justice, write that the
bill "seeks to prevent managers of low cost rental units from
taking advantage of their low income tenants by demanding cash
payments. With cash payments the tenants do not have evidence
of payment and can be subject to the failure of the manager to
turn over actual cash payments to the owner. The owner then
proceeds with an eviction action against the tenants. This
causes disruption for the tenant and aggravation for the owner.
This bill provides a simple remedy to the problem."
Recent amendments address concerns of the California Apartment
Association. This bill was amended recently to address concerns
raised by the California Apartment Association (CAA) that the
bill would not allow landlords to demand cash payment under any
circumstance. In particular, CAA indicated that a landlord
might wish to demand that a tenant pay his or her rent in cash
when the tenant "has previously attempted to pay rent with
checks on insufficient funds or who has stopped payment of
checks [cashier's check or money order]." CAA suggested
language to address this concern.
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The author and his sponsor amended the bill to include CAA's
language with some modifications. Specifically, the amendments
also provide that a landlord may demand cash payment for the
following three-month period after notifying the tenant that
they must pay cash during that period and giving the tenant a
copy of the dishonored check or money order. The amendments
also require that the notice must comply with existing law if
demanding or requiring payment in cash constitutes a change in
the terms of the lease. CAA indicates these amendments remove
their opposition.
Recent amendments attempt to address concerns of the California
Association of Realtors. CAR is opposed to the measure and
writes:
Some landlords do not permit tenants to pay rent in the
form of a personal check due to the payment history of
the tenant. In some cases, tenants have obtained a
money order or cashiers check to "ostensibly pay rent".
They have made copies of the money order or cashiers
check and then cashed the instrument. At an unlawful
detainer hearing, where the claim is for the
non-payment of rent, tenants claim they paid the rent
and provide a copy of the front of the money order or
cashiers check. The hearing is postponed until such
time that the tenant can show to the court a copy of
the front and BACK SIDES of the money order or cashiers
check. Of course tenants that engage in these
deceptive practices move out just before the court is
to rehear the unlawful detainer filing.
We are very concerned tenants will be advised to pay
rent with the use of a money order or cashiers check
and will follow the procedure as outlined. The result
will be that those tenants will enjoy several months of
free rent.
As a result, CAR suggested that the following sentence be added
to the measure: "The issuance of a money order or a cashiers
check shall not be considered as proof of payment of rent or
deposit of security." WCLP notes that this language is
problematic, writing "The phrase 'considered as proof' could be
read to mean that evidence of the issuance of the check or money
order (e.g., the receipt) is not admissible at all. For the
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same reason, the phrasing as a prohibition ('shall not') could
cause problems for the judge pro tem or commissioner, who, in a
hurried reading of the statute, might simply 'not consider' it."
In order to address CAR's concern, the bill was recently amended
to provide that "the issuance of a money order or cashier's
check is direct evidence only that the instrument was issued."
This reasonable amendment would appear to address CAR's concern
that copies of a money order or cashier's check may be used by a
tenant to demonstrate that they paid the rent. Instead, a
tenant may use a copy of a money order or cashier's check as
evidence only that the instrument was issued, not as to evidence
concerning what happened to the instrument after it was
obtained. The tenant would still have to prove that the rent
was actually paid.
At the time of the writing of this analysis, it is unclear
whether this amendment removes CAR's opposition, although it
should also be noted that the bill was amended to permit
landlords to demand cash payments in certain instances where a
tenant has tendered a bad check, as described above. This
amendment would appear to address CAR's concern that "Some
landlords do not permit tenants to pay rent in the form of a
personal check due to the payment history of the tenant."
REGISTERED SUPPORT / OPPOSITION :
Support
Western Center on Law and Poverty (sponsor)
Affordable Housing Alliance, San Francisco
Agora Group, Goleta
Beacon Housing, Los Angeles
Bet Tzedek Legal Services, Los Angeles
Cabrillo Economic Development Corp, Saticoy
California Affordable Housing Law Project
California Alliance for Retired Americans
California Church IMPACT
California Council of the Blind
California Labor Federation, AFL-CIO
California Legislative Council for Older Americans
California Partnership, Downey
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California Reinvestment Coalition
California Rural Legal Assistance Foundation
Center for Community Advocacy, Salinas
Central City SRO Collaborative, San Francisco
Chicano Consortium
Civic Center Barrio Housing Corporation, Santa Ana
Coalition for Economic Survival, Los Angeles
Community Housing Improvement Program, Chico
Congregations Building Community, Modesto
Consumer Federation of California
Council of Churches of Santa Clara County, Cupertino
East Palo Alto Council of Tenants, East Palo Alto
Emergency Housing Consortium, San Jose
Enterprise Foundation
Esperanza Community Housing Corporation, Los Angeles
Fair Housing Council of Riverside , Riverside
Father Joe's Villages, San Diego
First Community Housing Inc, San Jose
Fisher Sehgal Yanez Architects, Los Angeles
Fresno Interdenominational Refugee Ministries, Fresno
Fresno West Coalition for Economic Development, Fresno
Golden State Mobilehome Owners League, Chapter 24, East Palo
Alto
Gray Panthers California
Greenlining Institute, Oakland
Hillview Mental Health Center Inc, Pacoima
Housing Leadership Council of San Mateo County
Housing Rights Center, Los Angeles
Housing Rights Committee of San Francisco
Human Rights/Fair Housing Commission of the City and County of
Sacramento
Inclusive Homes Inc, Los Angeles
Inquilinos Unidos, Los Angeles
JERICHO: A Voice for Justice
La Raza Centro Legal Inc, San Francisco
Loaves and Fishes, Sacramento
Los Angeles Housing Law Project, Los Angeles
Los Angeles Housing Partnership Inc, Los Angeles
Martha's Village and Kitchen, Indio
Mental Health Advocacy Services Inc, Los Angeles
Mid-Peninsula Housing Coalition, Redwood City
Neighborhood Housing Services of Orange County
New Directions Inc, Los Angeles
Nightingale Manor, Palm Springs
O.N.E. Company, Los Angeles
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Orange County Community Housing Corporation
Partners in Housing Inc, Ventura
People of Progress, Redding
Planning for Elders, San Francisco
Protection and Advocacy
Public Advocates
Public Law Center, Santa Ana
Ren?e Franken and Associates, Sacramento
Rubicon Programs, Inc, Richmond
Rural Communties Housing Development Corp, Ukiah
Sacramento Neighborhood Housing Services
Saint Vincent de Paul Village, San Diego
San Francisco Homeless Senior Task Force
Sanders and Associates, Barbara, Oakland
Santa Cruz Affordable Housing Advocates, Santa Cruz
Santa Monicans for Renters' Rights
Senior Action Network, San Francisco
Shelter Inc of Contra Costa County
Shelter Partnership Inc, Los Angeles
Skid Row Housing Trust, Los Angeles
Southern California Association of Non-Profit Housing
Southern California Housing Development Corp, Rancho Cucamonga
Southern California Indian Center, Inc., Fountain Valley
Strategic Actions for a Just Economy, Los Angeles
Tenderloin Housing Clinic, San Francisco
Valley Housing Foundation, Pacoima
Vietnam Veterans of California - Sacramento Veterans Resource
Center
W.O.R.K.S., Los Angeles
West Hollywood Community Housing Corp
WRJ Group Inc, Fountain Valley
Opposition
Western Manufactured Housing Communities Association
California Association of Realtors (unless amended)
Analysis Prepared by : Saskia Kim / JUD. / (916) 319-2334