Understanding Lease Agreements in San Francisco: A Complete Guide
What is a Lease?
A lease agreement is essentially a legally binding contract between the landlord and the tenant. It essentially states that the tenant will pay the landlord a certain amount of rent over a set period of time, and provides terms for the tenancy, including things such as when the rent will be paid, the term (length) of the lease, restrictions on the use of the property, and what happens if either party fails to uphold their side of the agreement.
Technically , a lease agreement is also binding on any subsequent tenants when a unit changes to new ownership. Its terms may transfer to the new owner, and they have an obligation to honor them when they take over such terms.
The vast majority of lease agreements are written, although verbal agreements are acceptable under the law. Generally, written lease agreements are preferred because it is much easier to interpret what is expected of both parties, while verbal agreements are often very difficult to prove, which can lead to disputes.
Essential Parts of a San Francisco Lease Agreement
Adhering to local regulations requires that landlords in San Francisco include certain mandatory clauses in a commercial lease. Also, renters can expect specific details concerning the rights and responsibilities of all those involved in the agreement.
The Basics
To be legally binding, a lease for commercial space in San Francisco must identify these key pieces of information:
Parties – the landlord and tenant
Premises – the location and description of the property
Lease term – how long the tenant is authorized to occupy the property
Rent – amount of the monthly payment and any requirements for advance payment
Requirement for Multiple Original Copies
While some areas of the country allow for electronic or copies of signed lease agreements, San Francisco mandates that commercial leases must have two original copies signed by the parties. This allows both the landlord and tenant to maintain a copy of the original lease agreement.
Additional Required Terms
In addition to the above provisions, a lease for commercial space in San Francisco should include:
Commencement Date – date when the lease begins to be enforceable
Use – what the tenant will do in the space
Condition of Premises – acknowledge the state of the property
In San Francisco, landlords and tenants are prohibited from including any clauses that disclaim injury, death or property damage. Attempting to minimize liability is never a good idea, as the courts will likely rule those paragraphs or even the entire lease as null and void.
Local Laws Impacting San Francisco Lease Agreements
San Francisco’s unique legal landscape offers a number of ordinances and requirements that govern the rights and obligations of landlords and tenants, particularly with respect to rent control laws and tenant rights. The San Francisco Rent Ordinance (Rent Ordinance) is one of the most comprehensive rent control laws in the United States and establishes limits on a landlord’s ability to terminate a tenancy, refuse to renew a lease, or raise rents. In addition, San Francisco offers a number of tenant protections, discussed in more detail below.
San Francisco voters approved the Rent Ordinance in 1980, making San Francisco one of the most tenant-friendly municipalities in the country. The Rent Ordinance applies to most residential tenancies in the city, but there are limited exemptions for new construction, owner-occupied units, and short-term rentals.
The Rent Ordinance limits how often a landlord can increase rent. Under San Francisco law, a landlord cannot increase rent once per year by more than a set percentage. Increases in the Consumer Price Index (CPI) amount to a meaningful and reasonable increase to the tenant and, therefore, are allowed. The annual rent increase percentage limit is published each March.
Unless an exemption applies, under the Rent Ordinance and the California Ellis Act, a landlord generally cannot terminate a tenancy without just cause. Just causes included failure to pay rent, a material breach of lease terms, conviction of a crime on the premises, habitual drug or alcohol abuse on the premises, or a permanent change of use. In the event of a permanent change of use, a landlord may be required to pay tenants a specified amount of relocation assistance.
Commonly Seen Lease Agreement Terms
Most San Francisco lease agreements contain almost identical provisions when it comes to security deposits, maintenance obligations, pet policies, and early termination clauses. It is very important to ensure that all such provisions are clearly set forth in any lease agreement. In fact, unless the lease agreement establishes a contrary obligation on the part of the landlord, it is presumed, under California law, that a residential landlord has no duty to maintain the premises, except with regard to the common areas. On the other hand, and unless the lease agreement is very specific, the tenant is obliged to exercise reasonable care for the condition of the premises and is obligated to indemnify the landlord for any damage caused by the tenant or the tenant’s guests or invitees.
San Francisco’s Rent Control Ordinance requires a "good cause" to terminate a tenancy. However, it specifically provides that a landlord has good cause to recover possession of residential property if the landlord wishes to move into the unit or the landlord wishes to remove the unit from the San Francisco rental market pursuant to the Ellis Act. Section 37.9 warrants the following lease agreement provision:
Tenant agrees that Owner, or any person included as a "Family Member" in the Tenant’s application to rent this apartment, may recover possession of the Apartment by commencing and prosecuting an unlawful detainer action against Tenant without the necessity of a Notice to Cure or a Notice to Perform Conditions or Covenants etc., and without the necessity of any other residential unlawful detainer notice, if either (1) within thirty (30) days after delivery by Owner of the Notice to Tenant pursuant to the Owner Move-In provision of the Residential Rent Stabilization and Arbitration Ordinance and the affidavit necessary to support the Owner Move-in Notice to Quit, Tenant fails to properly vacate the Apartment or to vacate the Apartment after a judgment has been rendered and execution has been returned, Tenant shall be in default; or (2) if an Owner Move-In Notice to Vacate has previously been given to Tenant and has been recorded with the City, and within thirty (30) days after the delivery of said Owner Move-In Notice to Vacate, Tenant or a person included as a "Family Member" in the Tenant’s application to rent this apartment, shall cease to occupy the Apartment as his/her principal residence, or tenant consents to a sublet of the Apartment.
Please note that all of these clauses are broadly written so that there is no misconception about the intent of the landlord and the tenant. The same considerations apply to all of these clauses, and a broad application of them is almost always the fairest to both parties.
Tenant and Landlord Responsibilities
Tenant and Landlord Obligations in a San Francisco Lease
Both tenants and landlords have specific obligations under a San Francisco lease agreement. For example, most lease agreements require the tenant to pay rent, maintain the premises, use the premises for a lawful purpose, and comply with all insurance obligations contained within the lease agreement. Other obligations may be mandatory based on San Francisco law.
For example, most residential lease agreements require tenants to pay their rent before 5 p.m. on the day it is due. Furthermore, tenants must pay the full amount of rent due, even if the unit is not in perfect condition. In fact, tenants are not permitted to withhold rent because of any alleged substandard conditions of the premises .
Landlords also have specific obligations under a San Francisco lease agreement, including, but not limited to, the obligation to provide possession of the premises to the tenant, maintain the premises, comply with all written disclosures, and comply with all laws affecting the premises. Further, San Francisco landlords are required to make many written disclosures to new tenants as well as obtain certain certifications and registrations.
San Francisco landlord-tenant law also provides for rent increases, rent payment obligations, eviction notices, warranty of habitability requirements, security deposits, tenant harassment and retaliatory eviction restrictions, and repair and maintenance obligations, among other rules, regulations, and statutes.
Negotiating a Lease Agreement
Section 8: How to Negotiate a Lease Agreement
As with any contract, it is critical to balance what you need from the lease with what the other party needs. The most successful negotiations are those where each party feels some pain. This means that neither party will be entirely happy, but also won’t be unhappy for long. The parties must recognize that the common goal is a successful rental where the landlord retains a reliable and trustworthy tenant.
Both sides should use an attorney to properly draft the terms of the lease. Attorneys know how to properly craft exceptions and contingencies into a lease agreement. This knowledge will pay off in the long run if a dispute arises between landlord and tenant. Experienced attorneys also spot problems or potential problems that both parties tend to overlook. They can help prevent these problems from arising in the first place.
It is common for tenants to prematurely refuse to accept a term because it seems unreasonable when the landlord first proposes it. This tactic can sometimes be effective because it shows the landlord that the tenant is willing to walk away if the terms of the lease are not amenable to him.
However, great tenants can sometimes leave a good deal simply because their emotions get in the way. The best strategy is to offer a reasonable counter-offer and then be ready to engage in more negotiation.
A great strategy for landlords is to get a written offer and proposal from the tenant as far in advance as possible. A smart landlord will have more negotiations during the due diligence period due to the extra time involved to negotiate a lease agreement. This is because tenants are often more reasonable the further away they are from the actual move-in date. If the tenant has a large amount of bargaining power, however, a landlord may not be wise to allow a tenant to delay the process in favor of a long negotiation period. A landlord must be willing to walk away if he does not get the terms he wants to see in the lease.
Negotiating a lease agreement takes persistence and patience. Successful negotiations require both tenant and landlord to get what they want even though neither is likely to be completely happy with the deal.
What are the important things you should negotiate as a tenant?
Should you negotiate the following things as a tenant?
What are the important things you should negotiate as a landlord?
Should you negotiate the following things as a landlord?
Modifications and Ending Lease Agreements
In order to consider a rental unit in San Francisco, either of the tenants must have given written agreement for that rental agreement. For San Francisco rent controlled units, a landlord or tenant can change the terms of a rental agreement. For example, the parties can change the amount of rent per month with a written agreement. However, rent cannot be increased every year as the parties see fit. A tenant renting a unit in San Francisco can also terminate that rental agreement so that they don’t have to pay the rent anymore.
The landlord has to make sure that they provide the tenant with a termination notice in writing. You will need to ensure that the person assigned to deliver these termination notices does so in person and do not leave them in the mailbox or under the door. If a tenant is not paying their rent each month, the landlord will have to go to the court, sue for a judgement, terminate the rental agreement, and then evict them. A forced removal or eviction of a tenant can only happen through appropriate court proceedings. The landlord will need to deliver a notice to the tenant in possession of the residence that people legally call a "3-day notice to pay rent" or "quit." This is an eviction notice that allows the tenant to remedy the situation or be removed from the property if they have not paid their rent.
The landlord must also follow all the proper legal procedures and keep all documentation such as receipts if they are to sue the tenant who has defaulted with not paying their rent. The documentation needs to be maintained for the entire duration of the tenancy. The tenant may be billed or be responsible for payment of utility services, but typically the landlord will be the responsible party and be the one to sue for nonpayment. It isn’t uncommon for tenants who have been evicted to sue their landlord for not paying the utility bills.
Additional Resources
A few other helpful resources for both landlords and tenants are listed below:
H.E.L.P. (Housing and Economic Rights for Lifelong Progress) is the housing counseling and legal clinic at the East Bay Community Law Center. They provide advice and representation for low-income families and seniors in Alameda and Contra Costa counties with problems related to housing, including tenant/landlord issues. They can be reached at (510) 548-4040 x 235 or [email protected].
Bay Area Legal Aid (BALCA), founded in 2000, is a nonprofit law firm with offices around the bay. They provide low income families with a variety of legal services. Their housing unit is based in San Francisco. They can be reached at (415) 982-1300 or www.baylegal.org.
The San Francisco Tenants Union is an independent nonprofit grassroots organization that was founded in 1979. They provide tenants with support and advice on a wide array of issues , and host a large amount of educational programming on tenant rights and other related matters. They can be reached at (415) 282-6622 (Citizens Information Service), (415) 282-0333 (Help Line), (415) 282-6622 (Office), or www.sftu.org.
San Francisco Office of Labor Standards Enforcement serves as the city’s labor law agency to educate and assist both employers and employees with San Francisco’s employment laws. They can be reached at (415) 554-6292 or www.sfgov.org/site/olse/index.html.
U.S. Department of Housing and Urban Development is a federal government agency that provides affordable rental housing and other financial assistance for those who are eligible. It also helps to move people into home ownership and provides direct support to landlords. It can be reached at 1-800-569-6833 or www.hud.gov.