I have been getting this question over and over again about requiring residential tenants to get and maintain renter’s insurance. We go back and forth on this topic at the Board of Realtors. Here’s a case that could dampen the mood on this insurance issue, at least concerning whether you will be able to evict a tenant on a three-day notice basis for not having renter’s insurance. The case is Boston LLC v. Juarez, (2016) 245 Cal, App.4th 75.
In this case, a Los Angeles landlord, under the Los Angeles eviction controls, attempted to evict a long-term tenant of 15 years for cause on a three-day notice to perform or quit based on failing to carry renter’s insurance as required in the rental agreement. The landlord allowed the tenant to reside in the home 14 years before issuing the three-day notice for failure to maintain renter’s insurance. The tenant obtained insurance a few days after the notice expired, but the landlord proceeded with the eviction anyway. The trial court sided with the landlord and issued judgment in favor of the landlord, but in the end, the court of appeals disagreed with the trial court.
Now let me speak my mind a little and tell you how I look at this. I don’t think the Boston LLC case calls out, “Hey, requiring tenant insurance in residential tenancies is illegal.” As with all things legal, sometimes there is not a clear answer. Let me explain.
To understand what is going on with the insurance requirement, you have to understand how a three-day notice to perform condition or quit works. The deal is this. If you have a written contract and your tenant fails to perform a particular condition of the written rental agreement, you as the landlord can issue a three-day notice to your tenant to perform the specific condition or leave the property. Typically, you would issue this type of notice if, for example, a tenant brings a pet into the rental unit when your lease says no pets allowed.
Case law in California states that for a landlord to proceed with an eviction on this type of three-day notice, the breach must be a material item of the contract and not an immaterial breach. That is where the fight occurred in Boston LLC. The court basically said the insurance requirement was not material grounds for the eviction based on what had occurred.
I’ll give you some colorful examples of what may or may not be material or immaterial items in a contract. For example, your rental agreement states that your tenant is allowed a small dog up to 20 pounds. At the start of the rental agreement, the tenant brings along Baxter the Jack Russell terrier who weighs 15 pounds. Years go by and Baxter gets old, gaining a little chub, as we all do, and he becomes 23 pounds. You issue a three-day notice to evict the tenant based on Baxter violating the 20-pound rule. That would be an immaterial breach. But if Baxter dies and the tenant replaces him with a pit bull that weighs 60 pounds, that could be a material breach. Factual situations will always be a factor in whether a breach is material or not.
So does this mean that you cannot put a renter’s insurance requirement in your rental agreement and try to enforce it with a three-day notice to perform or quit? Boston LLC doesn’t help your cause, but it also doesn’t expressly say that you can’t. At the very minimum, though, you shouldn’t wait 14 years like the landlord did in Boston LLC to enforce such a provision. You also have to remember that the court of appeals probably saw through this landlord’s intent, that he was actually trying to get this tenant out of the unit for something other than for cause and this insurance requirement happen to be a convenient excuse to do so. For rent and eviction control areas, you cannot issue a 30-day or 60-day notice and unilaterally terminate a tenancy.
The bottom line is that you may not want to be “that landlord” in the next court of appeals case addressing if a rental insurance provision is a material or non-material breach, and you probably shouldn’t try to use a three-day notice to perform and quit to enforce such a provision. Your better option may be to issue a no cause 30-day or 60-day notice for non-eviction control areas or choose not to renew a lease. You may also want to offer incentives for tenants who obtain renter’s insurance such as slightly reduced rent. Or you could have a disclosure that recommends rental insurance and that the landlord’s policy will not cover tenants’ belongings or liability.
