Posted on November 13th, 2013
- By Ross Dwyer
Any landlord in California who does not want to become a defendant in a lawsuit needs to be aware of California’s implied warranty of habitability. A breach of this warranty can result in a tenant properly withholding rent and costly litigation. For those landlords in the affordable housing world receiving state and/or federal subsidies, failure to provide housing in line with the subsidy program’s habitability and property standards could result in a loss of more than just rent.
Landlords who provide affordable housing commonly take advantage of subsidies provided by the Low-Income Housing Tax Credit (LIHTC) offered by the IRS and grant funds provided through the Home Investment Partnerships Program (HOME). These programs have plenty of rules and eligibility requirements, including the well-known ones dealing with rent pricing and tenant income. Landlords providing affordable housing should pay particular attention to the habitability and property standards contained in both LIHTC and HOME.
Generally, HOME has more program-specific rules than LIHTC and more stringent property standards. LIHTC’s rules have less to do with habitability and more to do with rent and income requirements. Any property taking advantage of both LIHTC and HOME must abide by the following:
- State/local codes and standards or model codes (new construction and rehabilitation);
- The International Energy Conservation Code (new construction and rehabilitation);
- Uniform Federal Accessibility Standards (new construction and rehabilitation);
- HUD site selection standards under 24 CFR 983.57 (new construction); and
- If applicable, Housing Choice Voucher Program Housing Quality Standards (ongoing rental occupancy).
Property only using LIHTC must, at a minimum, meet local health, safety, and building codes, and HUD Uniform Physical Condition Standards under 24 CFR 5.703.
California statutes and case law establish the habitability and property standards for rental properties. Civil Code Section 1941.1 lists and defines what can make a dwelling uninhabitable; all landlords should be familiar with this list. Green v. Superior Court (1974) 10 Cal.3d 616 provides that under an implied warranty of habitability, landlords have a duty of repair. Under the implied warranty of habitability, “substantial compliance with those applicable building and housing code standards which materially affect health and safety” generally fulfills a landlord’s obligations. Id at 637.
A landlord is generally not obligated to address stand-alone minor housing code violations and need not repair damages caused by the tenant or the tenant’s family, guests, or pets.
Both HOME and LIHTC require ongoing property inspections to ensure compliance with the programs’ property rules and standards. HOME property inspections are required every year for property with 1-4 units; every two years for property with 5-25 units; and every three years for property with 26 units or more. A HOME inspection will determine if all HOME units, shared common areas, and the building’s exterior meet the HOME rules and property standards.
Property in the LIHTC program must be inspected within the property’s first two years in the program, and then at least once every three years after that. During LIHTC inspections, only 20% of the units in the program must be inspected for compliance with LIHTC rules and standards.
Property in either the HOME or LIHTC program that fails to meet applicable property standards could result in the loss of tax credits and/or subsidies. If you are a landlord and have a question about subsidies for your property, Ericksen Arbuthnot can provide assistance. Feel free to contact any of our three Bay Area locations, San Francisco, San Jose or Oakland, if you have questions about your rental property.