Scott v. Kaiuum (2017): Appellate Division for the County of Fresno Parses Subsidized Tenant’s Rent Payment Obligations Amidst Housing Authority Rent Abatement

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“Permitting a landlord to evict a tenant for failure to pay the full market amount of rent because the landlord failed to remedy basic violations of the habitability standards of Section 8 would reward the landlord for its bad behavior, and perhaps even create an incentive for landlords to refuse to correct defects with their properties.”

In Scott v. Kaiuum, the Appellate Division for the County of Fresno considered California State unlawful detainer procedure in the context of Section 8 tenancies subject to rent abatement for habitability defects. It noted that a landlord can terminate a tenancy by serving a three-day notice to cure and quit, which states the “precise sum” that is due. However, while Congress and HUD defer to state law on terminating tenancies, HUD regulations require that the landlord maintain the unit in accordance with Housing Quality Standards (HQS), and if the landlord fails to do this, the housing authority may reduce or suspend housing assistance payments. (HUD regulation further provides that the family is not responsible for the portion of the rent covered by the housing assistance payment under the subsidy contract.)

In reversing the trial court judgment for the landlord, the Appellate Division found that the landlord had served a three-day notice after the Housing Authority abated the subsidy payment based on the landlord’s own violations of the habitability standards under Section 8. By demanding the entire amount, instead of just the tenant’s portion, the landlord overstated the amount of rent due.

The Appellate Division correctly applied federal HUD regulations to state unlawful detainer law. However, it went further to say that the landlord could not even demand rent at all (under substantive California law governing landlord-tenant relationships), because of the habitability defects as stated in the Housing Authority “abatement letter”. It stressed that the defects described in the letter would have constituted habitability defects preventing the landlord from serving a three-day notice in the first place.

In doing so, the Appellate Division seemed to be giving some form of evidentiary presumption to the abatement letter – a presumption that does not exist in California rental housing law. While those defects may indeed have existed, and while the abatement letter may have been served as incidental evidence of the defects, the tenant would have nonetheless been required to establish the existence of the defects at trial. At that point, the defects might have frustrated the issuance of the three-day notice in the first place, or they may have just justified a reduced “reasonable rental value”, and the tenant could have paid the reduced rent to remain in possession. In other words, there is not necessarily a straight line between the issuance of an abatement letter and the withholding of the subsidy portion of the rent and a complete abatement of all rental obligation.