Parties in Boston, LLC v. Juarez Go To Trial Over Curable Breach; Appellate Division of Los Angeles Superior Court Praises Plaintiff for Being “Technically Correct”.

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“Given the statutory basis of unlawful detainer law, parties must comply with the statutes, including the time periods specified therein, with exactitude”.

In Boston, LLC v. Juarez (2015) 240 Cal. App. 4th Supp. 28, the Appellate Division of the Los Angeles Superior Court explores the application of a “forfeiture clause” in a residential lease.

Defendant Juan Juarez was a tenant of a residential unit covered by the Los Angeles Rent Stabilization Ordinance, who first moved in under a 1999 lease. That lease had two provisions relevant to the dispute: one required that he obtain renters insurance (which he didn’t do). Another stated that all lease covenants were “material”. (This means that instead of having a jury decide the materiality of a breach, the court can just decide – yes or no – if there was a breach.)

There are several important defenses available in an unlawful detainer action based on breach of a lease covenant. (For example, where the defendant had been in possession for a decade and a half, waiver is the most obvious choice.) And, while this lease also had an anti-waiver clause, the court declined to explore waiver of the anti-waiver clause, as the defendant had not adequately preserved the argument for appeal.

The court did opine that “unconscionability/adhesion” might have been an effective defense, were it raised. But then it moved on to explain how interpretation of statutes and contracts are a matter of law, how clear and explicit lease provisions govern, and how, if a lease has a “forfeiture clause”, the materiality of the breach is irrelevant. The dispute becomes a binary issue of law: did the defendant breach the provision or not.

The defendant’s main defense concerned substantial performance: where the breached provision of the lease required him to obtain renters insurance, and he obtained it seven days after receiving a three day notice, that should be considered “close enough” to cure the notice. The appellate division correctly pointed out that “substantial compliance” would only be relevant in measuring performance in the context of an uncurable breach (unlike this provision, where he easily could have obtained renters insurance within the three day notice period). Moreover, there is no basis in law to suggest that a tenant is allowed to comply with a three day notice in seven days, as this would somewhat defeat the point of having a statutory time period for unlawful detainer notices.

Boston, LLC v. Juarez will be satisfying for those who have had the frustrating experience of being technically correct but advised against proceeding on the merits. Given the cost of litigation and the chance of losing, this kind of case most often results in a private settlement agreement where the tenant does better than a complete forfeiture of their rights. Further, a tenant can generally obtain relief from forfeiture – even after an adverse judgment – if they are capable of curing the breach and making the plaintiff whole. Where this tenant actually had cured the breach (and before he even had to respond to the complaint), it is unusual that this case would have fully litigated.

In San Francisco, this outcome is all the less likely, following the new Jane Kim Amendment to the San Francisco Rent Ordinance. The Rent Ordinance now requires that, where a lawsuit is based on violation of a lease covenant, the violation must be “substantial”. This would likely thrust such a controversy back into the purview of a jury, “forfeiture clause” notwithstanding. At the very least, Boston, LLC v. Juarez tells us definitively that a three day notice is not a seven day notice (unless of course you serve it on the Monday before Thanksgiving).