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Special Rules Apply When Tenant-Occupied Property Is For Sale

Agents who have for-sale listings of tenant-occupied properties need to comply with the rules governing showings and notice of entry. California has some special — and somewhat surprising — rules in this regard, and it behooves California agents to become familiar with them. Recently, the legal department of CAR (California Association of REALTORS®) provided a memo on this topic. We note some of the highlights here.

While the California Civil Code (§1954) generally requires that a tenant be given written notice of an intent to enter, there is a special provision (§1954(d)(2)) covering property that is for sale. For a 120-day period after the tenant has been notified that the owner is selling the property, it is sufficient that the tenant be provided oral notice of the intent to enter. The oral notice may be given personally or by phone. Twenty-four hours is presumed to be reasonable notice. The showing should take place during normal business hours.

The original notice of the landlord’s intent to sell can be provided on CAR form NSE (Notice of Sale and Entry).

The question of open houses frequently arises when a tenant-occupied property is for sale. Fortunately, some answers were provided in the 2013 case of Dromy v. Lukovsky (Second Appellate District, August 30, 2013).

In that case, the tenant (Lukovsky) would not permit weekend open houses. The landlord filed a motion in Superior Court, based on Civil Code §1954.

The Superior Court ruled in favor of the landlord; but it did not grant an unrestricted right to hold open houses. Indicating a desire to fashion an order that was fair and reasonable to both sides, it came up with the following:

The agent could hold two open houses per month.
They could be on weekend days between 1:00 p.m. and 4:30 p.m.
The agent must be present, and the tenant may be present, during any open house.
The agent must give 10 days advance notice to the tenant of proposed open house dates, and the tenant has 48 hours to acknowledge or to propose an alternative weekend date.

The tenant appealed.

The Appellate Court noted that the phrase normal business hours, though not defined in the statute, was meant to strike a balance between two competing policies: (1) the tenant’s right of quiet enjoyment of the property, and (2) the landlord’s right and ability to sell his property. The Court noted that, at the time the legislation was enacted, the current edition of Black’s Law Dictionary defined “business hours” as meaning: “In general those hours during which persons in the community generally keep their places open for the transaction of business.” The Court then went on to say, “For our purposes, the relevant community consists of licensed professionals working in the residential real estate business.” Moreover, “It is undisputed that the custom and practice of [that community] is to hold open houses during weekends…”

Thus, the Appellate Court held that the judgment of the Superior Court was “reasonable under the facts and circumstances and that it complies with the requirements of section 1954, subdivision (b).”

California real estate agents will no doubt wonder how this decision applies to their business. The legal department of the California Association of REALTORS® (CAR) had this to say in its realegal publication. “…landlords and their listing agents who want to arrange weekend open houses should obtain the tenant’s consent or comply with the reasonableness standard required by the Dromy court.” To help insure that what they schedule is reasonable, landlords and agents “are strongly encouraged to, depending on the circumstances, pattern your weekend open house arrangements in a similar fashion to what the trial court ordered in Dromy…” (See the 4-point requirement that was stated above.)

Bob Hunt is a director of the California Association of Realtors®. He is the author of Real Estate the Ethical Way.