Can I Evict Month-to-Month Tenants After Buying a Duplex in Sacramento?
I recently talked with an aspiring real estate investor who was considering buying a duplex in Midtown Sacramento. Both units were occupied by long-term tenants with month-to-month rental agreements. His investment idea was pretty straightforward: buy the duplex, terminate the existing tenancies, furnish the units and convert them into short-term rentals. It's an interesting idea. But there was one fairly significant issue we needed to discuss before getting too far down that road:
Month-to-month doesn't necessarily mean you can simply give the tenants notice and tell them to leave.
Can I terminate a month-to-month tenancy after buying a Sacramento duplex?
This is something buyers of tenant-occupied multifamily property within the City of Sacramento need to understand. A month-to-month rental agreement describes the term of the tenancy. It doesn't necessarily give a landlord an unrestricted ability to terminate it.
For rental units covered by the City of Sacramento's Tenant Protection Program, tenants who have occupied their units for more than 12 months generally receive "just cause" eviction protections. The City requires landlords to offer to renew the rental housing agreement and prohibits eviction without a qualifying just cause.
And purchasing the property doesn't simply erase the existing tenancy.
As I often remind investors: when you buy an occupied duplex, triplex or fourplex, you're not just buying the building. You're also buying the existing tenancies. That can be a very important part of evaluating the investment.
What does "just cause" eviction mean?
Under the City of Sacramento's Tenant Protection Program, a landlord generally needs a recognized reason to terminate a protected tenancy. Some reasons involve actions by the tenant, including:
Failure to pay rent
Breach of the rental agreement
Criminal or nuisance activity
Failure to provide lawful access
The City's ordinance also recognizes certain circumstances that aren't necessarily the tenant's fault, including:
Necessary and substantial repairs requiring temporary vacancy
Owner move-in
Withdrawal of the rental unit from the rental market
But these aren't simply boxes an investor can check because they would prefer to have a vacant property. Each situation has requirements that need to be carefully followed.
That's why an investor shouldn't build a business plan around, "I'll buy it and give the tenants notice after closing," without first determining whether that strategy is actually permissible.
But they're month-to-month leases. Doesn't that make a difference?
This is probably the most important misconception. It's easy to assume that a month-to-month tenant can simply be given 30 or 60 days' notice and then required to leave. But when a tenancy is subject to just-cause protections, the fact that the written lease has expired and converted to month-to-month doesn't necessarily eliminate those protections.
In the case of the duplex I was discussing with this investor, these were long-term tenants. That fact mattered considerably more than he initially realized. His proposed investment strategy depended upon getting possession of both units. Before purchasing the property, therefore, it would be important for him to have a qualified landlord-tenant attorney evaluate whether and how those tenancies could legally be terminated.
That's a question you want answered before you buy the property, not after you get the keys.
This applies specifically within the City of Sacramento...There is another distinction that's incredibly important here: I'm talking about the City of Sacramento's Tenant Protection Program. The City ordinance applies within the incorporated boundaries of the City of Sacramento. It does not automatically apply to every property with "Sacramento, CA" in its mailing address. This can be confusing because Sacramento is much bigger geographically than the incorporated City itself.
There are large areas that people commonly think of as "Sacramento" and that may even have a Sacramento mailing address but are actually in unincorporated Sacramento County rather than the City of Sacramento. Different local ordinances may apply in those areas. So don't rely on the city name in the mailing address.
If you're considering purchasing a rental property and the distinction matters to your investment strategy, verify the property's actual governmental jurisdiction. The Sacramento County Assessor Parcel Viewer can be used to look up a property's jurisdiction.
Why this matters before you buy?
This is a perfect example of why due diligence can be every bit as important as physical property inspections when buying multifamily real estate. You might love the building. You might love the location. The numbers might look fantastic based on what you intend to do with the property. But if the investment strategy depends on having vacant units, the ability to legally obtain possession of those units becomes part of your investment analysis. The worst time to discover that your plan doesn't work is after you've closed escrow.
So when I'm helping a client evaluate an occupied duplex, triplex or fourplex, one of the questions I want to understand is not simply, "What are the tenants paying?"
It's also:
Who are the tenants, how long have they lived there, what type of rental agreements do they have, and does the buyer's investment strategy depend upon those tenants leaving?
Sometimes the answers to those questions can completely change how we look at the opportunity.
This article discusses the City of Sacramento's Tenant Protection Program and is intended for general real estate information only. It is not legal advice. California landlord-tenant law is complex, and other state or local tenant protections may apply even when a property is outside the City of Sacramento. Buyers and property owners should consult a qualified landlord-tenant attorney regarding a particular property and tenancy.
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