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Are section 8 Rent Payments Recoverable as Habitability Damages
Summary
Ultimately, whether payments made on behalf of a tenant by section 8 and not the tenant can be recovered by the tenant in a California lawsuit depends on whether the judge allows it.
Background of Habitability Lawsuits
Prior to 1974, in California, the law was substantially the same as landlord-tenant had been for hundreds of years, originating from English law - a tenant was responsible for maintaining the premises.
In 1974, in concert with other state jurisdictions, in the case Green v. Superior Court, the California Supreme Court "...h[e]ld that a warranty of habitability is implied by law in residential leases in California." Green v. Superior Court (1974) , 631.
In 1980, in Stoiber v. Honeychuck, the California Supreme Court held that "a tenant may state a cause of action in tort against his landlord for damages resulting from a breach of the implied warranty of habitability...." Stoiber v. Honeychuck (1980) , 918-919.
Basics of Damages for Habitability
As will be described, a tenant plaintiff can obtain damages measured by the loss in value or use that the defective habitability conditions caused, as well as damages for emotional distress.
As for the measure of damages for the loss in value or use that the defective habitability conditions caused, Stoiber v. Honeychuck explained that "[t]he measure of damages should be the difference between the fair rental value of the premises if they had been as warranted, and the fair rental value as they were during the occupancy in the unsafe or unsanitary condition." [Green v. Superior Court (1974) 10 Cal.3d 616, 638].
The Stoiber Court further explained that Green had suggested another measure of damages, as follows, "[a]nother reasonable approach is a percentage reduction of use: reducing the tenant's rental obligation by a percentage corresponding to the relative reduction of use of the leased premises caused by the landlord's breach..." [Green v. Superior Court (1974) 10 Cal.3d 616, 639 FN. 4].
Explosion of Affirmative Litigation for Money by Tenants against Landlords, Fueled in Part by Attorney Fees
In the fifty (50) years since Green and Stoiber affirmative lawsuits by tenants seeking money for habitability defects has exploded. In part, this growth in quantity of suits has been driven by the opportunity to obtain attorney fees in addition to money damages. Thereby, contingency-based attorneys are motivated to prosecute the cases.
Matter of First Impression - Can a Tenant Recover Section 8 Payments Paid by a Third Party
In response to the question, can a tenant recover Section 8 Payments paid by a third party and not by the tenant, the answer depends. Tenants and their attorneys say yes. Landlords and their attorneys say no. As a practical matter, the judge trying the case will have the ultimate say, or penultimate if the matter ever gets appealed.
Neither Green or Stoiber addressed how the measure of damages is impacted by the fact that a third party, such as the San Francisco Housing Authority as agent for the Housing and Urban Development entity of the U.S. Federal Government under the Section 8 rental assistance program, paid a portion of rent for the benefit of Plaintiffs. To my knowledge, no published or unpublished case has an on-point holding.
Author’s Firsthand Experience - Same Court, Same Building, Same Defendant - Exactly Opposite Rulings
From practical experience, this author had two motions in limine on the same question of law, whether payments of rent made by third parties and not the tenant could be recovereable by a plaintiff tenant in a lawsuit for habitability defects in two different cases in the Superior Court of California.
In the first case, Alfonso Huerta-Olivier v. 320 Alemany LLC, with the case number CGC-19-581225, MIL requested exclusion of all evidence of payment of rent by persons other than Plaintiffs. The underlying evidence was not pertaining to section 8 rent assistance, but pertained to theoretical payments by plaintiffs' family. The Honorable Mary Wiss denied Defendants' MIL 5 and allowed Plaintiffs to admit evidence of all rent. Ironically, I do not have a copy of any filed opposition, but, this author remembers distinctly that Judge Wiss was not impressed by the argument to deny evidence of payment of rent by third parties, including the Judge’s comment that who paid the rent did not matter.
Conversely, in the second case, Bianca Sanchez et al. v. 320 Alemany LLC, et al., with the case number CGC-21-596863, against the exact same defendant, in the exact same building, the defendant made substantially the exact same argument.
However, Bianca Sanchez et al. v. 320 Alemany LLC, et al., with the case number CGC-21-596863, the underlying facts were different. In CGC-21-596863, a substantial portion of the rent had been paid by the SFHA as a Housing and Urban Development Section 8 rent assistance. Defendants' arguments were that section 8 is not a party to the lease and one case that is not binding authority held that the rent is not "ren,' even though the section-8-landlord contract called the payments rent. Savett v. Davis (1994) 29 Cal.App.4th Supp. 13. Defendants also conflated the testimony of Plaintiffs' expert stating that Plaintiffs' expert had testified that his estimate of damages would be lower if he had known that Plaintiffs had received section 8.
It is for the reader of this blog to draw their own conclusions as to how two separate judges in the same court, against the same defendant and dealing with the same building arrived at 180 degree opposite and inconsistent rulings.
This author’s arguments against the theory that a plaintiff should not be allowed to recover rent assistance paid for by a third party start with the law. Green and Stoiber that hold that the measurement of damages is rent paid minus fair market value. Those cases do not state that rent paid is limited to only rent paid by the tenant. Indeed, the very nature of section 8 is that it is rent paid on behalf of the tenant for the tenant's benefit. Where the housing was substandard and uninhabitable, the tenant still suffered the same damages, the loss of the benefit of the housing. As a practical matter, in the alternative that section 8 rent payment would have gone toward habitable housing. There simply is no credible equitable argument that a wrong-doing landlord gets to retain rent that was overpaid relative to the legal value simply because a third party paid that rent on behalf of a tenant.
Binding Legal Authority Holds that a Plaintiff can Obtain Restitution when a Third Party, not the Plaintiff Unjustly Enriches a Defendant
Next, and in light of the first argument, denying a plaintiff tenant damages that section 8 paid on behalf of that tenant creates unjust enrichment to an acknowledged wrongdoing defendant. The on point case is County of Solano v. Vallejo Redevelopment District (1999) 75 Cal.App.4th 1262, hereinafter referred to as Solano v. Vallejo Redevelopment.
The facts of Solano County v. Vallejo Redevelopment are as followed. Vallejo Redevelopment wanted state grant money to develop nice housing in a vacant area. However, because the area was vacant and not blighted Vallejo was not eligible to get that grant money. Meanwhile, the County of Solano had blighted areas that qualified for the grant money.
So, Vallejo Redevelopment proposed a contract to Solano that somehow joined the two areas to qualify for the redevelopment money. That contract expressly stated that it terminated when a fixed dollar amount of funds had been expended. In some form, Vallejo Redevelopment was in charge of disbursing the money and Solano County had little control.
Unsurprisingly, virtually all of the money went to Vallejo Redevelopment to develop the nice and previously undeveloped area and almost none of the money went to redevelop the actual blighted areas in Solano.
At a certain point during the performance of the contract, an expenditure was made for the benefit of Vallejo Redevelopment that triggered Vallejo Redevelopment's ability to obtain a $3.0 million loan from a third party. At the time Vallejo Redevelopment made the expenditure triggering Vallejo Redevelopment's ability to obtain a $3.0 million loan, Solano was still owed $3.2 million under the contract. However, the same expenditure that triggered Vallejo Redevelopment's ability to get a $3.0 million loan also made the total expenditures exceed the amount that the contract stated triggered the termination of the contract. Vallejo Redevelopment terminated the contract and Solano ended up never receiving the $3.2 million.
Solano sued, including for unjust enrichment. "The trial court held that the Agency was liable to Solano County because the Agency committed an anticipatory breach of contract, and that Vallejo was liable based on unjust enrichment" Vallejo Redevelopment appealed arguing in part that it could not be liable for unjust enrichment because Solano conveyed no money to Vallejo Redevelopment.
The pertinent part of the holding was as follows, "While [the payor of certain redevelopment benefits] was not a party to the agreement between the [Vallejo Redevelopment] and Solano County, it set in motion the actions [required to form and perform on the contract].....[I]t is clear....that Solano County w[as intended to] receive a total of $5 million..[and Vallejo] ....paid $1.8 million of this amount." However, Vallejo "...was unable to pay the remaining $3.2 million to Solano County because...." its spending elsewhere terminated the contract based on total expenditures. So, even though Solano did not make payments to Vallejo, "Vallejo was unjustly enriched by the payments..." to third parties. Solano v. Vallejo 53-53.
The amount that entitled Vallejo Development to the $3.0 million loan was also the same expenditure that caused the total amount expended to reach the total amount to terminate the contract. Thereby, Vallejo Development was unjustly enriched through the $3.0 million loan issued to Vallejo, not by plaintiff, but, by an unrelated third party who was not a party to the case.
In other words, Solano v. Vallejo held that a defendant can be liable for unjust enrichment and ordered to pay damages therefore, even where there are no allegations that plaintiff paid any money to defendant and the unjust enrichment was conveyed to defendant by a third party who is not a party to the case. Solano v. Vallejo 53-53.
Other arguments include the fact that Section 8 is a collateral source.
Bottom line, in my opinion, "There [should be] no reward for being slick...." (1995) 31 Cal. App. 4th 1513, 1529.
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