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Carter v. Cohen

September 28, 2010


APPEAL from a judgment of the Superior Court of Los Angeles County, Quentin Kopp, Judge. Affirmed and remanded with directions. (Los Angeles County Super. Ct. No. BC374328).

The opinion of the court was delivered by: Manella, J.


Respondent Lauren Carter sued her landlord, appellant Jerry Cohen, alleging that her rent payments contravened the Los Angeles Rent Stabilization Ordinance (L.A. Mun. Code, ch. XV., art. I., § 151.00 et seq.) (RSO).*fn1 After a jury found that Carter was entitled to damages of $11,590 for overpayment of rent, the trial court awarded her $25,575 in attorney fees under a fee-shifting provision of the RSO. Cohen challenges the award of damages on the ground that the rental agreement was unlawful; in addition, he maintains that the fee award was improper because Carter's damages were recoverable in a limited civil case. We affirm the judgment in its entirety.


In 2002, Carter entered into a lease agreement with Ree Whitford regarding a guesthouse in North Hollywood. The guesthouse contained two rooms with a kitchen area, and was detached from a house on the same property. The guesthouse had been constructed without building permits, and was not registered under the RSO. From 2002 to 2004, Carter paid Whitford $890 per month in rent.

In September 2004, Cohen, an attorney, bought the house and its guesthouse from Whitford, and increased Carter's monthly rent to $1,475. A year later, in September 2005, he raised the monthly rent to $1,585. When Cohen increased the monthly rent to $1,685, effective November 1, 2006, Carter gave Cohen a 30-day notice of her intent to move out of the guesthouse, and they fell into a dispute regarding whether Carter's security deposit should be applied against her final rent payment. Cohen began proceedings to evict Carter, but voluntarily dismissed them after Carter vacated the premises. On November 8, 2006, the Los Angeles Department of Building Services declared the guesthouse "substandard," finding "'unapproved occupancy'" in a structure "'constructed without the required permits'" and "'not designed or intended to be used for such occupancies.'"

Carter initiated the underlying action on July 16, 2007. Carter's complaint alleged, inter alia, that Cohen had increased her rent in contravention of the RSO. Carter asserted two claims under the RSO, seeking disgorgement of the entire rent she had paid to Cohen, or alternatively, the rent she had paid in excess of the limits set by the RSO, together with penalties provided under the RSO (L.A. Mun. Code, ch. XV., art. I., § 151.10(A)). In addition, she asserted two claims under state rental statutes (Civ. Code, §§ 1941.1, subd. (d), 1950.5, subd. (l)) and a claim for unfair business practices.*fn2

Carter's claims were dismissed or abandoned, with the exception of her claim for disgorgement of the rent she had paid in excess of the RSO limits. On July 16, 2008, a jury determined that Carter's excess rent payments amounted to $11,590. Carter subsequently sought her attorney fees and the trebling of the jury's award pursuant to the penalty provisions of the RSO (§ 151.10(A)). The trial court awarded Carter $25,575 in attorney fees, but declined to treble the jury's award; in addition, the trial court awarded $5,427.01 in other costs.*fn3 On November 14, 2008, judgment was entered in Carter's favor. This appeal followed.


Cohen contends that the trial court erred in (1) permitting Carter to assert a claim under the RSO for excessive rental payments, and (2) awarding attorney fees to Carter under a fee-shifting provision of the RSO.

A. Claim For Excess Rent Payments

Cohen contends that Carter's claim for excess rent payments under the RSO failed as a matter of law because Carter's rental agreement was unlawful and the guesthouse fell outside the RSO. He maintains that Carter was entitled to recover her rental payments only to the extent they exceeded the reasonable rental value of the guesthouse. For the reasons explained below, we reject his contentions.

1. RSO

We begin by examining the RSO and other pertinent provisions of the Los Angeles Municipal Code. In 1979, the Los Angeles City Council enacted the RSO in an effort to regulate rent increases due to a housing shortage. (Klarfeld v. Berg (1981) 29 Cal.3d 893, 895-896.) The legislative purposes of the RSO are declared in section 151.01: "There is a shortage of decent, safe and sanitary housing in the City of Los Angeles resulting in a critically low vacancy factor. [¶]

. . . [¶] Therefore, it is necessary and reasonable to regulate rents so as to safeguard tenants from excessive rent increases, while at the same time providing landlords with just and reasonable returns from their rental units."

The RSO established measures to regulate rents and created the Rent Adjustment Commission to enforce them (§ 151.03). Central to the RSO is a provision governing permissible rent adjustments (§ 151.06). Absent special circumstances, the RSO permits a landlord to impose a "maximum adjusted rent" during a given period -- determined by a baseline "maximum rent" for a preceding period and an allowable adjustment, which is ordinarily a percentage of the baseline "maximum rent." (§§ 151.02, 151.06, 151.07.) Regarding such adjustments, section 151.04(A) states: "It shall be unlawful for any landlord to demand, accept or retain more than the maximum adjusted rent permitted pursuant to this chapter or regulation or orders adopted pursuant to this chapter." Section 151.05(A) further obliges landlords to register rental units, and ...

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