3 Day Notice to Pay or Quit – Compliance and Requirements

| Lindsay Petrone
rent

What is a “person” in the context of a 3 day notice to pay or quit?  Is it a natural person, like an individual, or could it also include an entity?  A recent case, City of Alameda v. Sheehan (2024 WL 4195486, Filed September 13, 2024), just explored this question.  In City of Alameda (“City”), the City served a 3-day notice on Shelby Sheehan (“Sheehan”) who had not paid rent for 17 months pursuant to a lease with the City.  Upon a successfully delivered notice to pay or quit and non-payment by the tenant within the 3-day period, the landlord can thereafter seek eviction of the tenant through an expedited unlawful detainer action.  The 3-day notice to pay or quit directed Sheehan to pay the outstanding rent by cash or check to City of Alameda c/o River Rock Estate Group at an address in Alameda, California.  Sheehan argued that the notice failed to provide the name of a natural person to whom rent may be paid, instead naming a corporation.  Therefore, the notice was invalid because the statute required a “person” to be listed.  The Court in Sheehan confirmed that a “person” in the context of a 3-day notice does include a corporation or entity.  However, the 3-day notice was ultimately defective because the corporation’s name was incomplete and incorrectly stated.

Section 1161 of the Code of Civil Procedure (“Section 1161”) governs the 3-day notice process, in which the notice is required to provide the tenant with the “name, telephone number and address of the person to whom rent shall be paid” within the 3-day period.  Section 1161 does not further define a “Person”.  In Sheehan, the Court looked to the definition of a “person” in another Code of Civil Procedure statute, Section 17, which states “a person includes a corporation as well as a natural person”.  The Court also noted that Section 1161 defines a “Tenant to include any person who hires real property” and that common sense and case-law both recognize that tenants, for the purposes of eviction via unlawful detainers, include both natural persons and entities.  In other words, if a corporate tenant can be served a 3-day notice, then a corporation or other entity can receive the rent.  The Court also recognized a lease can require rent to be paid by electronic means or otherwise to a corporate landlord, rather than to a named individual by mail.  Therefore, it would not make logical sense to allow payment to a landlord who is an entity, but then not allow an entity to collect the rent under a 3-day notice.  The Court also looked to the legislative history and noted that the legislature could have stated “natural person” in Section 1161 but did not.  For the stated reasons above, the Court held that the recipient or “person” named to receive the rent in a 3-day notice could be an individual or an entity.

Ultimately, in this case, the entity River Rock Estate Group was incorrectly spelled and the address stated on the 3-day notice for that entity did not match any River Rock entity found on the Secretary of State website.  As such, the 3-day notice did not strictly comply with the requirements of Section 1161 and would need to be corrected and again served on Sheehan to be enforceable.  The City of Alameda case reiterates that the requirements of Section 1161 must be strictly followed in order to be enforceable and also confirms a “person” to whom rent can be paid may be an entity or an individual, as long as clearly stated as to whom and where the money should be paid.  Landlords should make sure their notices are accurately drafted and follow the guidelines in Section 1161 to ensure any subsequent unlawful detainer action is valid if the rent remains unpaid after the 3 days.

 

Authored by Reuben, Junius & Rose, LLP Partner, Lindsay Petrone.

The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient. Readers should consult with legal counsel before relying on any of the information contained herein. Reuben, Junius & Rose, LLP is a full service real estate law firm. We specialize in land use, development and entitlement law. We also provide a wide range of transactional services, including leasing, acquisitions and sales, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.

Reduce Exposure to Mechanics’ Liens

| Kaitlin Sheber
Notice of Completion

While contractors typically enjoy a 90-day period to file a Mechanic’s Lien once a project is completed, project owners in California can take steps to significantly shorten this deadline by recording a Notice of Completion (“Notice”).  The Notice gives written notice that an entire project is completed.  A Notice that is properly recorded and served benefits project owners in two main ways:

  1. Reduced project risk because contractors and subcontractors have less time to record a Mechanic’s Lien – which can result in filing of a mechanic’s lien foreclosure action; and
  2. Project owners can clear title more quickly, smoothing the way for post-construction loans and sales.

Mechanic’s Liens Can be Recorded as late as 90 Days After Project Completion:

Unless an owner records a Notice, contractors and subcontractors have 90 days to record a Mechanic’s Lien.  But, if a Notice is properly recorded, that 90-day period is shortened to 60 or 30 days.  The time period depends on whether a direct contractor performed the work:

  • A direct contractor has 60 days to file a Mechanic’s Lien after a project owner records a Notice of Completion.
  • Persons that are not direct contractors have 30 days to file a Mechanic’s Lien after a project owner records a Notice of Completion.

It is critical that a recorded Notice be served on each direct contractor, subcontractor, and material supplier who may have the right to record a mechanic’s lien against the project.  The Notice will only be effective if timely and validly served, so we recommend service via certified mail with a proof of notice declaration to establish service in the event of any dispute.

When is a Project Completed?

The date a project is completed is the moment the clock begins to run to record a Mechanic’s Lien or Notice.  Under the California Civil Code, a project is considered complete when any of the following occur:

  1. Actual completion;
  2. Labor stops and occupation or use by the owner occurs;
  3. Labor stops for a continuous period of 60 days; or
  4. Labor stops for a continuous period of 30 days, after which a notice of cessation is recorded.

Additionally, a project is considered completed at the time a public entity accepts the project.

In practice, the definition of actual completion has proved difficult to nail down.  Ordinarily, “completion” means that the entire project has been completed.  But this meaning does not give clear direction for the date a court would find a project legally completed.

Courts may also determine completion by looking at the substantiality of work performed after a project is presumed completed.  Where a contractor performs additional work under the construction contract, courts will tend to find the project was not previously completed.  Conversely, the project may be actually completed even if the contractor later corrects defects.  Factors like an issuance of a Final Certificate of Occupancy can serve as evidence of completion, but are not definitive proof.  Unfortunately, as the California Civil Code currently stands, the important definition of completion remains ambiguous.

Notice of Completion Timing

A Notice must be recorded and served within 15 days from the date a project is completed.  Though the definition of completion is nebulous (as discussed above), a Notice is considered valid if recorded and served within 15 days of the true project completion, even if it includes an erroneous completion date.

 

Authored by Reuben, Junius & Rose, LLP Law Clerk Kaitlin Sheber.

The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient.  Readers should consult with legal counsel before relying on any of the information contained herein.  Reuben, Junius & Rose, LLP is a full service real estate law firm.  We specialize in land use, development and entitlement law.  We also provide a wide range of transactional services, including leasing, acquisitions and sales, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.