ACTION GOES TO COURT
OVER SECURITY DEPOSIT INTEREST

I had been to the Ronald Reagan Center for state business in downtown Los Angeles on two prior occasions. The first time I went to hear Earl Kavanau argue his own case. The second time was to support Carl Lambert in his Santa Monica Beach v Santa Monica Rent Control Board case.

It is a lovely modern building located in a blighted area. State business is taken care of in the building and they have one heavily guarded courtroom. This is the home of the Court of Appeals, Second Appellate District, Division 1. There are four judges on the appeals court and three of the four hear each appeal. One must admire the court’s promptness because at exactly 9 am the judges came walking in and the first case was heard.

There were not many present in the court. Rosario Perry argued the case. Gwen Wunder, Jim Jacobson, Roman Bruno, and I— your past president— were the rooting section .The City of Santa Monica thought so little of this case, that they only sent Joel Levy to represent their side.

We were there to hear Action Apartment Association v. City Of Santa Monica Rent Control Board.

It has been several years since ACTION filed this lawsuit against Santa Monica because owners were made to pay 3% interest on security deposits to tenants while there was no way owners were getting 3% interest on this money from the banks. The bank usually paid less than 1% to the owners. The security deposit money has to be “on demand” because the tenant can vacate anytime and the funds have to be returned after an accounting within 21 days. This is the background. Owners feel that they have been “extorted” out of $750,000 annually for three years— more than $2,000,000.

A while ago we went to trial court in downtown Los Angeles with the honorable Thomas Mitchell presiding. As hard as it is to believe— this judge seemed sympathetic to our plight, but to put it in one-syllable words— he felt “WE HAD NO CASE.” That is why we found ourselves in the Court of Appeals.

The appellate judges that heard our arguments on Monday, November 20, 2001 were: Robert Mallano, Reuben Ortega and Vaino Spencer. There we were with Rosario Perry representing ACTION and Joel Levy representing the City of Santa Monica.

The attitude of the judges could not have been better. While the trial court judge felt there was no merit to our case, the appeals court judges took a great interest in our case.

Statements were made: “Does this annual interest payment by owners advance any legitimate governmental interest?” “ How could the owners get their money back for this expense?” “The annual general adjustment does not take into consideration the security deposit interest expense paid by the owners.” “Does each owner have to file an individual increase petition in order to get compensated for this expense to the owner?” “That means 3,200 owners had to file each year. The form is 14 pages long and has 6 schedules to be completed. How many owners would bother with that?” “The Rent Board claims there is no impact by the security deposits on the Annual General Adjustment.”

The look on Joel Levy’s face when the judges finished with him told the story. They chewed him up.

While we have no guarantees of a win, I for one feel good about it. It is about time we win something.

The reason the judges were so well versed on the matter was because the written brief they were given and kept referring to was expertly prepared by Jim Jacobson.

If we win, we go back to the trial court before the very same Judge Mitchell and say, “Your honor, we do have a case— now let’s try it! This proves that we must continue the fight for what we believe is fair and just and it will eventually pay off. Your persistence and contributions made this possible.

JUDGES DO MAKE A DIFFERENCE

As the year draws to a close, there will be significant changes at the Santa Monica Courthouse. At least six judges are leaving. Does this have an impact on local decisions? You better believe it!

Two judges come to mind whose names many of you are familiar with and have been aggravated by. Judge Rubin (I always affidavit him) is leaving to go fill a vacancy on the Appeals Court, Division 8. All I can say is, whoever replaces him can’t be any worse for landlords.

Another judge, who shall remain nameless (although his name rhymes with “TINKEL”), is retiring. Let’s hope he takes his wife with him into obscurity.

There are others leaving, but the loss of these two will not bring a tear to my eyes.

CAA DELEGATES MEETING

Your president for 2002, Gordon Gitlen, Gwen Wunder and I took a ride down to San Diego on November 8, 2001. It was especially important for Gordon to meet the staff and the group that comprises the California Apartment Association. Gwen and I have been going to these meetings for ten years, so we feel that we do know the players. It is always good to check in and get the latest scuttlebutt.

There was a Budget and Finance Committee meeting, a Political Action Committee meeting, a Legal Committee meeting, and the Board of Directors and Delegates meeting.

A new slate of officers was elected for the year 2002. The President is Tom Scott; Vice President, Helen Sims; Secretary, Michael Pierce, and Treasurer, Michael Goldfarb.

Believe me when we relate to you that we do feel good about having a presence at the State level.

END OF THE YEAR RECORD KEEPING

The New Year is upon us and don’t you forget those 1099 forms. The IRS does not accept the 1099 forms until January of each year. You can’t give them out before the end of the year.

1) You should have your tenant’s social security number on file. If not, give him a Form W9 asking for it. ACTION can provide you with this form.
2) You should give form 1099 INT to any tenant you paid the 3% annual interest. ACTION can provide you with these forms.
3) You should give form 1099 MISC to any maintenance person you pay $600 during the year. ACTION can provide you with these forms.
4) You should give form 1099 MISC to any attorney you pay $1 or more during the year.

ACTION has these forms and will distribute them to any member who asks, free of charge.

You must give the form 1099 to the person involved by the end of January each year. You must then send the IRS their copy by the end of February each year. Those are the rules.

Thanks for reading.