When Peter, a graduate student in electrical engineering at UC Berkeley, went to look for an apartment for the 2020-21 school year, he settled on Sterling Allston, a complex on Allston Way in downtown Berkeley that used to be known as the Gaia Building before it was acquired by a Texas company last year and renamed.
While the apartment he rented was off a long dim corridor, it offered other amenities: it was close to the lab where he worked as a researcher and it was steps away from the western entrance to UC Berkeley. In short, it was convenient.
In early April, Peter (who didn’t want Berkeleyside to use his full name) and a roommate signed a lease for $3,819 a month.
Fast forward to the end of June. Shortly after UC Berkeley announced, on June 17, that the COVID-19 pandemic would mean most teaching would be held online with just a few in-person classes, Peter and his roommate decided that they did not want to move into Sterling Allston. They did not think breaking the lease would be an issue, however, because it included an “early termination fee.” That meant they could get out of their lease early if they paid $7,638, or two months’ rent.
So Peter was surprised when officials from the Sterling Berkeley Collection, which manages Sterling’s six apartment complexes in Berkeley, denied the request, citing an emergency law adopted by the Berkeley City Council in response to the COVID-19 pandemic that said landlords cannot assess a fee when tenants want to break a lease. Specifically, Sterling was referring to an April 28 vote that said it was “unlawful for a landlord to charge a fee for the termination of a tenancy prior to the expiration of the lease.”
“Please be advised that the early termination is no longer an option with recently passed changes to local municipal code,” said an unsigned email from Berkeley Sterling. “Any lease holders that do not fulfill their lease agreement will be held financially responsible for their signed agreement until their unit is rerented to another party or the lease expires. No payments in any amount will be accepted as termination of your lease agreement.”
Peter and his roommate were not alone in their quandary. Sixteen other UC Berkeley students who tried to get out of their leases with early termination clauses were also told that provision was no longer applicable.
“They tried to use this law that was a shield for tenants as a sword for tenants,” said Joseph Tobener, whose tenants’ right law firm, Tobener Ravenscroft, represents the 18 tenants.
A Sterling executive in Texas told Berkeleyside on Thursday that a marketing executive would respond to questions. No one returned our call.
Sterling, part of The Dinerstein Companies, is one of the nation’s largest property developers
Sterling is the student housing division of The Dinerstein Companies, a Houston, TX, company that builds and manages student and multifamily housing around the country. Considered one of the largest companies of its kind, The Dinerstein Companies, also known as TDC, has more than $1 billion in housing under construction and development, primarily in Texas and southern California, according to its website. In October, TDC acquired the Berkeley assets of Equity Residential, which included six apartment complexes with 343 units: the Gaia Building at 2116 Allston Way; Berkeleyan Apartments at 1910 Oxford St.; Renaissance Villa at 1627 University Ave.; ARTech Building at 2002 Addison St.; the Touriel Building at 2004 University Ave; and the Fine Arts Building at 2110 Haste St. The properties reportedly sold for $180 million.
The properties were rebranded to reflect the new owner. They are called Sterling Addison, (ArtTech) Sterling Allston, (Gaia) Sterling Haste, (Fine Arts) Sterling Jefferson, (Renaissance Villa) Sterling Oxford (Berkeleyan Apartments) and Sterling University Ave. (Touriel Building).
A misinterpretation of Berkeley’s emergency ordinance to protect tenants
The emergency ordinance the City Council passed in April to protect tenants was not intended to eliminate the early termination fee, according to City Councilmember Kate Harrison. It was intended to prevent landlords from assessing an additional fee when a tenant breaks a lease.
“Unfortunately, soon after the City Council passed 13.78.017, tenant attorneys funded by the City have seen landlords misinterpreting the code,” Harrison and City Councilmember Rigel Robinson wrote in a memo to council. “For example, one group of tenants attempted to pay a fee to end their lease and end further liability to the landlord in accordance with their pre-existing lease terms but the landlord claimed that 13.78.017 does not allow lease terms that charge a fee for terminating the lease. Instead, that landlord is trying to hold their tenants liable for a whole year of rent. This interpretation distorts the intent of the ordinance.”
To clarify the code, the council voted unanimously Tuesday to add this wording: “Negotiations between the parties, occurring when the tenants notified the landlord to their intention to exit the lease, in order to terminate a tenant’s liabilities are not precluded by the ordinance.”
The vote prompted Peter and his roommate to mail Sterling Allston a notice on Wednesday notifying them that they would be terminating their lease early and invoking the “early elimination fee.” Levi Hancock, the community manager for the Sterling Berkeley Collection, said in a reply email Thursday that the company had just learned about the Berkeley ordinance. The company will be reviewing it and will be getting back to Peter and his roommate, according to the response.
Berkeley expands COVID-19 protections to students
The City Council on Tuesday also voted to expand protections to students impacted by COVID-19, but those actions have caused confusion and pushback.
The council voted to add students to the category of those impacted by COVID-19 and to give them “the ability to break leases without penalty during the local state of emergency, if they give 30 days’ notice,” according to a press release from Harrison and Robinson’s office. “The update also allows a tenant to break a lease with 30 days’ notice if they, or their roommates, are or were registered with an educational institution whose in-person classes have been canceled or limited by the COVID-19 pandemic.”
That wording drew immediate feedback from apartment owners because it goes against state law, said Krista Gulbransen, the executive director of the Berkeley Property Owners Association, which represents landlords. “It says a tenant can break a lease without penalty, which is not true,” she said.
California state law 1951.2 law says landlords have a right to mitigate their financial losses when a tenant breaks a lease and that law supersedes local law, she said. However, state law also requires landlords to try and re-rent a vacated apartment as soon as possible in order to minimize the cost for the tenant, she said.
Harrison said Berkeley will issue some clarifying language today that states tenants can’t just duck out of their leases.
But the expansion of the ordinance to include impacted students means that they, like others impacted by the coronavirus, can have 12 months to pay a landlord the rent they owe.
For Tobener, the Berkeley law does not go far enough. His law firm gets 200 calls a week from tenants who can’t afford their rent and who want to break a lease. With the recent spread of COVID-19, the continued shelter-in-place orders, and continued high unemployment, this problem is only going to get bigger.
Tobener thinks the state of California should pass a law that lets tenants out of their leases entirely. The state should also offer subsidies to small landlords who depend on rental income, he said.
Update: July 17: Sterling Allston allowed Peter and his roommate to execute the early termination portion of their lease.