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Legal Q & A Tenants Operating Day Cares – by Franco Simone, Esq.

Posted on 01. Apr, 2016 by in all

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Q:  My tenants informed me that they plan on running a small day care business out of their apartment. However, my rental agreement strictly prohibits operating a business out of the apartment and the area in which the apartment building is situated is not zoned for commercial businesses. Can I prohibit my tenants from starting the day care?
A: No, you cannot prohibit your tenants from starting the day care. Under California law, houses, condos, and apartment units may be used to run a small family day care business. These laws were passed in order to make childcare more readily available for working parents in residential neighborhoods.  Further, running a small day care home is not considered a “business use of the property.” Thus, your tenants can run the small day care regardless of the language in the rental agreement prohibiting business operations. 

Q:  What does this mean for the provisions I have included in my rental agreement?
A: This means that any provision in your rental agreement that aims to prohibit utilizing the premises as a small family day care business is invalid. 

Q:  What type of notice is my tenant supposed to give me before he opens a small family day care business?
A: A tenant wishing to open up a small family day care business out of their rental unit is expected to give the owner of the property 30 days’ written notice of their intent to start the business. However, many prospective day care providers fail to provide written notice to the owner. Additionally, failure to give notice is not considered grounds to refuse operation of the day care opening because it is not mandatory for the tenant to obtain approval from the owner before starting the business. 

Q:  What can I do as a landlord to ensure that my property is well maintained?
A: Once you are made aware that your tenant intends on running a small day care business out of the property, you may increase your tenant’s security deposit amount due to this new business endeavor. You may demand an increased security deposit amount even if you charge your other tenants a smaller amount. However, the total security deposit amount you charge your tenant running the day care cannot, under any circumstances, surpass the maximum amount permissible under present law.  

Q: My tenant told me that she wanted to start a daycare business out of the house she rents from me. I told her no because I do not want my property damaged and I do not want to be liable. Are there any repercussions for denying the day care business?
A: Yes. Your tenant has the right under California Law to run a small family day care business out of her rental unit, even if you disapprove of it. Denying this right could open you up to a lawsuit.  

Q:  Is there any criteria my tenants must meet in order to open the small family day care?
A: Yes, the California Department of Social Services has to assess the conditions of the home as well as your tenant’s qualifications before licensing your tenant as a family day care provider. If the home is approved by the Department your tenant can supervise up to six children at a time or up to eight children if landlord approves in writing. Furthermore, it is mandatory that the day care provider carry either: (1) liability insurance of $100,000 per occurrence and $300,000 per year; or (2) affidavits by all parents acknowledging the lack of insurance. It may also be a good idea for you to request that you be named as an additional insured if your tenant does happen to carry insurance. However, property owners are responsible for any increases in insurance premiums as a result of being added as an additional insured. Lastly, it is always a good idea to require tenants to have renter’s insurance in addition to liability insurance and/or a bond. While the same rules that apply to other tenants are the same for day care providers, one should be cautious when assessing breaches of the agreement or when considering taking action to correct the violation because such action may be viewed as retaliatory.  

Q: My tenant gave me thirty days notice that she plans to operate a daycare business out of her apartment. I told her that she could only supervise four children because my insurance will only cover daycare businesses up to four children. She is now caring for six children. Can I tell her that she can only watch four because of my insurance policy?
A: No. Your tenant is allowed to watch up to six children under California Law. If she is in compliance with the other conditions she should have liability insurance of liability insurance of $100,000 per occurrence and $300,000 per year, you can request to be named as an additional insured. It may also be a good idea for you to look at different insurance policies that cover up to six children or more. 

Attorney Franco Simone, of the Landlords Legal Center and has been doing evictions for 20 years.  He is also an adjunct law professor at the University of San Diego.  Mr. Simone’s office is open Monday- Friday from 9:00 AM to 5:00 PM .-  Tel: 619-235-6180, website: www.landlordslegalcenter.com or email info@landlordslegalcenter.com  

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