Category Archives: Rental Property

Accepting Partial Rent Payments

May a landlord accept a partial rent payment after filing an unlawful detainer action? The answer is a cautious yes, if the landlord provides “actual notice” to the tenant that the acceptance of the partial payment of rent does not constitute a waiver of the landlord’s right to recover possession of the property or to sue for the remaining balance owed.

On the other hand, if a landlord accepts a partial payment of rent without providing the “actual notice” required, the landlord may have waived the right to collect any other amounts due and the right to seek possession of the property with respect to that default.

As you might imagine, the timing and nature of the “actual notice” has been the subject of some dispute. A recent California appellate case has helped landlords, by providing that the “actual notice” could be language in the lease itself. Therefore, it is important that the lease contain proper non-waiver language. If it does, it may provide a safety net for landlords that do accept partial payments during the pendency of an unlawful detainer action. Of course, a landlord would be well advised to add appropriate non-waiver language to the 3-day notices and the unlawful detainer complaint filed by the landlord.

Tax Benefits of Tenant Improvements

Businesses that incur costs upgrading office, retail or commercial space during the next year may be eligible for a nice tax break contained in a relatively obscure provision of the Job Creation and Worker Assistance Act of 2002. A special first-year bonus depreciation allowance is provided for qualified property, importantly including tenant improvements, made after May 5, 2003 and placed in service before January 1, 2005. (A 30 % first-year depreciation allowance is provided for qualified tenant improvements made after September 10, 2001, and before January 1, 2005.) This is a significant benefit, though of course, future depreciation will be reduced by the deduction taken.

It does not apply to new buildings but rather buildings that have been in service at least three years. It only applies to interior construction of leased space. Thus, an owner-occupant is not eligible for this deduction and it does not apply to the cost of structural components. It applies to both landlords and tenants, to the extent each shares in these costs.

This bonus depreciation allowance must be taken in the first year that the improvements are placed in service. If not, this opportunity will be lost and only standard depreciation deductions will be available.