California Lawyer Breaks Silence on Nightmare Squatters, Lawsuits, & $50,000 Evictions

0:00AI is incredible. It can teach you how to fry an egg and even write a poem, pirate style. But it knows nothing about your work. Slackbot is different. It doesn't just know the facts. It knows your schedule. It can turn a brainstorm into a brief. And it doesn't need to be taught. Because Slackbot isn't just another AI. It's AI that knows your work as well as you do. Visit slack.com forward slash meet Slackbot to learn more. Is there a good reason why the rent hasn't been paid? Get your f***ing cameraman out of my f***ing face. The tenants from hell are back.

0:36Graham Stephan:They move in, but then they won't pay and they won't leave. What's the most difficult part of being a landlord? The reality is it's gotten so bad in California that any mistake can cost you a property. How would you like to live in a beautiful home without ever having to pay rent or a mortgage? Sounds pretty good, doesn't it? Yeah. I've seen renters live on the property for years and not pay a single dime. Hey, Barb, can we talk to you about why you guys have so many lawsuits against you guys? Don't touch me. This is not an accident. The system is designed to make you fail. I would describe them as people who have a system figured out.

1:10Graham Stephan:So is the eviction system intentionally designed to fail? Yes. The entire market is broken, and most people just don't realize it yet. People who benefit from this really are institutional landlords, big corporations, and mom-and-pop landlords lose everything. 100%. They have to sell. it's another option. If you wanted to be a tenant and exploit these laws as much as you could, how would you do it? And how much money do you think you could make?

1:41Graham Stephan:Something I really haven't talked about a lot lately is that I am selling off all of my real estate in California. Things have gotten so bad. I see the writing on the wall and I just want to get out. And I want to say the straw that broke the camel's back is you. I found you on Twitter. We had a good talk. You are an eviction attorney. You look into real estate. We had a great talk. And I want to say within 10 minutes, you convinced me to not have anything to do with Los Angeles, California. Yeah. Being a landlord. So if you want to introduce yourself. Thank you so much for having me on. I'm Avi Sinai.

2:17I'm an eviction trial lawyer in LA. The word is out for a lot of these professional tenants. And you see them again and again and again in the courtroom. They're represented by the same lawyers, evicted by the same lawyers. And they understand how to game the system, right? They know that if they go to the property owner and then they just stop paying rent. And then they come and say to the landlord, look, it's going to cost you$20 ,000 to evict me. Once you give me$10 ,000, I'll leave. And half the time it works. And if it doesn't work, they just know how to stretch a case for six to nine months.

2:50And they stay there. And then they leave and they find the next thing.

2:54Graham Stephan:See, this is what I saw really common when I was working in real estate. I remember the first career tenant that I met seemed like a really, really, really nice guy. And he showed up and he was an attorney. He was making a few hundred thousand dollars a year. He had a wife. He had three kids, religious. and they met with the owner and they got along so well. And they rented this house in Beverlywood and it was $12 ,000 a month. Paid immediately, paid the security deposit and then it was like the next month that the rent was due, he started saying oh there's problems. There's water intrusion, there are rodents, there is this thing wrong, this thing wrong.

3:38Graham Stephan:I'm withholding rent until you fix these things. And the owner fixed all the things. And then the tenant said, no, no, you didn't fix the things properly. We're getting asthma. We have these issues. Could you fix it again? Delayed it a few months, fixed all the things. And then the tenant said, hey, listen, I wasn't aware. You're not current with your mortgage. You're behind. Because this was back in 2011. He was trying to do a short sale and showing financial hardship. And he says, well, because you're behind on your mortgage, I legally don't need to pay you rent. Now, this guy put his life savings in this property and wasn't receiving rent for it.

4:22Graham Stephan:He was hoping he could keep the property, do a short sale, be able to recoup something, or just be able to refinance his mortgage. This tenant drew it out for like three years before he had to leave. but he got three years of free rent in a place that was$12 ,000 a month, and he picked up and he did it again. You know, this story is insanely similar to a case I just finished, right? A family that would, on the outside, look completely normal, right? And I get a call from this property owner,$6 million house in Beverly Hills. And they say, look, I mean, they stopped paying rent. We need to evict.

5:00So I do a quick search, and all of a sudden, I see all these lawsuits. from these tenants. And I recognized a friend's name, that they were in litigation. So I called this friend. I said, hey, like, do you know these tenants? Like, yeah, well, you know, they moved in $4 million house. They immediately threatened to sue me for habitability. They stopped paying rent. I had to evict them. I had to pay them a fortune. During litigation, we found out they did it five times. And it was from$4 million home to$7 million home to$5 million home. And it was very hard to evict them, but we did it.

5:35Graham Stephan:So for those who aren't familiar, describe what a habitability lawsuit is and why tenants are taking advantage of it. Yeah. So under California law, landlord is required to give every tenant habitable space. The kicker is, is the legislator passed all these laws that if you have a certain code violation and it's not cured in 35 days, the tenant can sue and not just get their damages and a rent back. they can get statutory fees and attorney's fees. So attorneys can easily pick up the case and let's say there are 20, 30,$40 ,000 in damages, they can collect attorney's fees. So they're incentivized to continue full force in litigation and demand very, very high settlements at the beginning.

6:18There are also some local rules, like for example, in LA, San Monica, that related to harassment, that you're able to get attorney's fees on that too. So a court violation will make it really, really bad. An injury will make it really, really bad, but not necessary. What does harassment mean? Like, how have you seen harassment applied in your own practice? Yeah, so it could be very mundane things. Like, for example, offering a tenant a buyout too many times, not making repairs, giving notices that are considered bad faith. What's the most difficult part of being a landlord? It's the unknown of regulatory environment.

6:51What's going to come next? In the last five, six years, we've seen moratorium after moratorium, restriction after restriction. and there is this unknown of what is city councils going to do next? What are the people in Sacramento going to do next? How are they going to restrict our property rights further? And, you know, real estate, you have thin margins. It just makes it harder and harder. So it's very hard to plan ahead right now for landlords. This episode is in partnership with Airbnb. So Graham and I just wrapped up a trip. We were in Austin for a few days. We filmed episodes with Togi, Chris Camillo, and Caleb Hammer.

7:22And honestly, every time we're on the road, we're staying at homes on Airbnb. It's just become the default.

7:27Graham Stephan:And here's the thing most people don't think about. When you're the one traveling, your place back home is just sitting there empty. And that's a real missed opportunity. Whether you're gone for a long weekend or a few weeks, you can list your space on Airbnb and let it work for you while you're away. If you've ever thought about hosting but weren't sure how to manage everything from the road, Airbnb now has the co-host network. You can connect with a vetted local co-host who has real hosting experience and can take care of the day-to-day for you. A co-host can manage reservations, handle guest communication, and even provide on-site support so you don't have to think about it while you're traveling.

7:59So instead of your home sitting empty,

8:00Graham Stephan:you could be generating some extra cash, whether that helps you cover the next trip, your flights, or just goes towards something that you've been putting off at home. I actually listed a spare room in my house on Airbnb and I was genuinely so surprised how easy it was to set up, how seamless the entire process was, and it actually made me some pretty good money. I would actually recommend this to anyone out there that wants to make a little extra cash on the side. It's honestly phenomenal. If you're thinking about hosting but want some help getting started, Find a co-host at airbnb.com slash host.

8:28Graham Stephan:Now, you said on Twitter that Los Angeles landlords are the most discriminated class in our society. How would you explain that to the average person who hears that and thinks, that sounds insane? Yeah. So obviously, it's kind of a half joke. But objectively speaking, if you look at who city council are targeting, it's property owners. It's housing providers, right? Just this week, they passed a huge restriction, cutting in half the amount of rent increases landlords can pass to rent control residents. It's almost like they have this emergency button. And anytime their constituents or tenant rights groups say, hey, listen, we need some aid, we need some relief, they just pass another law.

9:08I think you can make the argument. Property owners are considered bad and renters are considered good. And if the city council can do something for their constituents, they're just going to do it. So do you see this problem just continually getting worse? And if you kind of expand this out in like a five to 10 year window, 20 year window, what do you expect to see if there's already 20 % of places in Los Angeles are completely vacant? How do you imagine this looking? I'm already seeing consolidation. So if an apartment building goes on the market, it's most likely going to be purchased by a larger property owner with a lot of units, right?

9:40These are skilled operators. They know what to do. They're much better equipped to deal with a tough regulatory environment. I don't know how the story is going to end, but we're clearly in a downward trend.

9:48Graham Stephan:Another Santa Monica story. This is interesting. I remember in 2014 or 2015, I was looking to buy a place for myself. And there was a condo that came up on Montana and Ocean, fourth floor. It's across from the beach. And they were asking$450 ,000, a really good price for a one bedroom. Here's the catch. It's tenant occupied. The tenant was paying like 600 bucks a month for this place. She was over the age of 62. She made several hundred thousand dollars a year and she was extremely healthy. And the HOA was basically what she was paying in rent. And so if you were to buy this place, you couldn't kick her out because she's a protected tenant.

10:32Graham Stephan:And your carrying costs would be the property taxes, HOA, insurance, maintenance, all these things that are several thousand dollars while she's paying 600. And so you have to carry the loss of 1500 to $2 ,000 a month, potentially for 30 plus years until she passes away. Yeah. The other issue I remember with this, why no one wanted to touch that, even though its value was like$900 ,000 was that in addition to her, her son was on the lease. And apparently no one could contact the son. Like no one knew where the son was, how old the son was, where he was. And so there's a chance that let's say you wait 30 years and then she passes away.

11:19Graham Stephan:All of a sudden the son comes out of the woodwork and well, actually, I'm on the lease and I am, you know, 45 years old and I'm entitled to this place for the next 50 years. And then it's like it's married. Yeah. What do you do? Yeah. Yeah. It's like you're buying a liability. But I remember this guy took such a huge loss on this place. Like he lost five, six hundred thousand. He even offered her like six figures, one, two hundred thousand dollars to leave. She wouldn't do it. So you can't evict someone if they're paying rent. No, unless it is there are considered a nuisance or unless they're somehow in violation of the lease or they're trying to do like cosmetic repairs that you don't approve of.

12:00Graham Stephan:All of those can be cured, though. Like let's say she moves in her friend or she sublets it. You can't just say, all right, well, now you're out. You got to give her a notice to, what is it? A notice to? It's called a notice to cease. Yes. A pre-pre-eviction notice first. Then you have to give an eviction notice with an opportunity to cure most of the time. And then if they don't cure and they don't leave, then you can file for eviction, which of course is going to take forever. What is the argument for investing in Los Angeles now? Very easy, right? I mean, we have 300 days of sun. All the problems in LA could be easily solved, right?

12:34It's mostly crime and homelessness. And historically, we've had incredible rent growth, incredible property appreciation growth, which if we don't have in the next 10 years, it's probably going to be the first time in forever that we didn't have it. I was just speaking with someone the other day, a big investor in a big fund, and he believes that Southern California has a huge opportunity, right? He sees this is the same condition I've seen in 2012 when nobody wanted to touch anything. If you would have told me three or four years ago, you can buy an apartment building at a five or six cap in LA, I would think you're crazy, right?

13:08But you can buy that right now in LA. What's the biggest misconception the public has about evictions? People think about evictions and they think about this horrible process that the evil landlords and the system are oppressing the tenants. In reality, it's completely the other way around. Every law in the book, every process, every step of the way is for the tenants. It is incredibly easy to lose an eviction in California, right? One misstep, one mistake in the notice and you're gone, right? And you have to restart all over again. Over the years, the time that it takes to evict someone has exponentially grown, right?

13:43And that's for many reasons. The laws changed, times got extended, budget cuts, not enough courtrooms, jury trials. But the restrictions became even harder. So what do we have today, right? I was about to go to trial just this week. And an hour before trial was supposed to start, the tenant defense lawyer files a motion to dismiss on a technicality that could have been filed on the first week of the case. That lawyer is not getting paid by the tenant. That lawyer is hired by a nonprofit that's being funded by taxpayers. And the taxpayers are footing the bill for these kinds of strategies.

14:18Graham Stephan:I had that almost exactly happened to me. There was a tenant who left a property and then moved back in when it was listed for sale. Oh my God. Sent me rent and I had to return the rent to her. And I was told by the person I was working with, yeah, if you take the rent, now you've created another tenant so you have to start over again. So I sent back the rent and I sent her some sort of notice. I had another company handling it. It was a property management firm at the time who was handling it. And they did not include, and this was like 2023, by the way, a one page COVID disclosure. That was it.

14:59Graham Stephan:Everything else is perfect, but the one page COVID disclosure. And as we were getting closer to the court date, I had another company look through and said, who served this? And I said, the property management firm, never have them do this. They missed this one form and we had to start over again by issuing her a new notice. And of course, she had the free legal assistance apparently telling her, yeah, don't mention this. We're going to use this at the last possible minute. And yeah, we caught it before then, but it did cost us several months because we had to go back. You have to post the RSO notice in front of their RSO rights.

15:38You have to post an LHD notice informing the amount of their tenant rights. And then you have to now post a third notice, which is the notice for right to counsel. And if you don't have one of these notices posted on a common area, that's an affirmative defense. So who's going to help the landlord?

15:53Graham Stephan:What if the landlord can't afford to evict their tenant and they just don't have the money? What do they do? Like, let's just say someone inherits a family property. It's breaking even every month, but it means a lot to them. And over time, they're going to pay it down and they have to evict the tenant. and they say, I don't have$20 ,000. What do they do? They have to sell. There's no other option. There's some cheap services out there for eviction, but that's still going to run you four or five grand. If you can't afford four or five grand, you got to sell the property. My philosophy has always been this, and this was very unpopular for people to hear, and it worked well for me up until recently.

16:28Graham Stephan:I'd never raise the rent. I hated raising the rent because I'd get really great tenants that would stay like eight to 10 years. They were awesome. Yeah. And I had zero hassles, zero headache. They always paid on time. If there's something that needed to be fixed, of course I do it because I don't want them to leave. And from my perspective, too, when a tenant leaves, my overhead is really high. Like, let's say on a unit, I might profit in a year, like net, net, net,$15 ,000 in a year for one unit. We're the Hartford, with decades of experience insuring millions of unique small businesses. When it comes to your small business insurance.

17:05Thank you. One size absolutely does not fit all.

17:08Graham Stephan:Get a quote or find an agent today at thehartford.com slash small business. If they move out, I repaint it. That's$4 ,000. It's usually maybe two to three months where it's empty, where I'm fixing it up and thinks that's another few thousand dollars in lost rent. And then there's another few thousand dollars in random miscellaneous things to get a tenant back in there. So it's basically when they move out, I miss almost a year's worth of profit. And so I think, well, instead of just having years worth of profit and turning the unit over, I may as well pass those savings back onto the tenant and just not have them leave by not raising the rent.

17:42Graham Stephan:But when the city comes in and says you cannot raise the rent, well, then jacking up the costs and everything else. That to me is a red flag that all of a sudden the city says it's mandatory. But they don't do that for groceries. They don't do that for insurance costs. They don't do that for car repairs. They don't do that for just about anything else. And so now I've gotten to a point where I have to raise rent every year because if I don't do that, I end up losing out so much more money. Of course, you have to raise it. And so now I'm at a point where I've had to and I hate doing it. But it goes to show it's one of those things where if they didn't do that, I wouldn't be raising the rent.

18:17Graham Stephan:But recently what they said is that you could only raise rent up to a certain amount or 90 % of CPI. So if inflation comes in at 2%, you could only raise under inflation basically. So every year you have a tenant, you're going to be making less and less and less and less. Exactly. If you wanted to be a tenant and exploit these laws as much as you could, how would you do it? And how much money do you think you could make? I think that I would find the highest rent apartment, probably complain about mold, having brain fog, and stop paying rent. You can probably stay there for nine, 10 months if you know what you're doing.

18:49And then you could pick up and do that again. Yeah. And there's plenty of people who are doing that. So, and there's, I'm guessing that, you know, there are laws against creating a registry where you say, oh, this tenant's here. Yeah, you can't do that. Why not?

19:00Graham Stephan:Because why can't you have a Yelp for tenants? Why can't you do that and say, hey, here's the person's name, you're a problematic tenant? Because on the flip side of that, you could also in the same registry say, this was a phenomenal tenant. This tenant, I didn't want to move. So I think there's two problems with that. Number one, eviction cases are sealed by law. The documents are not available to the public. These are not secret proceedings, but the documents themselves are protected. And I think that someone tried actually to do that and they got sued. So can't do that. What's the lowest rate you've seen a tenant pay?

19:37I've done a very, very hard eviction in LA. The tenant was paying$250 a month. She lived there for 20 years. When I came in, she had a seven-figure lawsuit against the landlord. No eviction attorney would take the case. But we filed an eviction. We took a risk. we offered her$75 ,000 in the hallway to leave right before trial and she said no and we took a risk in trial and we won in trial and she got evicted and then she proceeded to call her city attorney's office she called every member of city council said that I cheated in trial and then she filed a bar complaint against me we didn't do anything wrong so there was nothing to do about it.

20:20She got evicted because she didn't pay the rent and she violated the rules, but that was great for the property owner. But there's a much easier way to avoid these kind of tenants. I tell this to all my clients. I post on Twitter all the time. I took the 20 worst tenants that I evicted and they're horrible. And I said, what's the common denominator with all of them? And in 95 % of cases, if you run a name search and you look for litigation history, they have a long litigation history not necessarily just for evictions collections they sue people for personal injury for employment vast majority of renters are decent people nobody wants to go to court right just insane people want to go to court but something happens when you go to court a lot you get comfortable with it and the fear just kind of goes away so in 95 percent of the time if the property management or the owner just did a simple litigation search on the tenant, a ton of cases would have come up.