Understanding Loss of Use (Rent Differential) Damages
In the landlord-tenant context, the term “loss of use” refers to one of the most important measures of money damages available to a tenant wrongfully evicted from a rental unit–particularly in a city with rent control (e.g., San Francisco, Oakland, Berkeley, San Jose, Mountain View, Richmond, East Palo Alto, Emeryville, and Hayward). “Loss of use” generally refers to a renter’s inability to reside at a unit the renter is otherwise entitled to possess. A tenant’s “loss of use” of the rental unit may be the result of a natural disaster, such as a fire. It may also be the result of another party’s wrongdoing or negligence, such as the landlord’s failure to make repairs, rendering the unit uninhabitable; or any other landlord action or inaction that causes a tenant to vacate the unit against his or her will. In the latter instance, the landlord may be liable to the tenant for loss of use damages (among others).
So what are “loss of use” (also referred to as “rent differential”) damages? These are damages that compensate a tenant for the value of the tenant’s present possessory interest in a rental unit through the duration of the tenancy. Put another way, these damages compensate the tenant for not being able to enjoy the rental unit during the remainder of the lease term.
Let’s say, for example, that Landlord and Tenant have agreed to a two-year lease for a rental unit with monthly rent of $2,000.00. At the start of the lease term, the fair market value of the rental unit is $2,000.00. One year into the tenancy (during which Tenant has paid rent on time and otherwise taken proper care of the rental unit), the fair market value of the rental unit has increased to $3,000.00. The landlord wants to earn fair market value rent of $3,000.00 and breaches the lease, forcing Tenant to move out after just one year. Tenant’s loss of use damages are the difference between the fair market value of the rental unit ($3,000.00 per month) and rent at the time of the wrongful eviction ($2,000.00 per month) multiplied by the remaining months of the rental term (12). In other words, Tenant’s loss of use damages are ($3,000.00 – $2,000.00) × 12, or $12,000.00.
The same principle applies in the context of a tenant wrongfully evicted from a rent-controlled apartment. However, the tenant’s damages in this scenario are generally much greater. In rent-controlled cities, “loss of use” or “rent differential” damages are wrongful eviction general damages comprised of the present cash value of the lost future possessory interest in the rent-controlled apartment.1 Put another way, “loss of use” damages in this context compensate the tenant for not being able to enjoy the rental unit for however long a tenant intended to continue residing there. These damages “can be estimated but not fixed . . . but are nonetheless awarded because they are considered a natural and proximate result of the eviction.”2
Let’s say, for example, Tenant was forced out of a rent-controlled apartment in San Francisco by Landlord, who claimed he would be moving his son into the unit. Instead, Landlord put the unit on AirBNB the day after Tenant vacated. Tenant was paying a monthly rent of $2,000.00 at the time she moved out. The fair market value of monthly rent was $4,000.00 at the time she moved out. She planned to continue living at the rent-controlled apartment for eight more years. Tenant is entitled to loss of use damages of ($4,000.00 – $2,000.00) × 12 months per year × 8 years, or $192,000.00. Additionally, the San Francisco Residential Rent Stabilization and Arbitration Ordinance permit all damages to be tripled.3 As a result, the Tenant’s loss of use damages will be $192,000.00 × 3, or $576,000.00. Rent differential damages for a period of twenty years have been upheld.4
If you or someone you know has been wrongfully evicted and may be entitled to loss of use money damages, contact Tenant Law Group for a complimentary case review. We can evaluate your matter and advise you of your options, empowering you to take action.
1. See Beeman v. Burling, 216 Cal. App. 3d 1586, 1600 (1990) (citing Stillwell Hotel Co. v. Anderson, 4 Cal. 2d 463, 468–69 (1935)); Chacon v. Litke, 181 Cal. App. 4th 1234, 1245 (2010).
2. Beeman, 216 Cal. App. 3d at 1600.
3. See S.F., Cal. Admin. Code § 37.9(f)(“Whenever a landlord wrongfully endeavors to recover possession or recovers possession of a rental unit in violation of [the Rent Ordinance], the tenant . . . may institute a civil proceeding for . . . money damages of not less than three times actual damages (including damages for mental or emotional distress as specified below), and whatever other relief the court deems appropriate.”) (emph. added).
4. See Chacon v. Litke, 181 Cal. App. 4th 1234, 1246 (2010).