Policy Memorandum
To: California Secretary of State – Business Programs Division (UCC Section)
From: Johnny Albert Morales, Founder, Future Octave Records LLC
Date: November 21, 2025
Subject: Clarification on UCC Filings, Lease Agreements, and Tenant Protections
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I. Background
Future Octave Records LLC has made 30 months of consecutive payments for occupancy without a written lease agreement. Despite this, property owners have attempted to side‑step accountability by refusing to provide a lease, then misapplying unlawful detainer actions against the wrong tenant. In addition, hazardous living conditions—including three months without electricity and reliance on extension cords—violated California’s habitability laws.
This memorandum clarifies how UCC filings remain just and enforceable even without a signed lease, and how California law recognizes tenancy through payment acceptance.
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II. Issue
Property owners argue that without a signed lease agreement, UCC filings cannot be triggered. This creates a loophole that undermines tenant protections and LLC owners starting from scratch. The issue is whether acceptance of rent payments over time establishes tenancy and whether violations of property management law allow UCC filings to be enforced without a signature.
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III. Legal Framework
1. UCC Article 9 – Secured Transactions
- § 9‑109, § 9‑201, § 9‑310: Authorizes creation and perfection of security interests.
- Even without a lease, obligations arising from statutory duties can trigger UCC protections.
2. California Civil Code – Habitability and Tenancy
- § 1941.1: Requires landlords to provide habitable premises, including electricity.
- § 1942: Grants tenants remedies when habitability is violated.
- § 1947.3: Acceptance of rent payments—even from third parties—creates tenancy unless explicitly disclaimed. Thirty months of accepted payments establishes Future Octave Records LLC as the tenant.
3. California Code of Civil Procedure – Unlawful Detainer
- § 1161: Defines unlawful detainer actions against “tenants” who fail to pay rent or comply with obligations. Payment history itself establishes tenant status.
4. California Health & Safety Code – Substandard Housing
- § 17920.3: Defines substandard housing to include lack of electricity and unsafe wiring.
- Three months without power and reliance on extension cords meet this definition.
5. Case Law Principles
- California courts recognize implied tenancy or tenancy at will when rent is accepted over time.
- Thirty months of payments is more than sufficient to establish tenancy, regardless of a signed lease.
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IV. Recommendations
1. Clarify Guidance: The Secretary of State should issue guidance confirming that acceptance of rent payments establishes tenancy under California law, even without a signed lease.
2. Support UCC Enforcement: Recognize that UCC filings are valid when statutory obligations are violated, not only when contracts are signed.
3. Protect LLC Owners: Educate new LLC owners that documenting payments and conditions provides enforceable rights under Civil Code §§ 1941.1, 1942, 1947.3, and CCP § 1161.
4. Address Habitability Violations: Reinforce that hazardous conditions such as lack of electricity trigger statutory protections and justify equitable remedies.
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V. Conclusion
Property owners may attempt to avoid UCC filings by refusing to sign lease agreements. However, California law does not allow landlords to escape responsibility. Thirty months of accepted payments legally establishes Future Octave Records LLC as the tenant. Habitability violations further justify protective filings.
By clarifying these protections, the Secretary of State can ensure that LLC owners starting from scratch are not disadvantaged by procedural loopholes and that UCC filings remain a powerful tool for justice and transparency.
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⚖️ Key Laws Referenced
- UCC Article 9 (§ 9‑109, § 9‑201, § 9‑310) – Secured transactions
- California Civil Code § 1941.1 – Warranty of habitability
- California Civil Code § 1942 – Tenant remedies for habitability violations
- California Civil Code § 1947.3 – Acceptance of rent establishes tenancy
- California Code of Civil Procedure § 1161 – Unlawful detainer
- California
Health & Safety Code § 17920.3 – Substandard housing definition