Residential Landlord and Tenant Considerations under California’s new “Rent Control” model.

This article is meant to serve as an informational and, hopefully, insightful overview of AB 1482 and not a complete and thorough analysis of the entire law, or an analysis of your particular situation.   Please read the entire disclaimer, at the conclusion of this article. 

As of this week, Landlords and Tenants throughout California have entered a new phase of “Property Rights”.  Both Landlord and Tenant should become quite familiar with AB 1482, which is being affectionately referred to as ‘Anti-Rent Gouging”, but effectively acts as rent control legislation.  Although this law is filled with both new rules and exceptions to the new rules, AB 1482 will, in a nutshell, offer Tenants greater protections against eviction and cap annual rent increases.

As mentioned, this new law makes two big changes in the Landlord / Tenant relationship - First, it requires that, when evicting a Tenant, Landlords state a “Just Cause”, or "Legally Sufficient Reason", for the eviction.  Gone are the days when a Landlord could simply terminate a tenancy for no reason at all.  Well, as of the date of this article, Landlords do still have just over 60 days to evict problem Tenants or low rent payers before that option is taken away from them.  At any rate, there is still a fair amount of flexibility under the new law for Landlords to manage their properties as they see fit, but this is now countered with more robust protections for Tenants.  Second, the law places a cap on how often and how much rent can be increased in any 12 month period. Finally, the law comes with a host of exceptions, or exemptions to both the "Just Cause" and "Rent Cap" rules.  I will touch on these exemptions, as well as a bit of the new notice requirements.

 

Part 1 - Just Cause Evictions

When seeking to evict a Tenant, AB 1482 requires that Landlords now provide a “legally sufficient reason”, or “Just Cause” for the eviction.  This protection applies to any Tenant who has resided in the home, continuously and lawfully, for 12 months. If additional tenants are added to an already existing lease, the protections apply only if all of the tenants have continuously and lawfully occupied the property for 12 months or if one or more tenants have continuously and lawfully occupied the property for 24 months.

This concept of “Just cause” has two seperate components that a Landlord has at their disposal for justifying an eviction - “at fault” and “no fault”.

“At Fault” - Tenant did something wrong, and they have to go…

Under the At Fault scenario, the Tenant has typically done something that is disagreeable to the Landlord and the Landlord has chosen to evict the Tenant.  Under this scenario, the Landlord can simply evict the Tenant (after employing the typical rules for curing default) and move on. The Landlord is under no obligation to assist the Tenant in relocating to new housing.

Within the text of AB 1482, there are 11 stated examples of behaviors that could rise to the level of “At Fault” Just Cause.  Among these are: failing to pay rent, breach of a material term of the lease, Criminal activity on the premises / common areas and unauthorized subletting, among others.

“No Fault” - Tenant did not do anything wrong, but still has to go…

Under the No Fault scenario, the Tenant has typically not done anything wrong, however, for one reason or another, the Landlord would like the tenant to move out of the unit.  If the Landlord wishes to evict a Tenant under this area of the law, they will now be required to offer the Tenant some form of financial assistance and may choose from either (a) providing a payment directly to the Tenant equal to one month’s rent, or (b) waiving the Tenant’s final month’s rental payment.

AB 1482 also has a fairly long list of reasons where it might be appropriate for a Landlord to evict a tenant using “No Fault” Just Cause.  In addition to complying with a government or local ordinance that requires that the property be vacated, Landlords may also evict a Tenant if they intend to substantially remodel the property, or if they intend for it to be occupied by either themselves or an immediate family member.  Note: For leases that are entered into on or before July 1, 2020, you can simply inform the Tenant that the home will be occupied by a family member and the Tenant must vacate. For leases entered into on or after July 20, 2020, the Tenant must either agree to this type of eviction in writing, or the terms of this type of eviction must be clearly spelled out in the original lease.

 

Part Two - Rent Cap

As mentioned above, the second major area of of AB 1482 is a rent cap.  The new law now limits the maximum rent increase in a 12-month period to the lesser of either 10% or 5% plus the change in the Cost Of Living.  The law also allows for no more than two increases in rent in a 12-month period.  Interestingly, the law explicitly does not limit the allowable increase in rent for new Tenants, where no tenant from the prior tenancy remains in possession of the property.

 

Part Three - Exclusions

As is typical with most laws, lobbying groups and other interested parties have, somehow, been able to convince the legislature to carve out exceptions or exemptions to the rules of AB 1482.  Included in the legislation is a long list of properties that will be immune from either the “Just Cause” requirements, as well as the Rent Cap.  Let's take a look at both lists - they just might save you a lot of time and trouble.

“Just Cause” Exclusions

AB 1482 does not apply to residential properties that are already subject to a local ordinance which requires Just Cause for eviction, when that ordinance was adopted on or before September 1, 2019.  The bill also does not apply to residential properties that are subject to a more protective local ordinance requiring just cause for termination adopted after September 1, 2019. Also - the “just cause” termination requirements do not apply to:

  1. Transient and tourist hotel occupancy
  2. Housing accommodations in a nonprofit hospital, religious facility, extended care facility, licensed residential care facility for the elderly, or an adult residential facility
  3. Dormitories owned and operated by an educational institution
  4. Housing accommodations in which the tenant shares bathroom or kitchen facilities with the owner who maintains their principal residence at the property
  5. Single-family owner-occupied residences, including residences in which the owner-occupant leases no more than 2 units or bedrooms
  6. A duplex in which the owner occupies one of the units as the owner’s principal place of residence
  7. Housing that has been issued a certificate of occupancy within the previous 15 years (on a rolling basis)
  8. Residential property that is separate in title from any other dwelling unit (such as a condominium), so long as the lease includes the proper notice of the exemption and so long as the owner is not a REIT, corporation, or LLC in which at least one member is a corporation.
  9. Deed-restricted affordable housing for persons and families of very low to moderate income

Rent Cap Exclusion

As with the Just Cause exclusion, the Rent Cap exclusion is also carved out for more restrictive local ordinances.  For example - if your local city has a more restrictive rent control ordinance in place (think San Francisco, Oakland or L.A.), you will be bound by the local laws, not the statewide law that we are discussing herein.

Additionally, the rent cap does not apply to:

  1. Dormitories constructed and maintained in connection with any California higher education institution for use by students attending such institution
  2. Housing that has been issued a certificate of occupancy within the previous 15 years (on a rolling basis)
  3. Residential property that is separate in title from any other dwelling unit (such as a condominium), so long as the lease includes the proper notice of the exemption and so long as the owner is not a REIT, corporation, or LLC in which at least one member is a corporation.
  4. Deed-restricted affordable housing for persons and families of very low to moderate income
  5. A duplex in which the owner occupies one of the units as the owner’s principal place of residence

It is also worth mentioning, again, that this law applies to all rent increases occurring from March 15, 2019 onward and, once signed by Governor Newsom, takes effect January 1, 2020. For example - if a landlord increases rent by more than 5% plus the change in the cost of living between March 15, 2019 and January 1, 2020, the applicable rent on January 1, 2020 will be the rent as of March 15, 2020, plus the maximum increase permitted under AB 1482. An interesting carve out for violation of this rule - the landlord would not be liable to the tenant for any overpayment.  Funny, right?

Finally - Notices

Along with this law come a bevy of new notices that Landlords are required to give to their Tenants.  Because this material is so dry, I won't go into it in this article. However, if you would like to know more about this, or any other topic, don't hesitate to reach out to our office to schedule a consult, or, feel free to read the entire text of the AB 1482 by clicking here.

Conclusion

We are definitely experiencing a new day in property rights, real estate ownership and management.  Now, more than ever, a thoughtful and well-crafted rental agreement and rental strategy, that is actively enforced, will be the cornerstone for successful and profitable real estate relationships.

Michael Clem’s disclaimer:  The information provided on this website does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only.  Information on this website may not constitute the most up-to-date legal or other information. This website contains links to other third-party websites. Such links are only for the convenience of the reader, user or browser; Michal Clem does not recommend or endorse the contents of the third-party sites.

Readers of this website should contact their attorney to obtain advice with respect to any particular legal matter.  No reader, user, or browser of this site should act or refrain from acting on the basis of information on this site without first seeking legal advice from counsel in the relevant jurisdiction.  Only your individual attorney can provide assurances that the information contained herein – and your interpretation of it – is applicable or appropriate to your particular situation. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client relationship between the reader, user, or browser and website authors, contributors or contributing law firms.  The views expressed at, or through, this site are those of the individual authors writing in their individual capacities only – not those of their respective employers. All liability with respect to actions taken or not taken based on the contents of this site are hereby expressly disclaimed. The content on this posting is provided "as is;" no representations are made that the content is error-free.