Assembly Bill No. 1482 – statewide rent control – has been approved and signed by the governor as of October 8, 2019. While effective January 1, 2020, it is essentially effective right now and will be retroactively effective to any rent increases since March 15, 2019 come January 1, 2020 (i.e. even if you raise the rent now, you may have to reduce it come the new year).
Many exemptions exist that will apply to most small owners; corporate owners are the primary target of the current law.
Read on for further details of this new law and to see if an exemption may apply to your rental property(ies).
An important editorial note for property owners and voters: an earlier statewide rent control ballot measure, California Proposition 10, was defeated at the polls in November 2018 by 59 percent against and only 41 percent in favor. With that sound voter rejection of rent control in-hand, this rent control bill was nevertheless overwhelmingly passed by the California State Legislature consisting of a Democratic Party supermajority in both houses and the governor’s office.
This New Statewide Rent Control Has Two Key Components: 1) Caps Rental Increases; 2) Requires “Just Cause” For All Evictions
“Caps” Annual Rental Increases In Value and Frequency
- “Caps” rental increases to 5 percent plus the percentage change in the cost of living, as defined (i.e. a consumer price index), or 10%, whichever is lower.
- Also limits rental increases to twice per year, but cannot exceed the annual “caps” noted above. (i.e. you could raise the rent in February, then again in August, so long as the cumulative total is within the annual limit.)
Requires “Just Cause” For All Evictions (And Potential Relocation Expenses)
- There are “at-fault just causes” and “no-fault just causes”
- “At-fault” includes non-payment of rent and some common sense and currently-exiting reasons such as criminal activity, unlawful use, refusal to allow (lawful) access, etc.
- “No-fault” currently includes: intent to occupy (i.e. you want to move in); occupancy by your “spouse, domestic partner, children, grandchildren, parents, or grandparents,” “remodeling”, and; a few other reasons to review in-depth.
- Many of the “no-fault just causes” will require relocation assistance payments of one month’s rent to the tenant(s) prior to their moving out.
Some Exemptions To The New Law Include:
Single-family homes and condominiums (“condos”) are EXEMPT, unless owned by a Corporation or Real Estate Investment Trust (“REIT”).
LLCs are EXEMPT if owned by individuals (i.e. you own an LLC [that owns a rental property], or you and your spouse own the LLC, or you and your business partner own the LLC, etc., all EXEMPT).
LLCs are NOT EXEMPT if a corporation is an owner or co-owner of the LLC (i.e. Corporation X owns the LLC, or you own the LLC along with Corporation X = NOT EXEMPT).
Duplexes are EXEMPT if owner occupied in one unit; duplexes are NOT EXEMPT if both units are rented out. Accordingly, most traditional duplexes will NOT be exempt.
Any property constructed within the previous 15 years is EXEMPT.
If your property qualifies for an exemption, you must provide a notice to the tenant(s) of that fact that the property is exempt, using specific statutory language. This can be a stand-alone document, lease addendum, or incorporated into a new lease, all depending on when the tenancy started.
What If You Already Have Local Rent Control:
If your property is in a location with local rent control already in-place (i.e. Los Angeles, Santa Monica, San Francisco, etc.), those ordinances will remain and the ‘more-tenant-friendly’ law will likely apply in any conflicts between this state law and your local law.
Landlords should consult their management company, trade organization(s) and/or legal counsel soon to discuss if they are exempt (and if so, send notices of exemption to those tenants) and certainly prior to issuing any future eviction notices or rent increases.
Sources / Read the full law here (link to California Legislature)
Author Devin R. Lucas is a Real Estate Attorney, Broker and REALTOR®, specializing in Newport Beach, Costa Mesa and Orange County coastal communities, serving individual and investors in residential real estate.
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