CA’s New Statewide Rent Control Law

Lee Chen, Esq.

On October 2, 2019, California enacted the AB 1482, representing the most comprehensive reform of California landlord-tenant laws in decades.   The law, which essentially imposes “rent control” provisions for certain rentals in California, officially takes effect on January 1, 2020, but any rent increases for rentals subject to the law since March 15, 2019, must be made retroactively compliant with the new provisions.

The new state law is similar to many of the local rent control ordinances in California, such as those that exist in the cities of San Francisco, Oakland, Los Angeles, etc.  If your property is subject to a more restrictive local rent control ordinance, then any applicable local provisions that are more restrictive would supersede the California law.  Otherwise, unless your rental is specifically exempted as described below, there are new restrictions on your ability to increase rents and evict tenants.   The details of the new California rent control law can be found in California Civil Code Sections 1946.2 and 1947.12 and here are the frequently asked questions about this new law:

  1. Is my Property Subject to the Law?

The law applies to all leases except the following main exemptions:

  1. A single-family residence or a condominium where the Owner is not either an (i) a Real Estate Investment Trust (“REIT”), (ii) a corporation or (iii) an LLC in which at least 1 member is a corporation. Landlords seeking this exemption must provide written notice of this exemption using language in Civil Code 1947.12(d)(5)(B) before July 1, 2020, and notice of this exemption must appear in all leases claiming this exemption after July 1, 2020;
  2. Section 8 housing;
  3. Duplexes where the owner-occupied one of the units as a principal residence at the inception of the tenancy and so long as the owner continues to reside there as a principal residence; and
  4. Housing built in the last 15 years.

 

2. How does this law affect rent increases?

The law primarily places restrictions on rent increases and evictions.  With respect to rent increases, annual rent increases are capped at 5%  plus the percentage change in the cost of living adjustment (COLA), or 10%, whichever is less.  The percentage is applied to the lowest rental rate charged for that unit in the last 12 months prior to the increase.  So, for example, if a unit subject to the law in the city of Los Angeles charged $1,000 as the lowest rent in the last 12 months, then the maximum annual increase would be 5% + 2.5% COLA = 7.5% or $75.  COLA can usually be found online for each city.  Moreover, landlords cannot raise rents more than twice a year and the aggregate increase on an annual basis cannot exceed the limits above.  So, using the numbers above for L.A. as an example, if you wanted to raise rents twice in a year, the total sum of these increases could not exceed 7.5%.

  1. How does this law affect landlord’s right to evict?

This is likely the most significant change in the law.  Under prior law, a landlord could generally terminate a long term tenancy by giving sixty (60) days notice and was not required to have any reason.  Starting in January 2020, a landlord wishing to evict a tenant that is controlled by the statewide rent control law who has lived in the residence more than 12 months must establish “Just Cause” for eviction.  A “Just Cause” eviction can be for either “no-fault” or “at-fault.”

“No-Fault” Evictions include the following:

  1. The Owner or their spouse, domestic partner, children, grandchildren, parents or grandparents intends to occupy the unit and only if the tenant agrees or the lease permits this. So leases may need to be modified to allow the landlord to claim this exemption.
  2. The Owner intends to withdraw the unit from the rental market.
  3. The Owner is required to comply with a state or local requirement to vacate the unit (for example, the unit has been “red-tagged”). Tenants evicted for this reason may be entitled to notice that they are entitled to “re-location assistance” or “rent-waivers” of 1 month’s rent.
  4. The Owner intends to demolish or “substantially remodel” the unit. The degree of improvements that rise to a “substantial remodel” as opposed to a mere “cosmetic improvement” is defined in Civil Code 1946.2(b)(2)(D)(ii) and basically requires modification of a structural, electrical, plumbing, or mechanical system that requires a permit, or abatement of a hazardous condition that requires the tenant to vacate for at least thirty (30) days.

 

“At Fault” Evictions include the following:

  1. Non-payment of rent;
  2. Breach of a material term in the lease, but only after providing written notice of the breach and opportunity to correct the violation. This notice must be given before a 3-day notice to quit;
  3. Committing waste or a nuisance such as trashing the place or using the unit as a meth lab;
  4. Landlord wishes to extend or renew the lease for the same term (e.g. 1 year) and the tenant refuses to extend;
  5. Criminal activity by the Tenant (e.g. drug use);
  6. Illegal assignment or subletting of the unit;
  7. Refusing landlords lawful right to access the unit;
  8. Use of the unit for an unlawful purpose (e.g. housing code violations such as too many occupants);
  9. Employee/licensee refuses to leave after permission revoked (e.g. a tenant allows someone else to stay in the unit who then refuses to leave); and
  10. Tenant makes an offer to surrender the unit to the landlord who accepts the offer, but then the tenant refuses to leave.

Remember that all termination notices subject to this law must now state the “Just Cause” for eviction (whether no fault or at fault), and be ready to present evidence proving the “Just Cause” for eviction if the tenant ends up challenging the unlawful detainer.

This new law was passed as a measure to combat the affordable housing shortage in California. Critics contend that the actual impact will be the opposite as new developers will be less incentivized to develop affordable housing and existing landlords may be encouraged to regularly raise rents to try and keep up with market demand.   The law, as it currently stands, is scheduled to sunset in the year 2030.

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