Rent control is here to stay in California – at least until 2030. On October 8, 2019, California Governor Gavin Newsom signed the Assembly Bill 1482, which caps annual rent increases at 5% and imposes rules on just cause eviction. The legislation is meant to address the rising cost of housing and increasing homelessness affecting the state.
California’s rent cap is particularly noteworthy because of the scale. There are approximately 17 million renters in the state; however, it’s estimated that only about 2.4 million California households will actually be affected by the new bill. The signing of this bill makes California and Oregon the only two states in the country that cap rent increases statewide.
The bill goes into effect on January 1, 2020, and includes the following clauses:
Annual rent increases
Annual rent increases are limited to 5%, plus a change in the Consumer Price Index (CPI) for a maximum increase of 10%. Rent increases made between March 15, 2019 and January 1, 2020 that are above the 5% plus CPI restrictions have to be lowered to the rental amount of March 15, 2019, plus the 5% and CPI or by 10% – whichever one is lower as of January 1, 2020. Landlords and property managers won’t be required to provide refunds to renters for the rent collected before January 1. Vacant property rent costs can be priced however you like. Once a new renter has moved into the property, you’ll need to abide by the new rental cap restrictions.
Just cause evictions
The bill enacts “just cause” eviction rules for renters who have lived at a rental for 12 months (24 months if an additional renter moves into the same property). Evictions are separated into at-fault and no-fault. For no-fault evictions, landlords and property managers will need to provide the renter time to correct their lease or rental agreement violations before a notice of termination can be issued. If the tenant doesn’t correct their behavior within that time frame, they can then be served with a 3-day notice to quit.
Acceptable reasons for at-fault evictions include:
- Failing to pay rent
- Breaching the terms of the lease
- Committing or permitting nuisance behavior as applicable to local nuisance ordinance laws
- Failure to keep the property clean
- The tenant refuses to complete a written lease extension or renewal on or after January 1st, 2020
- The tenant participates in criminal activity on the property
- Transferring or subletting the property in violation of the terms of the lease
- Refusing to let the property owner access the property
- Using the property for unlawful purposes
- The property’s employee, agent, or licensee fails to vacate the property after employment is terminated
- Failure to deliver possession of the property following a renter’s lease termination notice, which the property owner accepts in writing
No-fault eviction reasons include:
- The owner or relative of the owner intends to occupy the unit. Relatives are considered the owner’s spouse, domestic partner, children, grandchildren, parents, or grandparents. Leases that were entered into on or after July 1, 2020 will require the tenant to agree to the lease termination in writing. Otherwise, the lease will need to include a lease termination for owner occupancy provision.
- Withdrawing the property from the rental market.
- Intent to demolish the property or significantly remodel it.
- If the owner is complying with a local ordinance, court order, or government entity which results in the need to vacate the property.
No-fault evictions will entitle the tenant to relocation assistance or a rent waiver that’s equal to one month’s rent. The tenant must be notified of this right on their notice of termination. The relocation assistance or rent waiver must be paid within 15 calendar days of the termination notice. If the property owner fails to pay this within the time frame, the lease termination will be void. For lease agreements that are started or renewed on or after July 1, 2020, you must provide the following notice or addendum to your lease:
“California law limits the amount your rent can be increased. See Section 1947.12 of the Civil Code for more information. California law also provides that after all of the tenants have continuously and lawfully occupied the property for 12 months or more or at least one of the tenants has continuously and lawfully occupied the property for 24 months or more, a landlord must provide a statement of cause in any notice to terminate a tenancy. See Section 1946.2 of the Civil Code for more information.”
If this is given to the tenant as a lease notice, the tenant must sign a copy.
Rental properties that are exempt from this law include:
- Owner-occupied duplexes
- Properties that were built within the past 15 years
- Single-family homes
- Housing that’s subject to more restrictive rent control ordinances
If your property is exempt, you must provide your tenants with a written notice stating the following:
“This property is not subject to the rent limits imposed by Section 1947.12 of the Civil Code and is not subject to the just-cause requirements of Section 1946.2 of the Civil Code. The property meets the requirements of Sections 1947.12 (d)(5) and 1946.2 (e)(8) of the Civil Code and the owner is not any of the following: (1) a real estate investment trust, as defined by Section 856 of the Internal Revenue Code; (2) a corporation; or (3) a limited liability company in which at least one member is a corporation.”
This notice must be included in rental agreements started on or after July 1, 2020.
Additional Information on Assembly Bill 1482
The rent control policies of Assembly Bill 1482 will primarily apply to apartments and other multi-family buildings – with some exceptions – along with some single-family homes. Condos and other single-family homes will be exempt unless owned by a corporation or real estate investment trust. Duplexes that have one unit occupied by the owner will also be exempt.
If you live in a city that already has rent control, AB 1482 won’t override your local laws. It will, however, cover units that aren’t already subject to local rent control laws.
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