California’s housing crisis has resulted in significant legislation addressing rent control, long-term tenancies, construction of accessory dwelling units, and other measures to provide additional housing stock and to add further tenant protections. The newest legislation, AB 1482, will become effective in January 2020.
What does the new law do?
AB 1482 (known as the “Tenant Protection Act of 2019”) is a statewide rent control bill for certain residential properties. It changes eviction procedures and landlord notice requirements, among other things, by adding and repealing sections 1946.2, 1947.12, and 1947.13 of the California Civil Code. Landlords and tenants should be mindful of these changes in the law, which include the following provisions:
- Rent Cap: Landlords cannot raise the annual rent by more than 5% plus the Consumer Price Index (the CPI increases about 2-3% per year).
- Eviction: Landlords must show “just cause” before evicting tenants that have lived in the property for at least 12 months (or 24 months if there is a change in the adult tenant – such as a change in roommates). The new statute defines two types of “just cause”: “at-fault just cause” and “no-fault just cause,” as discussed below.
- Relocation Fee: Landlords evicting a tenant to make renovations or build condos may have to pay a relocation fee to the tenant, equal to one month’s rent, by either a payment of such sum or a waiver of the last month’s rent. A landlord may be required to state a specific dollar amount in addition to other notice requirements under this subsection and, consistent with landlord-tenant law generally, the landlord’s failure to strictly comply renders the notice of termination void.
- Waiver Not Allowed: Tenants cannot waive rights provided to them under the new law, as any waiver is “void as contrary to public policy.”
Do these changes in the law apply to my rental property?
- Several exemptions found their way into AB 1482. It comes as no surprise that California’s real estate lobbyists were closely watching this bill to protect their client’s interests. Some examples of exempt property not subject to the new laws include: housing less than 15 years old; a duplex where the owner lives in one unit; and single family residential properties if the owner is not a real estate investment trust, a corporation, or a limited liability company with at least one corporation as a member of the LLC.
- To invoke the residential property exemption above, the landlord must provide written notice of the exemption with the following language:
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. This 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.
For tenancies commenced or renewed on or after July 1, 2020, this notice must be provided in the rental agreement. For tenancies existing prior to this date, landlords may provide this language in the rental agreement through an amendment or other instrument. The law does not directly address a very common situation – a month-to-month tenancy based on an oral lease or a lease that has rolled over to a month-to-month basis. These leases are “renewed” each month. For those situations, landlords are advised to provide the written notice above to their tenants by July 1, 2020, and obtain tenant signatures acknowledging receipt of the notice. Failure to do so may subject a landlord of a potentially exempt residential property to all of the provisions of the new laws.
Two Types of “Just Cause” for Termination or Eviction
Landlords with rental properties subject to the new laws must specifically identify the reason for an eviction and can no longer rely on no-cause eviction letters. Landlords must know the statutory sections and list one or more “just cause” in eviction notices. The new law separates “just cause” into “at-fault just cause” and “no-fault just cause,” and provides these examples:
At-Fault Just Cause includes:
- a failure to pay rent
- a breach of the material term of the lease under California Civil Procedure Code Section 1161 including but not limited to committing waste, or a violation of a lease provision after the tenant is issued a written notice to correct the violation
- maintaining, committing, or permitting the maintenance or commission of a nuisance
- assignment to another tenant or subletting to a subtenant in violation of the lease
- criminal activity or a criminal threat directed to the landlord/owner, whether on or off the residential real property
- If the written lease terminates after July 1, 2020, the tenant has refused to execute a written extension or renewal of the lease for an additional term of similar duration after a written request or demand from the landlord/owner
- Tenant’s failure to deliver possession or leave the premise after providing notice of tenant’s intent to terminate the lease, or the landlord’s acceptance of tenant’s offer to surrender the premises
No-Fault Just Cause includes:
- If the owner or his/her family intends to occupy the property (subject to special provisions for leases entered into on or after July 1, 2020)
- Withdrawing the property from the rental market or an intent to demolish or substantially remodel the property (with specific definitions related to the replacement or substantial modification of any structural, electrical, plumbing, or mechanical system versus cosmetic improvements such as painting, decoration, and minor repairs that can be performed safely without vacating the property)
- If the owner complies with a local ordinance or an order issued by a governmental agency
Is the lease violation curable?
Regardless of the circumstances supporting either type of “just cause,” before a landlord issues a notice to terminate, he or she must determine whether the lease violation is curable. If it is, the landlord must first give notice of the violation with an opportunity to cure. If the violation is not cured within the time provided in the notice, the landlord may serve a three-day notice to quit without an opportunity to cure. Only after these steps will the landlord have properly noticed termination of the lease and be able to bring an unlawful detainer action in court to regain possession of the property.
What are some of the anticipated effects of the new law?
Undoubtedly, the Tenant Protection Act will require landlords to provide additional notices, update their leases, and follow additional procedures. This will increase litigation over the new “just cause” legal standard for tenant evictions and could delay unlawful detainer actions over technical violations of the new law. As discussed above, while examples of “just cause” include a failure to pay rent, creating a nuisance, or breaching the lease, landlords and tenants will inevitably disagree if one of these examples is not present. Advocates of the bill argue this requirement will protect from discriminatory or retaliatory evictions.
For our builder and real estate developer clients, this Act may detract interest in building or investing in multi-family housing investments. But this may not be true since the negotiated carve-out exemption for properties constructed within the last 15 years was a large enough timeframe for the California Building Industry Association to withdraw its opposition to the bill. If a property was built within the previous 15 years (presumably measured from the date of the rent increase/eviction and not from the date of the Act), it is not subject to the rent cap, “just cause” eviction standard, or any other aspect of the new law.
AB 1482’s author David Chiu (D-San Francisco) says the rent cap will prevent “rent gouging” and “egregious” increases. He further notes that property owners will make a profit because the average annual rent increase is far below the new restrictions. Opponents of the Act argue that California needs more housing and the Tenant Protection Act will stifle investments in rental housing. And many advocates of the Act say it’s not enough because, without halting an increase in a property’s rent once a tenant moves out (also known as “vacancy control”), the Act is unlikely to materially help California’s housing crisis. To this end, it has been widely reported that several organizations are seeking signatures to place a rent control initiative on the 2020 ballot, even though a previous ballot measure in 2018 was easily defeated.
This summary of the Tenant Protection Act does not address each requirement or subsection affecting the rights of landlords and tenants. We recommend contacting our real estate, business, and litigation attorneys to ensure compliance with California’s new landlord/tenant law and to minimize the potential for non-compliance causing unintended consequences.
Ravn R. Whitington is a partner at Porter Simon and is a member of the firm’s Trial Practice Group where he focuses on all aspects of civil litigation .
He has a diverse background in trial practice ranging from complex business disputes to personal injury, from criminal defense to construction law, and all matters in between.
He may be reached at email@example.com or www.portersimon.com.
Ethan Birnberg is an associate attorney at Porter Simon and is licensed in California, Nevada, Colorado, and Wyoming. He can be reached at firstname.lastname@example.org or www.portersimon.com. Porter Simon has offices in Truckee and Tahoe City, California, and Reno, Nevada. Its attorneys regularly assist clients with all types of real estate issues, including landlord tenant issues, lease formation and disputes, evictions, development, construction, HOAs, insolvency and bankruptcy-related matters, and issues that span across several other practice areas.
The content contained and opinions expressed in this blog are solely those of the author. This blog contains content and opinions concerning the law generally, and is not intended to constitute legal advice or to create any attorney‑client relationship with the reader. The reader should consult with an attorney about any specific legal issues prior to embarking on any course of action or inaction involving legal matters. The author makes no claims, promises or guarantees about the accuracy, completeness, or adequacy of the contents of this blog and expressly disclaims liability for any errors and omissions.