A Summary of The New Rent Control Law
Effective January 1, 2020, California will be one of only two states to impose statewide Rent Control on its residential property owners. Oregon is the only other state that imposes statewide Rent Control.
Exemptions.
Here is the good news: The new Rent Control Law exempts individual owners of single-family residential properties. This means that a husband and wife who own two or three single-family rentals are exempt from the new laws.
Unfortunately, the new Rent Control Law applies to every other residential property, including a duplex, triplex, and apartment except the following:
Residential properties that are less than 15 years old;
Rooms rented within an owner-occupied single-family residence;
Guesthouses rented within an owner-occupied single-family residence; and
A duplex only if the owner occupies one of the units.
Fortunately, most families purchasing single-family residences as rentals will be exempt from the new Rent Control Law. I will refer to this group of properties as Exempt Properties.
Rental Cap.
The Rent Cap only applies to Non-Exempt Properties. The new Rent Control Law prohibits all landlords of Non-Exempt Properties from raising rent more than 5% plus cost of living during any 12 month period.
Cost of living is defined as the Consumer Price Index in the County where the residential property is located. By example, if Consumer Price Index ("CPI") for Los Angeles is 2.7%, then the landlord can raise rent by 7.7% (i.e. 5% plus 2.7% CPI).
However, under no circumstance can the landlord of a Non-Exempt Property raise rent more than 10% or more than twice during any given 12 month period.
The new Rent Control Law guarantees "higher" rents for all tenants as landlords who may not have otherwise raised rent on an annual basis will now do so.
Termination (Just Cause).
Without Just Cause, a landlord of a Non-Exempt Property will no longer be able to terminate a tenant, even after expiration of the lease. This restrictions applies only to tenants who have continuously occupied a Non-Exempt Property for 12 consecutive months.
If a tenant has occupied the property for 12 consecutive months, then a landlord cannot (1) refuse to renew the lease or (2) terminate the tenancy without Just Cause. The new Rent Control Law distinguishes between (1) At-Fault Just Cause and (2) No-Fault Just Cause
At-Fault Just Cause includes the following:
tenant's failure to pay rent;
tenant's material breach of the lease;
criminal or nuisance activity by the tenant;
assigning or subletting the property without landlord consent; or
tenant's refusal to allow landlord to inspect the property;
2. No-Fault Just Cause includes the following:
owner/spouse/children/grandchildren intent to occupy the property;
withdrawal of property from the rental market;
owner intends to "substantially remodel" the property;
The term "substantially remodel" means any structural, electrical, plumbing, or other improvements that requires a permit. This provision could be a landlord escape hatch as landlord can terminate any lease as long as permit is pulled for work.
Note that for leases entered into after July 1, 2020, a landlord wanting to move back into his own property will not be considered Just Cause unless a provision is included in the lease agreement allowing him to do so.
For all Non-Exempt Properties, termination notices must state whether termination is based upon At-Fault or No-Fault Cause or they are deemed defective and void.
Right to Cure for At-Fault Just Cause Termination.
It is important to note that any termination for At-Fault Just Cause requires landlord to first serve a 3 Day Notice that gives the tenant 3 days to cure.
Remember, effective September 1, 2019, the law was changed to provide that a 3 Day Notice no longer includes Saturday, Sunday or Holidays. This means that if you serve a 3 Day Notice on Thursday, it would not expire until midnight on the following Tuesday.
Relocation Fee for No-Fault Just Cause Termination.
The new Rent Control Law requires a landlord to pay an amount equal to one month rent to any tenant as a Relocation Fee for all terminations based upon No-Fault Just Cause.
Payment must be made within 15 days after serving tenant with the Notice of Termination based upon No-Fault Just Cause.
In summary, the new statewide Rent Control Law contains more information than above discussed, please talk to your property manager and lawyer if you have further concerns.
