NHEH Publications

New Rent and Eviction Control Law (AB 1482): What Landlords Need to Know

 

By Anne Secker

Attorney, Noland, Hamerly, Etienne & Hoss

 

Landlords beware:  The California legislature recently passed Assembly Bill 1482, a new rent and eviction control law that goes into effect January 1, 2020.  The law affects every owner of rental property—some to a greater degree than others, depending on the nature of the property and its ownership structure.  All landlords must be aware of the new law because it will affect the way they do business in 2020.  Owners of multi-unit properties are impacted most, although even owners of one rental unit or those who rent their homes are affected to some degree.  Among other things, for multi-unit apartments, the new law places limits on rent increases and specifies the reasons a landlord may terminate a tenancy.  It also, under certain circumstances, imposes burdens on landlords terminating tenancies, including paying relocation assistance to evicted tenants.

 

The new law, known as the Tenant Protection Act of 2019, comes at a time when homelessness in California is reaching unprecedented levels, and policy makers are scrambling for answers.  Legislators passed AB 1482 in response to the current state-wide affordable housing crisis, which has been a contributing factor in the rise in homelessness.  They hope that the bill will mitigate the crisis by protecting tenants from excessive rent hikes and aiding evicted tenants in relocating.  

 

While proponents see AB 1482 as bringing beneficial change in a time of desperate necessity, opponents have raised concerns about the new bill.  Some economists worry that introducing rent control can actually make problems worse in the long run by discouraging investment in the housing market and thereby decreasing the supply of housing available to the public.  There also also likely unintended consequences that may result from the bill—including motivations for landlords to increase rent each year when they may not have done so without the rent increase case.  Nevertheless, whether you agree with the changes introduced by AB 1482 or not, it will be important to be aware of them heading into the New Year.

 

It is important to know how the new law applies to you if you are a landlord. 

 

Single Family Dwellings, Condos and Units in Planned Developments

 

The good news is that most of the new law does not apply to:

  • Single family dwellings, condos, or units in a planned unit development (provided that the owner is not a real estate investment trust, a corporation, or a limited liability company in which at least one of the members is a corporation); or
  • Duplexes where the owner occupies one of the units. 

This means that landlords exempt from the new law are not limited in the amount by which they can increase rent and are not subject to the “just cause” standard for evictions (see below in Multi-Unit Apartment section for discussion of this requirement).  Landlords of single family dwellings, condos and planned unit developments who are corporations, a real estate investment trust or a limited liability company in which one of the members is a corporation are subject to the new law. 

 

Even landlords who are exempt from the new law must provide notice to their tenants that includes specific statutory language stating that the unit is not subject to the rent caps the law imposes.

 

Multi-Unit Apartments

 

            Multi-unit apartments are hit hardest by the new law.  Landlords of multi-unit properties:

  • Are limited in the amount of rent increases they can impose over a 12-month period to the lesser of:
     
  • 5% plus the percentage change in the cost of living, defined by the Consumer Price Index (CPI) from the Bureau of Labor Statistics, or
  • 10% of the lowest rental rate charged for the prior 12 months of tenancy.
  • The law looks back to March 15, 2019 and measures all rent increases from that date.  If a landlord increased rent by more than the allowed amount after March 15, 2019, the applicable rent on January 1, 2020 will be the rent as of March 15, 2019, plus the maximum permissible increase. Landlords will not be liable for any corresponding rent overpayments that occur between these dates.
     
  • Must have “just cause” to terminate tenants who have occupied the property for more than 12 months.  The law identifies two types of just cause:
     
    • at-fault, meaning things within the tenant’s control, such as the failure to pay rent, violation of the lease or criminal activity on the property.
    • no-fault, meaning things that are out of the tenant’s control, such as the landlord’s withdrawal of the property from the rental market or an owner’s intent to occupy the property themselves.
       
  • Must state in a written notice of termination the just cause for termination.  If the cause for termination is something that can be remedied, the landlord must first allow the tenant an opportunity to cure the violation prior to issuing a notice of termination.  If the violation is not cured within the time frame in the violation notice, the landlord may serve the tenant with a 3-day notice to quit.
  • For no-fault just cause terminations, landlords must provide relocation assistance to evicted tenants.  This can be done one of two ways, at the landlord’s option, either:
     
  • Provide a direct payment of one month’s rent to the tenant, or
  • Waive in writing the payment of rent for the final month of tenancy, prior to the rent becoming due.
  • If the tenant fails to vacate the property, these funds may be recovered as damages in an eviction action.

These major changes are effective January 1, 2010.  Love them or hate them, it is imperative that landlords understand this new law so that they can be prepared for doing business in the years to come.  AB 1482 is set to expire on January 1, 2030 unless lawmakers vote to extend it.

 

This article is intended to address topics of general interest and should not be construed as legal advice.

 

© 2019 Noland, Hamerly, Etienne & Hoss