2019 brought about a big change for California renters and property owners. AB 1482, also called the Tenant Protection Act of 2019, was passed in October and applies statewide rent control to specified properties. The law itself can be confusing, so we’re here to break it down for you.
The new law affects both rent increases and just cause evictions and has exemptions which many single-family homeowners will fall under.
Who Does AB 1482 Affect?
This new law primarily affects the following:
- Multifamily units that are over 15 years old. This will change year over year, i.e. this year it applies to properties built in 2005 or earlier, next year it will be 2006, etc.
- Properties that are wholly or partly owned by a corporation
Your property is exempt if you meet one of the following:
- Housing restricted by a deed, regulatory restriction contained in an agreement with a government agency, or other recorded document as affordable housing for persons and families of very low, low, or moderate income, as defined by the law (for rent caps only).
- Dormitories for higher education institutions (college dorms).
- Housing subject to more restrictive rent control ordinances.
- New construction – properties that have been constructed within the last 15 years. This means some of the housing previously exempt under Costa Hawkins will now be subject to the State’s rent control provisions.
- Owner-occupied housing accommodations in which the tenant shares a bathroom or kitchen facilities with the owner who maintains principal residence.
- Owner-occupied duplex in which one of the units is the owner’s primary residence at the beginning of the tenancy and the owner continues occupancy.
- Single-family homes and condominiums if the owner is not a real estate investment trust, a corporation, or a limited liability company (LLC) in which at least one member is a corporation. Most of our clients fall under this exemption.
- Transient and hotel occupancy. Nonprofit hospital occupancy, religious facility occupancy, residential care for the elderly occupancy (Just cause only).
The new law limits the amount that rent can be raised. It states that the rent increase for a 12-month period cannot exceed 5% + percentage change in the cost of living over the previous year’s Consumer Price Index. It also cannot exceed 10% total. Additionally, the landlord is prohibited from increasing the rental rate in more than two increments over a 12-month period.
The gross rental rate will not include rent discounts or credits, incentives, or concessions. If your property is considered affordable housing, please review Civil Code 1947.13. While gross rental rate is left undefined, it’s advised that any and all fees charged by the landlord (pet rent, utilities, or month to month fees) be included in the gross rental rate.
To calculate the maximum allowable increase over the allowed 5%, refer to Civil Code §1947.12(g)(2) which reads:
“Percentage change in the cost of living” means the percentage change from April 1 of the prior year to April 1 of the current year in the regional Consumer Price Index for the region where the residential real property is located, as published by the United States Bureau of Labor Statistics. If a regional index is not available, the California Consumer Price Index for All Urban Consumers for all items, as determined by the Department of Industrial Relations, shall apply.”
At the time of this writing, the current cap for San Diego County is 7.21% (5% plus 2.21% change in the CPI).
When Does This Take Effect?
If the rent was increased more than the allowed amount between March 15, 2019 and January 1, 2020, the rent must be adjusted (commonly referred to as a Rent Rollback) to the March 15th, 2019 rent plus the maximum allowable increase. This is the new rental rate the tenants are expected to pay as of January 1, 2020. You will not be required to reimburse the tenant for any overpayment of rent for 2019. The law expires on January 1, 2030.
Just Cause Provisions
Beginning on January 1st, 2020, California Civil Code 1946.2 states that after 12 months, a tenancy can only be terminated for a specific set of reasons.
Please note: for those landlords with property in San Diego, if you fall under one of these exemptions, you are likely still affected by the San Diego Just Cause Ordinance (see here).
Under the statewide law, there are two different types of of just cause eviction: At-Fault and No-Fault.
At Fault Reasons
For any curable just cause reason, you must give notice of a violation with an opportunity to cure such as 3 Day Notice to Pay Rent or Quit or a Notice to Perform or Quit.
Default in the Payment of Rent
Tenant fails to pay rent as stipulated in the lease agreement and any Notice to Pay Rent or Quit has expired. You can begin the unlawful detainer.
Breach of a Material Term of the Lease
As described in the Code of Civil Procedure §1161, subdivision 3, including (but not limited to) violation of a lease provision after being issued a written notice to correct the violation. If the condition is curable, such as removing an unauthorized pet or roommate, a Notice to Perform Covenant or Quit must be given.
Nuisance Activity or Waste
This is when the tenants are causing serious damage or harm to the property or common areas. It applies to neighboring units as well, i.e. if they are damaging surrounding areas and units or creating excessive noise and refusing to comply when asked. Further outlined in Civil Code 1161 subdivision 4, if the offense is curable, a Notice to Perform Covenant or Quit must be given.
Criminal activity or criminal threat by the tenant to the property, including any common areas, as defined in subdivision A of Section 422 of the Penal Code. Applies on or off the residential property, that is directed at any owner or agent of the owner of the residential real property.
Assigning or Subletting
If the tenant is subletting their room or unit and it is not allowed in the lease, they are subject to eviction. The same applies in the instance of assigning the lease (transferring the lease to another party).
Refusal to Provide Access
This occurs when you are trying to enter the home, whether it be for an annual inspection or to show the property for sale, and the tenant refuses access to the home, despite the notice they were given. Landlords are allowed to enter the home for a set list of reasons and if the tenant continually denies access despite getting written notice and they refuse to reschedule, their lease can be terminated.
Failure to Vacate and Deliver Possession
If the tenant does not give back possession of the property despite signing a written notice to vacate, they are subject to eviction.
Refusal to Sign Lease Under Similar Provisions
The tenant had a written lease that terminated on or after January 1, 2020, and after a written request or demand from the owner, the tenant refused to sign a written lease renewal for an additional term of a similar duration with similar provisions.
Using the property for an unlawful purpose (defined in Civil Code 1161 subdivision 4) is grounds for eviction.
Employee, Agent, or Licensee Failure to Vacate
The employee, agent, or licensee’s failure to vacate after their termination as an employee, agent, or a licensee as described in Code of Civil Procedure §1161, subdivision 1.
For no-fault evictions, the tenant will be entitled to relocation assistance equal to one month’s rent. Most landlords will satisfy this requirement by waiving in writing the tenant’s obligation to pay the final month’s rent.
Intent to Demolish or Substantially Remodel
If the home is going to be uninhabitable for a long period of time due to major repairs or renovations, you are able to terminate the tenant’s lease.
Withdrawal from the Rental Market
If you plan to withdraw your property from the rental market altogether, you can terminate the tenant’s lease.
Owner or Relative Occupancy
If the owner or their relative plans to move back into the home, the lease can be terminated.
If there is a local, court, or government order to vacate the property, the tenants must comply.
How it Affects Existing Local Ordinances
Here's where it can get tricky. If the California city already has a local ordinance, which the City of San Diego does, the law that is the MOST protective will take effect. It can typically be classified it as more protective if the following are met, but we recommend consulting with your attorney:
- The just cause for termination of tenancy under the local ordinance is consistent with the aforementioned sections.
- The ordinance additionally limits the reasons for termination of a residential
tenancy, provides for higher relocation assistance amounts, or provides
additional tenant protections that are not prohibited by any other provision of
- The local government has determined their ordinance to be more protective than the state provisions.
The Civil Code 1946.2 will also not apply if has not been in possession of the property for more than 12 months and it will apply if an additional tenant is added ONLY if:
- All tenants have consistently and lawfully occupied the property for 12 months or more
- One or more tenants have consistently and lawfully occupied the property for 24+ months
Do I Need to Notify My Tenants?
Tenants need to be notified if they are subject to the new law. If they ARE subject, you must send a notice using statutory language disclosing that AB 1482 applies. This must be provided by August 1, 2020 if the tenancy existed prior to July 1, 2020. For any tenancy following that, the statement must be included as a lease addendum or as a written notice signed by the tenant. The notice should read:
“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 the property falls under the separately alienable exemption (single family homes, condos, or townhouses not wholly or partly owned by a corporation), the following notice needs to be sent:
“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.”
We received our information via our attorney, Kimball, Tirey, and St. John LLP. We strongly recommend consulting with your attorney regarding your specific properties.