LEGISLATIVE HISTORY OF RENT CONTROL IN CALIFORNIA
Prior to the enactment of the Costa-Hawkins Act in 1995, local governments were permitted to enact rent control, provided that landlords would receive just and reasonable returns on their rental properties. In 1995 the California State Legislature passed the Costa-Hawkins Act. The Costa-Hawkins Act protects landlords from local rent control ordinances. The three main protections under the Costa-Hawkins Act are:
- Cities cannot enact rent control on housing first occupied after February 1, 1995, and housing units where the title is separate from connected units (such as free-standing houses, condominiums, and townhouses).
- Housing exempted from a local rent control ordinance before February 1, 1995, must remain exempt.
- Landlords have a right to increase rent prices to market rates when a tenant moves out (a policy known as vacancy decontrol).
In 2019, tenant advocacy groups managed to get Proposition 10 on the ballot. Proposition 10 was a local rent control initiative aimed to repeal the Costa-Hawkins Act. Fortunately for rental property owners the California voters rejected Proposition 10 with a 60 % “NO” vote.
Despite the vote by California residents against rent control, on October 8, 2019, Governor Newsom signed into law the Tenant Protection Act (AB 1482), which becomes effective January 1, 2020. The Tenant Protection Act imposes state-wide rent control rules on certain residential rental properties, including limits on rent increases, requiring “just-cause” for evictions, and it drastically reduces the “new construction” exemption previously found in the Costa-Hawkins Act. As a rental property owner, this new law may affect you.
WHAT PROPERTIES ARE EXEMPT FROM THE TENANT PROTECTION ACT?
- Single family residences, condos and townhomes: These properties are exempt from the Tenant Protection Act, so long as they are not owned by a corporation or a real estate investment trust (“REIT”). If your rental property falls in this category, is owned by an LLC, and none of the members are a corporation, the Tenant Protection Act will not apply to your rental property.
- Duplexes: These properties may be exempt from the Tenant Protection Act. For this exemption to apply one of the units must be owner occupied and must have been owner occupied at the time the other unit was rented to a tenant.
- Existing City Rent Control Ordinances: If your property is already under a city rent control ordinance1 the Tenant Protection Act does not apply, your existing city rent control ordinance still applies.
- Certificate of Occupancy issued in the last 15 years: If you own a rental property that is not excepted as a single family residence, condo, townhome, or duplex, it is exempted from the Tenant Protection Act for the first 15 years from the issuance of the certificate of occupancy. After that, it will be subject to the Tenant Protection Act.
SOME ITEMS OF CAUTION:
- Even if your property is exempt from the Tenant Protection Act, you still need to review any lease agreement that you enter into after July 1, 2020. If there is not a clause that advises the renter that the property is exempt from the Tenant Protection Act, that omission will place it under the act! Our office can help review your lease agreement and suggest language to use to protect you from unwittingly subjecting your unit to the Tenant Protection Act.
- If your property does not fall under any of the exceptions listed above and you believe it will be subjected to the Tenant Protection Act, you should contact our office to discuss tactical planning to limit your exposure under this new law. The new rules are exhaustive and are not addressed in this mailing.
- Section 8—On October 1, 2019 Governor Newsom signed into law SB 329, which goes into effect January 1, 2020. SB 329 bans blanket policies against taking Section 8 applicants and requires landlords to treat voucher-holders like any other applicant. The law also will prohibit “No Section 8” advertisements. You may still reject a Section 8 applicant as a renter, but the rejection cannot be based on a “no Section 8” policy or the fact that the applicant is a Section 8 recipient.
We hope that you find this summary of the Tenant Protection Act helpful. If you have any questions regarding this new law or how it affects your rental properties, please reach out to J Johnson Law Office, Inc. and we will be happy to discuss those questions with you. We believe that most of our client’s properties will likely be exempted from the Tenant Protection Act; however, if you are uncertain please contact us before January 1, 2020 to be sure.
1 California Cities with Rent Control Ordinances: Berkeley, Beverly Hills, East Palo Alto, Emeryville, Glendale, Hayward, Los Angeles (& unincorporated Los Angeles), Los Gatos, Maywood, Mountain View, Oakland, Palm Springs, Richmond, San Diego, San Francisco, San Jose, Santa Monica, Thousand Oaks, Union City, and West Hollywood.