The 2 New Laws That Change (Almost) Everything AB 1482 & SB 329

 
 

The 2 New Laws That Change (Almost) Everything AB 1482 & SB 329

It only took 169 years, but California finally passed statewide rent control that should be effective January 1, 2020 once signed by the Governor.  AB 1482, formally titled “The Tenant Protection Act of 2019” marks a turning point for tenant rights in the history of this state.

AB 1482 – Governor Newsom asked the legislature to put on his desk a pro-tenant bill that has real “teeth” and they were up to the task.  This bill, approved by the Assembly and Senate and now awaiting the Governor’s signature, would do the following:

  • Put a rent cap on all properties built before 2009 of 5% over the Consumer Price Index (CPI, 2.1% last year)
  • Institute “just cause eviction” for all tenants. Now if an owner wants to give notice to a tenant that has paid as agreed (No Fault Notice to Vacate), the owner must pay that tenant one month’s rent at move-out or allow them to skip the last month’s lease payment.

What properties are included in AB 1482?

  • Any property whose title is held by a corporation and/or multi-unit (2+) would be included.

What properties are excluded from AB 1482?

  • Owners with single family homes (including townhomes and condos) that are considered “separately alienable” (a legal term, meaning, can you transfer ownership of one unit separately from another unit).
  • A duplex when the owner lives in one unit and rents the other out.
  • Properties built after 1/1/2005 or fifteen years before the date of the active law. So in five years, properties built after 1/1/2010.
  • For those renting a room in their own house.
  • If a rental property is located in a city already under more strict regulations.

“Just Cause” Tenant Eviction Protections.  This will restrict your authority to remove tenants from possession of their (your) rental.  There are two causes upon which an owner will legally be permitted to vacate a tenant; they fall under the classifications of either “Just Cause” or “No Fault”.

Just Cause: a tenant breach of the rental agreement, including:

  • Default in the payment of rent.
  • A breach of a material term of the lease, including, but not limited to, violation of a provision of the lease after being issues a written notice to correct the violation.
  • Criminal activity by the tenant on the premises.
  • When a tenant gives written notice to vacate to the owner, but subsequently fails to deliver possession.
  • Using the premises for an unlawful purpose.

In addition to “Just Cause”, there is a second basis upon which to terminate a tenancy, described as “No Fault”.  No Fault can include:

  • An intent to occupy the property by the owner or their spouse, domestic partner, children, grandchildren, parents or grandparents.
  • Withdrawal of the residential property from the rental market.
  • Intent to demolish or substantially remodel the residential property.
  • The owner complying with a governmental agency order.

If the tenant vacates with “No Fault”, the owner must offer a “relocation benefit”.  This would be one month’s full rent, in an amount equal to the last payment made by the tenant to the landlord.

This law has a “sunset clause” of January 1, 2030, but governmental regulations have a tendency to be self-perpetuating.

SB 329 – This is another law that could be problematic for owners.  This law addresses the Section 8 program.  If you are not familiar with Section 8, it is a rental assistance program that financially helps over 5 million households nationwide.  A household must apply with the government, show proof of insufficient income to rent a “market rate” property, and the government contributes to that rent depending on the verified income of the applicant.  Typically, an applicant must pay 30% of their income toward the rent and the government pays the balance directly to the landlord.

To date, this has been a voluntary program for a rental property owner.  When asked if they participated in the Section 8 program, an owner could legally say, “No”.   Many owners don’t want their rent decided by the government, annual inspections and tenants who may not have adequate security deposits.  Because many owners prefer not to work with a government entity, there are far more tenants eligible for the Section 8 programs than there are owner willing to accept a Section 8 tenant.

With this law, Section 8 is now included in the “source of income” carve out in the Fair Housing Act, meaning an owner cannot deny an applicant simply because they are participating in the Section 8 program.  You could deny for poor credit, rental history and other criteria, but not just because they are using Section 8 income.  If an owner were to deny simply because a tenant participates in Section 8, that would be a violation of the Fair Housing laws, and if reported, possibly subject to a first time fine of $19,797.

These are the laws, but questions remain:

  • Will local cities accept these measures and back down from passing more restrictive rental control laws (lower rent caps, higher tenant relocation fees, and adding legal assistance) or will these measures embolden them?
  • Is this the end of statewide efforts to “protect” tenants or just the beginning? Do they attempt to include all rental housing (single family homes and condos)?
  • Do they make all rental property owners register so they can better track those properties included in these measures?
  • With mandatory Section 8, will the state require the “first” qualified tenant, and not the best one be allowed to rent a property, even if they participate in Section 8?
  • Will Fair Housing crack down on owners denying Section 8 participates, even if they claim it was not because of Section 8?
  • Lastly, is there an attempt to pass “legal assistance” for tenants? Owners would contribute funds to help pay for a free attorney when an owner is trying to evict a tenant.

 

I suspect this is not the end of laws to better protect tenants and usurp private property rights.  No matter what happens, we will continue to be here, navigating these choppy waters and looking out for your best interests at all times.  If you want more information, and a more detailed look at the rental trends in our state, visit www.RenterState.com.