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Legal Q & A by – Richard Beckman

Posted on 01. Nov, 2019 by in all, Magazine Articles

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Question: Did the new statewide rent control law I’ve been hearing about take effect?

Answer: AB 1482 – the Tenant Protection Act of 2019 – has been passed by the California legislature and is in front of Governor Newsom for his anticipated signature. Absent his veto, which is by all accounts extremely unlikely, AB 1482 will become law and will take effect January 1, 2020. 

Question: What does AB 1482 do?

Answer: AB 1482 is the most significant state legislation affecting residential landlord-tenant rights to be enacted recently. It establishes statewide rent and eviction control on all units built before the last 15 years which are not already covered by similar local ordinances, such as the San Francisco Rent Stabilization and Arbitration Ordinance, or Berkeley’s Rent Stabilization and Eviction for Good Cause Ordinance. 

Question: What eviction controls does the new law impose?

Answer: As with the local laws upon which AB 1482 is based, the permitted reasons to terminate a covered tenancy fall into two categories – acts by the tenant that violate the lease or applicable law, and efforts taken by the property owner that are based on the owner’s need to recover possession of the unit from the tenant.

In the first category – tenant actions – “just cause” includes the following:

(A) Default in the payment of rent;

(B) A breach of a material term of the lease;

(C) Maintaining, committing, or permitting the maintenance or commission of a nuisance;

(D) Committing waste;

(E) 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 has refused to execute a written extension or renewal of the lease for an additional term of similar duration with similar provisions, provided that those terms do not violate this section or any other provision of law.

(F) Criminal activity by the tenant on the residential real property, including any common areas, or any criminal activity or criminal threat, as defined in subdivision (a) of Section 422 of the Penal Code, on or off the residential real property that is directed at any owner or agent of the owner of the residential real property.

(G) Assigning or subletting the premises in violation of the tenant’s lease;

(H) The tenant’s refusal to allow the owner to enter the residential real property as authorized by Sections 1101.5 (owner’s need to enter to install water-conserving plumbing fixtures) and 1954 (standard right of entry statute) of this code, and Health and Safety Code Sections 13113.7 (entry to insure the unit has operable smoke alarms) and 17926.1 (same, but for carbon monoxide detectors);

(I) Using the premises for an unlawful purpose;

(J) The employee, agent, or licensee’s failure to vacate after their termination as an employee, agent, or a licensee as described in paragraph (1) of Section 1161 of the Code of Civil Procedure.

(K) When the tenant fails to deliver possession of the residential real property after providing the owner written notice as provided in Section 1946 of the tenant’s intention to terminate the hiring of the real property, or makes a written offer to surrender that is accepted in writing by the landlord, but fails to deliver possession at the time specified in that written notice as described in paragraph (5) of Section 1161 of the Code of Civil Procedure.

In the second category – owner actions – “just cause” includes the following:

(A) Intent to occupy the residential real property by the owner or their spouse, domestic partner, children, grandchildren, parents, or grandparents. NOTE: The right to ‘owner occupy’ shall apply only if the tenant agrees, in writing, to the termination, or if a provision of the lease allows the owner to terminate the lease if the owner, or their spouse, domestic partner, children, grandchildren, parents, or grandparents, unilaterally decides to occupy the residential real property

(B) Withdrawal of the residential real property from the rental market (commonly referred to as an “Ellis Act” eviction ground).

(C) An Order from a government agency or court requiring the unit be vacated. NOTE: If it is determined by any government agency or court that the tenant is at fault for the condition or conditions triggering the order or need to vacate, the tenant shall not be entitled to relocation assistance.

(D) Intent to demolish or to substantially remodel the residential real property.

Question: If I evict the tenant, do I have to pay them anything?

Answer:  It depends on why the tenancy is being terminated. A payment to the tenant is required when the tenancy is terminated through no fault of the tenant. The owner has the option of providing a direct payment to the tenant equal to one month of the tenant’s rent that was in effect when the owner issued the notice to terminate the tenancy. Or, the owner can waive the payment of rent for the final month of the tenancy, prior to the rent becoming due. If a tenant fails to vacate after the expiration of the notice to terminate the tenancy, the actual amount of any relocation assistance or rent waiver provided pursuant to this subdivision shall be recoverable as damages in an action to recover possession.

Question: Is my rental building covered by the new law?

Answer: Unless it was built within the last 15 years, it appears all rental units in California will be covered by either state or local rent and eviction control.

Question: Are any units exempt?

Answer: Generally speaking, all residential rental properties will be covered. As with most local eviction control laws, a home in which  the owner lives with the tenant is exempt – as long as the owner rents or leases no more than two units or bedrooms. An accessory dwelling unit or a junior accessory dwelling unit on the same lot will also be exempt. Also, a duplex in which the owner occupied one of the units as the owner’s principal place of residence at the beginning of the tenancy, so long as the owner continues in occupancy, is exempt. New construction is exempt (defined as housing that has been issued a certificate of occupancy within the previous 15 years). And single-family homes or condominiums are exempt, provided that both of the following apply:

(A) The owner is not a corporation or LLC; and

(B) The tenants have been provided written notice that the residential property is exempt from this section using the following statement:
“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.”

Finally, designated low income housing restricted is exempt.

Question: Do I have to provide notice to the tenant about this new law?

Answer: Yes, no later than August 1, 2020, either by adding the required notice to the rental agreement or providing it as an addendum. An owner of residential real property subject to this section shall provide notice to the tenant as follows:

“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.”
(Note: The provision of the notice shall be subject to Civil Code Section 1632 regarding translation of contracts negotiated in language other than English.)

Question: If my units are in an existing ‘rent control’ city, will I be covered by both laws?

Answer: AB 1482 does not apply to residential real property covered by a more protective local just cause ordinance. However, given that most local rent and eviction control laws exempt buildings built after the local law’s effective date (e.g. 1979 in San Francisco, 1980 in Berkeley), there is uncertainty as to what a ‘more protective local law’ means, given that AB 1482 applies to more recently built units (the prior 15 years). This issue may depend on a close review of the applicable local law and the provisions of 1482. However, again, it is likely all units will be covered by one or the other, unless exempt.

Question: What about the rent control part of the new law? How strong etc. is it?

Answer: The State prefers to call it a ‘Rent Cap law, based on the right of owners to increase rents beyond the annual inflation rate, as is the limitation imposed by most local rent control laws. Under AB 1482, the increase can be the combination of the annual percentage change in the cost of living, PLUS 5 percent, or 10 percent, whichever is lower.

Question: How are increases calculated?

Answer: The statute is a bit confusing, but the amount of the increase is to be based on the ‘lowest gross rental’ rate charged for the unit at any time during the 12 months prior to the effective date of the increase. The basic restriction is that the tenant shall not receive a rent increase that exceeds the maximum percentage allowed (again, 5% of the prior rent plus the CPI for the period). The law applies to all rent increases occurring on or after March 15, 2019. 

Question: Is there a penalty for an excessive rent increase?

Answer: As a concession to the opposition to the statute, there is no penalty for a rent increase that exceeds the permitted amount prior to January 1, 2020. As the statute states, “In the event that an owner has increased the rent by more than the amount permissible between March 15, 2019, and January 1, 2020, both of the following shall apply:

(A) The applicable rent on January 1, 2020, shall be the rent as of March 15, 2019, plus the maximum permissible increase under subdivision (a).

(B) An owner shall not be liable to the tenant for any corresponding rent overpayment.

Richard Beckman, of Beckman Feller & Chang P.C., has been practicing landlord-tenant law for over 26 years, primarily in rent-controlled jurisdictions such as San Francisco, Oakland and Berkeley. He represents clients in a broad range of real estate-related disputes, including partition of co-ownership interests, purchase contract disputes, insurance coverage analysis and land use. Mr. Beckman also specializes in all aspects of landlord-tenant issues, representing landlords and tenants in residential and commercial matters. He can be reached at 415-871-0070; email rbeckman@bfc-legal.com or by visiting the website www.bfc-legal.com.

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