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The new law establishing statewide rent control for residential rental units is the Tenant Protection Act of 2019. The law becomes effective January 1, 2020, with some retroactive provisions with respect to rent increases after March 15, 2019.
The new law creates new obligations on landlords and new tenant rights in addition to preexisting rights the tenant has.
The tenant has a right to a 30-day notice to terminate the tenancy if the tenant has lived in the property for less than one year and a 60-day notice if the tenant has been in the property for more than a year.
The landlord is prohibited from terminating the tenancy without "just cause". The landlord must provide a prescribed notice to the tenant of their rights under the new law. The "just cause" must be communicated to the tenant in writing. The landlord must provide the tenant with a period to cure the violation for an "at-fault" termination. This is generally within 3 days not including Saturdays and Sundays and other judicial holidays, after service of the notice. If the violation is not cured within the time period set forth in the notice, a 3-day notice to quit can be enforced without a further opportunity to cure the violation.
The new law also provides for "no-fault" just cause terminations. The owner is required to provide the tenant with relocation assistance for a "no-fault" termination by providing a direct payment to the tenant of one month's rent or waive in writing the payment of rent for the final month.
Rent increases are subject to limitations for all increases on or after March 15, 2019. The owner is prohibited from increasing rents more than once in any 12-month period by more than 5.00% plus the percentage change in the cost of living, or 10%, whichever is lower. The base rent used in the calculation is the lowest gross rent charged in the prior 12-month period. The percentage change in the cost of living is based on the change in the Consumer Price Index for the area where the property is located from April 1st to April 1st as published by the US Bureau of Labor Statistics.
Some of the more common "at-fault" terminations include: failure to pay rent; a material lease violation; criminal activity; assigning or subletting the premises in violation of the lease terms; tenant refusal to allow the owner to enter the premises under specific Health and Safety Codes; or using the premises for an unlawful purpose.
Common "no-fault" terminations include: intent to occupy the property by the owner or close relatives; withdrawal of the property from the rental market; government order to vacate the property due to health conditions or habitability; intent to demolish or substantially remodel the property.
The new law only affects residential rental units. Commercial rents are not affected. There are relatively few exceptions to the new law for residential rental units. Some units exempt from the new law include: transient and tourist hotel occupancy; extended care facilities; licensed residential care facility for the elderly; dormitories owned by an institution of higher education or an inclusive school covering grades kindergarten to 12th grade; a principal residence which is owner-occupied and no more than two bedrooms are rented out; or a duplex where one unit is owner-occupied.
The new law has very specific notice and compliance requirements. Owners will want to become familiar with those requirements to document "at-fault" tenant evictions. Owners will essentially give tenants a month of free rent in "no-fault" tenant evictions. The timing of rent increases must be carefully monitored to avoid more than one rent increase in less than a 12-month period. The owner should also document the cost of living changes from year to year for their property location to support rent increases. Of course, none of this increases the stock of housing in California. How about giving a tax credit for impact fees paid on new construction as an incentive to increase the supply of residential housing in California?