AB 1482: Statewide Rent Control and Just Cause For Eviction in California

AB 1482, a state-wide bill that will enforce rent-increase limits and just cause for eviction laws throughout California is about to land on Governor Newsom’s desk. The governor has said that he plans to sign the bill. This means we can expect a state-wide rent cap and just cause for eviction rules to become law in the coming weeks. The bill is set to expire in 10 years, and so it will remain in effect until January 1, 2030. You can read the full text of AB 1482 here. Below we will cover the main points of the bill, the types of properties and owners exempt, and what it will mean for you and your real estate. 

A Rent Cap

AB 1482 institutionalized a statewide annual rent cap of 5% plus the change in the cost of living (inflation). In other words, after adjusting for inflation, property owners will not be able to raise the gross rent more than 5% in a year. Additionally, the bill restricts the number of times property owners may raise the rent – no more than 2 times over a 12 month period if a tenant has lived in the unit for over a year. 

If you’ve already raised the rent on your unit in the 2019 calendar year, the following provision will apply to you: if you increased the rent by less than the amount specified above between March 15, 2019, and January 1, 2020, you would be allowed to increase the rent twice within 12 months of March 15, 2019, but not by more than 5%.

Note, you cannot require that a tenant waive their rights under this bill – such a provision in a lease will not be legally binding. 

Exemptions:

There are exceptions to this rule, and the following will not be subject to the statewide rent cap:

1. State recognized affordable housing units. 
2. Dormitories at institutes of higher education 
3. Housing subject to rent or price control through another public entity, if that restriction is less than the amount specified above (5% + inflation). 
4. Any property that has been build (issues a certificate of occupancy) within the past 15 years. 
5. You are exempt if you own a residential property and the property’s title is not held by any of the following: 
   • A real estate investment trust,
   • A corporation,
   • A limited liability company (LLC) in which at least one member is a corporation. 
6. A duplex in which the owner occupies one of the units as the owner’s principal place of residence at the beginning of the tenancy, so long as the owner continues to occupy the unit. 

If your property falls under this category of “an exception” for reasons 5 or 6 above, than you must notify your tenants in writing with the following clause included in the notice (for tenancy starting after July 1st, 2020):

“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 (c)(5) and 1946.2 (e)(7) 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.”

Just Cause for Eviction

The Just Cause for Eviction portion of this bill identifies two situations under which a landlord asks a tenant to leave: at-fault just cause and no-fault just cause. As a landlord, you will have to abide by different rules under these two situations. We will summarize these rules below. You can find a list of both “at-fault” and “no-fault” just causes here under Section 1946.2. 

Note: if your real property is subject to a local ordinance requiring just cause for termination of a residential lease, and that local ordinance was adopted on or before September 1, 2019, the local ordinance will apply. If the local ordinance was adopted after September 1st, 2019, and if the local ordinance is “more protective” than this bill’s just cause regulations, then the local ordinance shall apply. You can read more about the criteria set forth for an ordinance to be considered “more protective” here. 

No-Fault Just Cause

If you require a tenant to vacate the property due to a “no-fault” just cause reason, you will be required to provide one month of rent (equaling the rent was in effect at the time that the notice was delivered) in relocation assistance to the tenant. This assistance can take the form of waived rent for the last month of tenancy, or an actual payment made to the tenant. If you choose to waive the rent, written notice must be given to the tenant.

If you fail to provide this relocation assistance to the tenant, his or her notice of lease-termination will become void.

If you, the landlord, have done what is required by law to vacate a tenant, and the tenant fails to leave the property when required, then the actual amount of any relocation assistance or rent waiver provided can be recoverable as damages in an action to recover possession.

At-Fault Just Cause

As the owner, before you can issue a notice to terminate a tenancy due to an “at-fault” reason, if the tenant’s actions constitute a curable lease violation, you must first give notice of the violation to the tenant with an opportunity to cure the violation. Take a look at paragraph (3) of Section 1161 of the Code of Civil Procedure to learn more about delivering this notice. 

If the violation is not cured within the time period set forth in the notice, a three-day notice to quit without an opportunity to cure may thereafter be served to terminate the tenancy. Under this situation, you will not be required to offer the tenant relocation assistance. 

Exemptions:

These just cause for eviction laws will not apply to the following (you can find the complete list of exemptions here):

1. Hotels or “transient housing” like Airbnb’s
2. Housing accommodations in which the tenant shares a bathroom or kitchen facilities with the owner who maintains their principal residence at the residential real property.
3. Single-family owner-occupied residences, including a residence in which the owner-occupant rents or leases no more than two units or bedrooms, including, but not limited to, an accessory dwelling unit or a junior accessory dwelling unit.
4. A duplex in which the owner occupies one of the units as the owner’s principal place of residence at the beginning of the tenancy, so long as the owner continues to occupy the unit. 
5. Any property that has been build (issues a certificate of occupancy) within the past 15 years. 
6. You are exempt if you own a residential property and the property’s title is not held by any of the following: 
   1. A real estate investment trust,
   2. A corporation,
   3. A limited liability company (LLC) in which at least one member is a corporation. 
      
      
      

What About Costa Hawkins?

Many property owners are familiar with Costa Hawkins – a California law that limits the reach of rent control. As the law stands today, Costa Hawkins has three main provisions:

• It protects a landlord’s right to raise market rent on a unit once a tenant has moved out.
• It prevents cities from establishing rent control (or capping rent) on units built after February 1995. 
• It exempts single-family homes, condos, and townhomes from rent control restrictions. 

What you may not know is that Costa Hawkins is designed to limit rent control created by local jurisdictions. Therefore, because it is at the state-level, the rent cap created by AB 1482 is not limited by Costa Hawkins. 

What AB 1482 Means for You and Your Real Estate

As a property owner, you will need to comply with these new laws if you are renting out a non-exempt property and your tenant remains in the property over 12 months. If you use a property manager, we suggest that you ask him, her, or the company what they are doing to ensure that you will be in compliance with these new laws. 

If you do not use a property manager, and you would like to better understand if these laws apply to you and what you will need to do to remain in compliance, we suggest that consult a real estate lawyer. If you have questions about the wording of the bill, you can call the housing office of one of the bill’s main authors, Assemblymember David Chiu at (916) 319 – 2085. 

If you are considering selling your investment property, and would like to understand your options, please contact us: (831) 600-6550. We specialize in residential and small commercial real estate sales in and around the County of Santa Cruz.