RENT CONTROL AND EVICTIONS - THE NEWLY PASSED TENANT PROTECTION ACT OF 2019.
California Governor Gavin Newsom signed important legislation that will affect many landlords and tenants of residential property across the state. The two biggest impacts created by the Tenant Protection Act of 2019 will be: (1) imposing a percentage limit on annual rent increases; and (2) introducing a just cause requirement for terminating tenants who have occupied a property for 12 months or more.
The changes will require landlords of all types, from institutional to individual, to carefully consider property management procedures, asset rehabilitation plans, and even corporate ownership structures.
SOME DETAILS ABOUT THE CAP ON RENT INCREASES IN THE NEW CIVIL CODE SECTION 1947.12
In passing statewide legislation to cap rent increases, California follows Oregon, which passed a similar law in February 2019 but allowed rent increases up to 7% plus inflation. California's provision requires analysis of any rental rate increases after March 15, 2019, despite going into effect on January 1, 2020. To clarify their intent, the bill's authors included a finding and declaration that "the unique circumstances of the current housing crisis require a statewide response to address rent gouging by establishing statewide limitations on gross rental rate increases." (§ 1947.12(k)(1).) Stating that "this section should apply only for the limited time needed to address the current statewide housing crisis" [§ 1947.12(k)(2)], the bill will automatically sunset on January 1, 2030.
The new law does not regulate the amount of rent the landlord may charge for new tenancies. The statute permits the landlord to establish the initial rental rate with no maximum and controls only the future increase amounts. The rules governing the maximum rent increase are retroactive to March 15, 2019. For any increase imposed between March 15, 2019, and January 1, 2020, the landlord can either capture the maximum increase or must reduce the amount to the maximum permitted increase as of January 1:
If the increase was less than the maximum permissible amount, the landlord may further increase the rent in no more than two installments to reach the maximum amount.
If the increase already exceeds the maximum permissible amount, the landlord must reduce the rent to the maximum amount as of January 1, 2020. The landlord does not need to refund the tenant for any prior overpayments
SOME DETAILS ABOUT THE JUST CAUSE EVICTION PROCEDURES IN NEW CIVIL CODE SECTION 1946.2
The legislation requires written notice of the just cause for termination of certain tenancies, and just cause is broken down into two categories.
"At-fault just cause" is defined in section 1946.2(b)(1) to include, among other reasons:
non-payment of rent;
material breaches of lease terms after notice and an opportunity to cure;
criminal activities on the property, or criminal threats against the owner or owner's agent; or
improper assignment/subletting of the space.
"No-fault just cause" is defined in section 1946.2(b)(2) to include termination based on:
intent to occupy the unit by certain family members of the owner, provided that any leases entered into after July 1, 2020, include a lease provision permitting such termination;
withdrawal of the property from the rental market;
compliance with a government order or local ordinance that necessitates vacating the property; or
intent to demolish or substantially remodel the property.
In order to terminate a tenant based on no-fault just cause, the owner must elect to either: (A) pay the tenant an amount equal to one month's rent within 15 days after notice; or (B) waive the rent for the final month of the tenancy. Failure to do so voids the notice of termination. Terminating owners are also required to notify tenants of their right to payment or rent waiver.
This blog is for informational purposes only and is not intended to be taken as legal advice. To answer specific questions please contact an attorney.