In California, rent control has been regulated by some cities and counties for decades. However, as of January 1, 2020, rent control law is now statewide. California rent control law Assembly Bill 1482, also known as the Tenant Protection Act of 2019, places limits on rent hikes to prevent them from being overly egregious in a housing market that's not only expensive, but also highly competitive.
Defining Rent Control
Rent control caps the amount of money a landlord can charge a tenant. Some rent control laws also limit the circumstances by which a property owner or a manager can terminate a rental agreement or choose not to renew a lease. Rent control laws are in effect in cities all over the U.S. and in California cities such as Los Angeles, San Francisco, Palm Springs, San Jose and Oakland. Smaller towns and some counties also have their own rent control ordinances in place.
Rent control ordinances usually apply to properties like apartments, but not all rented premises fall under this umbrella. As an example, the 1995 Costa-Hawkins Rental Housing Act states that rent control doesn't apply to single-family homes, condos and units built after February 1, 1995. Owner-occupied buildings with less than three or four units, short-term rentals, government-subsidized housing and detached residences may also be free of rent control regulations. Costa-Hawkins also allows "vacancy decontrol," which means landlords can raise the rent on a unit to meet current market levels when a tenant vacates the property.
Read More: The Pros and Cons of Rent Control
California Tenant Protection Act
The California Tenant Protection Act, also known as AB 1482, limits rent increases at 5 percent plus location inflation in areas of California without rent control laws already in place. If a tenant lives in a city that does not already have a rent control law, his rent increases are limited to 5 percent, plus local inflation, but can never exceed a total of 10 percent. For example, AB 1482 covers a city like San Diego, which has no local rent control regulations. If a tenant is paying $2,000 a month to rent a unit, and the inflation rate is 2.21 percent, the landlord can raise the rent only as much as 7.21 percent, or $144.20.
In anticipation of possible rent gouging occurring prior to the date of the law's passage on January 1, 2020, lawmakers made AB 1482 retroactive to March 15, 2019. Whatever amount of rent a tenant paid as of that date is the amount by which a landlord must base an increase of 5 percent, plus local inflation, not to exceed a total of 10 percent. Additionally, a landlord may only raise rent twice over 12 months, and this amount is still subject to the rent cap.
Unintended Consequences of AB 1482
The law contains no explicit language allowing a landlord to put off, or save, future rent increases. A "use it or lose it" caveat encourages the landlord to seek the maximum amount permitted every year or risk never completely catching up to market rates. A tenant who pays lower rent in comparison to market rates will receive higher, more frequent increases until her rent payments reach the desired rate. Conversely, a tenant who already pays the market rate for a unit will receive fewer increases.
Before this statewide rent control law went into effect, some landlords could, and did, raise rents to market rates when it came time to renew a tenant's lease. They even evicted residents with no just cause in non-rent controlled areas. However, Los Angeles and other cities in California passed emergency legislation at the end of 2019, requiring immediate just cause for all evictions to stem this tide.
"At-Fault" Evictions Under the Act
For tenants who have occupied a residence for over 12 months, California's new law does not allow termination of the tenancy without just cause from the landlord, who must give his reasons for eviction in writing. Just cause protections also apply when at least one tenant of several has lived in the residence for 24 months or more.
While the main "at fault" causes of eviction, like not paying rent on time or carrying out criminal activity on a property, do not differ that much under the Tenancy Protection Act as they did before it, the Act allows additional reasons to terminate a tenancy:
- Failure to pay rent.
- Material breach of the lease after written notice to correct it.
- Committing or maintaining a nuisance or waste.
- Criminal activity or threats to the property owner or agents.
- Subletting without permission from the landlord.
- Refusing lawful entry by the landlord.
- Failure to leave the residence after giving notice.
- Using the property for an illegal or unlawful purpose.
- Failure to vacate the premises after the landlord has terminated the tenant's employment if he is a resident manager or maintenance person.
- Refusal to sign a new lease that is similar to the previous one.
"No-Fault" Eviction Under the Act
Under the Tenant Protection Act, a landlord can evict a tenant for specific reasons that have nothing to do with her behavior while renting the unit. When removing a tenant for such "no-fault" reasons, the landlord must compensate her for relocation expenses equal to one month's rent. He can do this by waiving the last month's rent or by giving her the money. Any no-fault terminations by the landlord must include written notice of the reason for eviction and the tenant's right to relocation compensation. If the tenant does not vacate after receiving the notice, the landlord can recover his money by suing the tenant and listing that amount as damages in an unlawful detainer action.
Reasons for no-fault termination include:
- The intent to occupy the residence by the property owner or a relative of the property owner. The lease must also contain wording on the possibility.
- The property owner has planned to withdraw the residence from the rental market.
- The landlord has received government notice that he must vacate the unit based on health, safety or other code violations.
- The property owner plans to demolish or substantially remodel the property, not including upgrades that are merely cosmetic. A landlord can withdraw compensation for relocation if the tenant caused the changes to occur.
Full Exemptions to the Act
In California cities and counties where rent control was already in place, landlords must follow local ordinances regarding tenancy. However, for those areas where there were no such laws, tenants have protection under AB 1482. For example, the city of Los Angeles has rent control laws in place, but the city of Glendale, located in Los Angeles County, does not. In this instance, Glendale renters have protection under the Tenant Protection Act.
Properties and circumstances can receive a full exemption from the law's rent control and just-cause clauses in certain circumstances:
- Tenancies in which the renters have lived on the property less than 12 months.
- Owner-occupied single houses and condominiums.
- A duplex in which one of the units is the landlord's primary place of residence.
- Multifamily residences with certificates of occupancy issued less than 15 years before a particular date.
- Residences in nonprofit hospitals; religious or licensed care and health facilities; dorms operated by a school or college; public housing; hotels; and additional transient housing.
Rent Control Exemptions to the Act
In specific circumstances, a property is exempt from rent control, but still subject to just-cause eviction law. If there is a rent control exemption, a landlord has to notify his tenant of it in writing. After July 1, 2020, he must include that information in the lease. The properties exempted are:
- Single-family homes.
- Other residences "separately alienable from title." This applies to stand-alone properties that a landlord can sell apart from others he owns.
- Properties owned by a natural person, a company owned by people, or another entity representing a person or people, such as a revocable trust, can also benefit from this exemption. The exemption does not apply to corporations that own properties, such as real estate investment trusts or LLCs with corporate members.
- Duplexes and houses operated as boarding houses or dormitories not occupied by the owner.
Just Cause Exemptions to the Act
As with rent control exemptions, there are also exemptions to the just clause regulations in the Tenant Protection Act. In these instances, a landlord can evict a tenant without just cause. However, he cannot raise the rent on a tenant more than the maximum permitted. The tenant must also get written notice of this exemption from her landlord, and, after July 1, 2020, the landlord must include the notice as an addendum to the lease.
Exemptions include owner-occupied housing with shared bathrooms or kitchen facilities, and owner-occupied properties with less than two in-law units. A just cause partial exemption does not apply in situations concerning subtenants. In those cases, while the tenant is a master tenant or a landlord to a subtenant, the tenant is not the property owner and does not qualify for an exemption.