I recently listed and put into escrow a triplex in the heart of North Park. Within a three-block radius are numerous restaurants, bars, gyms, cafes, and retail shops. It is a 10 out of 10 location.
Additionally, it is zoned Complete Communities, Sustainable Development Area & Transit Priority Area. The parcel also qualified for Affordable Housing Density Bonus, Accessory Dwelling Density Bonus, and major reductions in parking (which is starting to backfire).
The property generated a lot of phone calls. Upon hearing all three units were tenant occupied, many investors lost interest citing the burden of complying with Tenant Protection Laws, which got me curious. What are the new Tenant Protection Laws and what is the state of the rental market?
Let’s start with the landmark law, AB 1482*, signed by Governor Gavin Newsom in 2019: Rent Control and Just Cause Eviction in California.
Rent Control: a rent cap at 5% plus the inflation rate, with a 10% maximum increase.
Just Cause: California law restricts a landlord’s ability to terminate a residential lease, evict the tenant and retake possession of the property when a tenant has lawfully occupied the residential property for 12 months or more. The landlord is prohibited from ending the tenancy without “just cause.”
There are two types of Just Cause evictions: At Fault Just Cause and No Fault Just Cause.
At Fault Just Cause would include but not be limited to
• Default in rent payments
• Maintaining, committing or permitting a nuisance
• Criminal activity
• Subletting in violation of the lease
• Not allowing the landlord to enter the premises after being given lawful notice to enter
No-Fault Just Cause would include but not be limited to
• Owner and/or owner’s family intends to occupy the property
• Withdrawal of the property from the market
• Demolish or substantial remodel of the unit (not cosmetic repairs)
No-fault Just Cause requires the owner to provide the tenant with a relocation assistance payment (equal to one month’s rent) OR agree to waive the final month’s rent. The landlord must give the tenant notice of the tenant’s right to relocation assistance or rent waiver in writing. Failure to comply with this renders the termination notice void.
San Diego has gone one step further. Instead of landlords paying tenants one month of rent for no-fault evictions, they pay two months of rent, and if the tenant is 62 years of age or older or disabled, the landlord is required to pay three months of rent.
Originally, AB 1482 required landlords to give reasons for No Fault Just Cause; Gov. Newsom updated the law last month. Landlords now must prove the reasons for their No Fault Just Cause by:
• If the owner or family moving into the unit, provide the tenants with the identities of the people moving in
• The unit must be occupied within three months of the eviction
• Whoever moves in must live in the unit for at least one year
• If the vacate reason given was for renovations, the landlord must provide the tenant copies of remodeling permits or contracts. (Whose property is it?!?!)
Landlords or property managers failing to do the above will have to allow the tenants to move back under the original lease terms.
In the past, when a lease expired, the landlord and/or the renter could opt to not renew – tenancy over. Now, only the renter has the option to not renew. California has made landlords stuck with tenants and if they want to be unstuck, they’re going to pay heavily.
Because landlords and property managers are in the rental business to make money, it doesn’t take a genius to predict a cat-and-mouse game between property owners and the State with these unintended consequences of AB 1482:
• High rents due to property owners needing a high starting base for the rent caps.
• High rents to cover months of free rent.
• High rents to cover legal costs of evictions.
• High rents to cover damages by tenants who cannot be sued because they have no assets.
• Harder for seniors and the disabled to find apartments because the owner could lose up to 25% of one year’s worth of rent moving seniors or the disabled.
• Longevity insecurity for renters. With 12 months being the trigger for burdensome regulations, many property owners are opting for 11-month leases and then telling the renter to move on.
• Exodus of property owners leaving the state.
* Some properties are exempt from AB 1482.
Here’s a link to an informative article: mynd.co/knowledge-center/what-exemptions-apply-to-ab-1482-californias-statewide-rent-control-law.
– Reach eXp Realtor and La Mesa Vice Mayor Laura Lothian at: [email protected].
