California’s New Rent Control

On September 11, 2019, the California Legislature passed Assembly Bill 1482 known as the California Tenant Protection Act of 2019 (the “TPA,” not to be confused with the New York Tenant Protection Act of 2019!). On October 8th, Governor Gavin Newsom signed it into law.

The provision will sunset on January 1, 2030.

You can read the text of the law here: 

https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201920200AB1482

What Does the TPA Do?

The TPA has two primary regulatory aspects:

First, it limits rent increases to the Consumer Price Index + 5% or 10%, whichever is less. 

The CPI calculation is a complex one that zeros-in on Regional Total Consumer Price Indexes maintained by the United States Bureau of Labor Statistics and not the California CPI maintained by the California Department of Industrial Relations.

Each of these indexes have multiple baskets of commodities that yield different CPIs for various regions, market segments, and time frames.

Therefore, it would be madness for any Landlord to attempt this calculation on his own and should contact a CPA or Real Estate Attorney to vet any contemplated rent hike. In general, CPI tends to hover around 3% per year making most rent increases contemplated by the TPA between 7% and 8%.

https://data.bls.gov/pdq/SurveyOutputServlet?data_tool=dropmap&series_id=CUUR0400SA0,CUUS0400SA0

Second, it limits the manner and reasons for which a tenant may be evicted. Instead of month-to-month tenancies only being governed by the terms of the rental agreement, or at-will tenancy, the TPA requires “just cause” to remove a tenant.

“Just Cause” is further broken down into “At-Fault Just Cause” Evictions and “No-Fault Just Cause” Evictions.

At-Fault Just-Cause Evictions include: (See Cal. Civ. C. Sec. 1946.2(b)(1)(A-K) for a full list)

– Lease Breach

– Non-payment of rent

– Nuisance as defined by State Law

– Criminal Activity

If any of the above are ‘curable’, the TPA further requires that tenants be given as “reasonably notice” as defined by Section 1161 of the Code of Civil Procedure – which is the 3-Day Notice that most landlords are already familiar with. In situations covered by the above, a Landlord may initiate an Unlawful Detainer Action against the tenant upon expiration of the 3-Day Notice and reject all further attempts to pay rent or cure.

It is important to note that “curable” is not defined by the code section(s) and it would be difficult to imagine or identify a non-curable breach of the lease. Therefore, it may be prudent for all Landlords to issue the statutory 3-Day Notice and not wade into the murky line-drawing the legislature has contemplated.

No-Fault Just-Cause Evictions include: (See Cal. Civ. C. Sec. 1946.2(b)(2)(A-D) for a full list)

– Landlord or immediate family moving in 

– Converting the unit into a condominium 

– Demolition of the Unit (not simply renovating)

– Complying with a Court order or new statutory compliance affecting the unit.

If the Landlord is exercising one of these provisions, he will need to give a 60-Day Notice and relocation assistance.

Relocation Assistance (See Cal. Civ. C. Sec. 1946.2(d))

Perhaps the largest distinction between the Los Angeles Rent Stabilization Ordinance that our readers may be familiar with and the new TPA, is that the latter sets relocation assistance as a single month’s rent either paid out to the tenant or by waiving the last month’s rent prior to move-out. 

This is in drastic contrast to the RSO’s draconian formulas intended to chill any and all repositioning, improvement, or further development of Los Angeles Real Estate. 

Notice Requirements

Basically, all landlords need to separately notify, or include in the Lease, disclosures that the property is or is not covered by the TPA, which specific statutory language. (See Below)

Which Properties Does the TPA Apply To?

The TPA has a fairly limited scope that focuses on two factors:

First, the age and type of the dwelling unit:

The TPA specifically excludes: (See Cal. Civ. C. Sec. 1946.2(e))

  1. Dwelling units less than 15 years old as determined by its Certificate of Occupancy
  2. Hotel Occupancy under subdivision (b) of Section 1940
  3. Non-profit housing such as hospitals, religious facilities, extended care facilities, licensed residential care facilities for the elderly, or adult residential facilities. 
  4. Dormitories
  5. Shared Co-Living Spaces
  6. Single-family owner-occupied residences
    1. 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.
  7. A duplex in which the owner occupied one of the units as the owner’s principal place of residence at the beginning of the tenancy, so long as the owner continues in occupancy.
  8. Any unit already covered by a stricter Rent Stabilization Ordinance. Therefore, LA’s RSO and California’s TPA are not in conflict.

Second, the type of ownership structure:

The TPA applies to any and all Single-Family Dwellings (with no other units attached) where the owner is:

    1. A Real Estate Investment Trust (as distinguished from a Revocable or Living Trust)
    2. A corporation
    3. An LLC with a Corporate Member

In Summary: 

  1. All traditional multi-unit residential dwellings, including condominiums, that are more than fifteen (15) years old, except for owner-occupied duplexes AND
  2. Only those single-family dwellings that are more than fifteen (15) years old and owned by a REIT, Corporation, or LLC with a Corporate Member.

When Does the TPA Take Effect?

Various potions of the TPA take effect on a rolling basis as follows: 

March 15, 2019 Any rent hikes between this date and January 1, 2020 will be rolled back on 

January 1st to the rent as of March 15th + the statutory increase.

January 1, 2020 All Just-Cause and Rent Cap provisions go into effect

July 1, 2020 All leases entered into after this date, must include statutory disclosures:

“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 (d)(5) and 1946.2 (e)(8) 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.”

Or

“California law limits the amount your rent can be increased. See Section 1947.12 of the Civil Code for more information. California law also provides that after all of the tenants have continuously and lawfully occupied the property for 12 months or more or at least one of the tenants has continuously and lawfully occupied the property for 24 months or more, a landlord must provide a statement of cause in any notice to terminate a tenancy. See Section 1946.2 of the Civil Code for more information.”

August 1, 2020 Deadline to give notice to tenants of the above, if the tenancy began prior to 

July 1, 2020.

About the Author

Josué Cristóbal Guerrero, Esq. is a Partner at Gomez & Simone, APC, a Southern California Real Estate Law Firm with offices in Los Angeles, Ontario, La Mirada, and opening December 1, 2019 – Santa Ana