Statewide rent control arrived in California effective January 1, 2020, and today Steve Rosenberg, VP of Investor Education at Mynd Property Management and Giles Imrie, VP of Corporate Counsel at Mynd are talking about what this means for Oakland landlords and investors. There have been a lot of comments and concerns about the implementation of this new law, and it’s important to know what’s happening as we move forward with rent control.
Background: California’s AB1482
This law provides a statewide cap on rental increases. Owners can increase rent five percent every year, plus the CPI for your particular region. You cannot go over 10 percent, even if the CPI is high. Right now, your rental increase won’t be able to go any higher than seven or eight percent. That’s the annual maximum that you can increase rent.
There are a couple of exemptions in place for individually owned single-family homes, condominiums and a few others that we have described in previous blogs.
The second piece of this law is the just cause eviction ordinance, which says you can no longer terminate a lease at the end of the term unless the tenant has breached the lease or not paid rent or caused damage. It means the tenant now has the option, if they are otherwise in compliance with the lease, to renew their lease and stay as long as they want.
You can still remove the tenant and get possession back if you’re doing something like moving back into the property yourself. You can terminate the lease without cause under a few conditions and with a potential payment of relocation fees to your tenant.
Pay Attention to Lease Disclosure Requirements
Now that this law is in effect, there are a couple of things coming up that you’ll need to be aware of in order to stay compliant with it. You’ll need to start with three different disclosures that you need to build into your lease documentation if you want to take advantage of the various exemptions provided in this law.
Disclosures need to be provided to your residents through the lease agreement as of July 1, 2020. Before July 1, you are required to provide information to your residents, but on July 1, you actually have to have the verbiage in your lease agreement.
The initial disclosure is if your property is subject to the rent cap. Your property is included if it’s not a single-family home and it’s not a condo or townhouse or owned by any kind of corporation. Then, you have to put in the specific statutory language advising the tenants of what the civil code sections are and how they allow the protections under the rent cap and just cause ordinance.
The other two disclosures are really important.
For example, there is an owner move-in exception in the just cause ordinance, so if you or a family member want to move back into your home, then you are allowed to terminate the lease. The catch is, you have to add this language into your lease as of July 1. That specifically gives you the right to do that. Failing to update your lease documentation with the correct language will result in a loss of this exemption.
Basically, this means you have to re-write your lease as of July 1, 2020, especially if you want to take advantage of these exemptions. You must either include it in the body of the lease itself or include an addendum.
You are required to have the disclosure language in there of “if your property is subject to rent control.”
This adds a level of complexity because you may be managing different kinds of property with different leases and different disclosure terminology. Some of the properties you own may be subject to rent control and others may be exempt. You will have to be able to identify which type of property it is and insert the correct documentation into the lease.
If your property is exempt and it is a single-family home or condo or townhome, then you need to add that disclosure information stating that the property is exempt. Failing to do so means it is no longer exempt. Every lease after July 1 you must maintain that same statutory language.
Implementing AB1482 is Changing and Challenging
It’s early, and we’ll be learning more about how AB1482 is implemented and enforced as we move through the year. The main implications are certainly with the rent increase portions of the law. It was retro-acted to March of 2019. So, if you raised your rent beyond what is currently allowed between March of 2019 and now, you’ll have to go back and re-adjust that rent to get it in compliance with the rent cap.
These are the main issues that have popped up with Oakland rental property owners, and it’s possible that future issues will be decided in the courts. With all of the exemptions and the juggling of local rent control ordinances with the statewide rent control law, there’s a lot of confusion even among experienced property investors.
We’re also following what’s happening in other markets. In Seattle, there has been talk about a new law in which when investors buy a home with the intention to flip the property, they would be required to give the residents a certain amount of time before they would actually have to move out of the property. There are a lot of things in the works, and the tenant rights organizations are constantly pushing for new legislation on all fronts.
For those of you that want to know more about 1482, we have a lot of video and blog content that further explains the law and how they apply to you. It’s critically important that you are educated about rent control and just cause eviction. If you’re not already working with a professional Oakland property management company, you might want to check in and make sure you’re compliant. We’d be happy to help and we have tons of resources, so contact us at Mynd Property Management if you have any questions.