Today’s topic is one that’s incredibly important to anyone renting out a property in San Diego or anywhere in California. It’s AB 1482, or the Tenant Protection Act of 2019. There’s a lot you need to know, and we’re taking a look at what it means for you and your investment properties.
AB 1482 and Statewide Rent Control in California
Rent control is a constant way for the government to control and limit rent increases each year. It has been getting a lot of attention in California because of the recent laws that were passed.
From a landlord’s perspective, it limits your rental increases. The amount you increase rent is capped on an annual basis, and it will average around seven or eight percent every year. This new statewide rent control law will be in effect for the next 10 years.
No matter what, rents are capped at a 10 percent yearly increase. Here’s how it works according to AB 1482: Rent increases cannot go over 5 percent of the total rent plus inflation, which is set by the Consumer Price Index (or CPI).
If there was a year with 6 percent inflation, landlords are still unable to raise the rent 11 percent. It’s capped at the 10 percent.
The implementation of this law can be complex given some unique circumstances that many landlords may not even be aware of. You must definitely stay on top of AB1492 and local rent control laws. The government does not necessarily police rent control. It’s one of those things that could be brought up in court by the residents of your property. Not following the law can mean potential court situations, in which you’ll not only lose your case, but you’ll also be subject to paying attorney fees and monetary damages.
Look Back Provision in AB 1482
It is required that California landlords and investors know these laws and all of their exemptions and requirements. If something happens, and you unintentionally fall out of compliance, there are dozens of tenant advocacy groups that will be ready to support the tenant in filing a complaint or taking legal action against you. Don’t get caught by surprise. Residents know their rights, and you have to be just as educated on what the state requires and limits.
There are a lot of variables with AB 1482, which makes executing the requirements of this law even more complex. You’ll have to manage a lot of numbers, and you’ll have to take a look at the last time you raised rent. That’s because there’s a look back provision in the law, where you have to come into compliance if you raised your rent by more than the legal limit in 2019.
The law went into effect January 1, 2020. If you raised your rent by more than the allowed amount after March 15, 2019, you have to come into compliance. You aren’t required to give back any of the rent that you collected, but you do have to bring that rental amount back down to the legal amount and go from there.
Also, this rent control law pertains to residents living in the unit already and not new residents moving into the rental property.
Is your San Diego Rental Property Exempt or Included?
There are exceptions and variables in the law. For example, homes that are 15 years old or newer are exempt from AB 1482. Single-family homes are only included in the rent control law if they are owned by REITs, corporations, or LLCs where one member of the LLC is a corporate entity. Individual owners renting out a home they once lived in are exempt from AB 1482.
Before you think about how you’re going to comply with the rent control laws, you have to find out in what capacity your property or properties are included. There are investors throughout California who have some of their properties included in rent control and some that are not. This requires a lot of attention to detail, and you might want to get help from an attorney who specializes in landlord and tenant law or a professional San Diego property manager who can tell you whether your investment property is included and what you have to do moving forward. Even if your property is exempt, you’ll need to let your residents know that the exemption applies to your property.
AB 1482 is statewide, but it’s not a blanket policy of rent control that touches everyone.
Investing in San Diego Rental Property
Investors might be a bit worried about investing in a new San Diego rental property. If they don’t know what rent control is and how it might affect their investment, there will be some hesitation.
Whether you’re a current investor or you’re thinking about investing in San Diego real estate, make sure you become familiar with AB 1482 and all of the other local and state rent control laws that will impact the way you rent out a property.
If you need help making some smart decisions or bringing your investments into rent control compliance, we’d be happy to work with you. Our team knows this law inside and out, and we stay on top of the potential changes in the legal landscape. Contact us at Mynd Property Management if you need any help at all with your San Diego investment plans.
You can also visit our Facebook group of investors, which is called Master Mynd. It’s a real estate investors’ club, where you can exchange ideas with other owners. Check out our weekly podcast as well, called The Myndful Investor. We invite leaders in real estate and property management to talk about their success and, more importantly, their failures. There’s a lot to learn from this relatable content.