Several California rental laws are currently in effect this year, and there are also some industry trends that we believe will impact the California rental market over the next few years. We’re talking about these things today in an effort to keep you educated and informed about your responsibilities as an investment property owner.
Tenant Protection Act of 2019: AB 1482
AB 1482 was signed in October of 2019, and is effective as of January 1, 2020. It’s called The Tenant Protection Act of 2019, and it’s a big deal. This is the first time that rent caps are in effect statewide. There’s also a just cause eviction provision which changes the way you get possession of your property back.
Those properties affected by this law are multi-unit buildings with two or more homes in which the owner does not reside in one of them. Single-family homes and condos are not impacted.
Whether your property is included in the rent control laws or not, you have to disclose to your tenants whether or not they get the privileges associated with this new law. The California Association of Realtors is providing a disclosure for all tenants that needs to be delivered by August 1, 2020. Here at Progressive Property Management, we’re planning to do it earlier.
Make sure you tell your tenants whether they are covered by this law or not.
Evictions: Just Cause and Relocation Fees
If your property is impacted by this law, and you want to get your property back from the tenants who are currently living in it, you have to pay them a relocation fee that’s equivalent to one month’s rent. They can forgo paying the last month of rent, or you can write them a check after they vacate. This is important because previously, you’ve been able to give tenants a 60-day notice and then get your property back without paying anything. Now, you have to pay to have them leave.
When you’re evicting because your tenant isn’t following the terms of the lease or isn’t paying rent, you can do what’s called a just cause eviction. This allows you to evict your tenant without paying a relocation fee.
Limiting Rental Increases
The rent cap on affected properties is now five percent over the Consumer Price Index (CPI). That’s the maximum you can increase rent. The amount will change annually. With the current CPI, this year it would have been a 7.2 maximum increase. This also rolls back to March of 2019. So, if you raised your rent more than 7.2 percent since March, you’ll have to roll it back to meet that maximum.
This law is a game changer for people in California who own rental properties. We have a lot of information on our website, so make sure you check it out.
Section 8 Housing: SB 329
The other law we want to highlight is one that hasn’t received as much press and attention. But, it’s still very important. It says you can no longer say no to Section 8 tenants. Section 8 is a federal housing program for people who cannot afford rent. They apply to the program to prove their income does not meet market rents, and the government gives them a voucher to cover the rent that they can’t afford.
Previously, owners who didn’t want to rent to Section 8 tenants could simply not accept them. Now, they are a protected class. You can still require them to meet your criteria. You can deny them if they don’t meet your credit standards or other aspects of your criteria. But, you cannot deny them simply for receiving Section 8 benefits. Their voucher is part of their income, and you’ll face a fair housing fine of around $20,000 if you deny someone just because they’re on Section 8.
Trends in Landlord and Tenant Laws
There are some new trends we’re watching carefully in states like Washington and Minnesota. One of the laws these states have implemented is that owners can no longer pick the best qualified tenant. Instead, it’s required that you pick the first qualified tenant.
So, if your rental criteria says that you’re looking for a 650 credit score and an income that’s three times the rental amount and no evictions in the last 12 months, the tenant who meets those qualifications first gets the property.
Another law that we expect to be on the ballot in California this year pertains to vacancy decontrol. Right now, if a tenant leaves your property, you can bring the rent up to whatever the market demands. If you’re below market and you’ve been renting out a home for $1,500 when the market says you can rent it out for $2,000, you can bring it up to the market levels when a tenant leaves your property.
With vacancy decontrol, you can’t do that. The most you could increase your rent is 15 percent from the last increase. So, in our example you’d bring your rent up to $1,700 instead of the $2,000.
Because of all these new laws and those that are coming, it’s becoming more and more difficult to self-manage. If you want to continue managing your rental properties on your own, make sure you are aware of the new requirements. It really has an impact on what you can do and not do.
If you have questions about these new laws and how we can help you, please contact us at Progressive Property Management.