A Landlord’s Guide to California’s New Statewide Rent Control Laws
By: Colton Addy
Applicability of California’s Rent Control Laws: California Civil Code Sections 1946.2 and 1947.12 took effect on January 1, 2020, and implement statewide rent control in California for most residential properties. The rent control laws, however, do not apply to a rental property that was issued a certificate of occupancy in the last 15 years. (Civ. Code §§ 1947.12(d)(4), 1946.2(e)(7)). The statutes also do not apply to most single-family residences, provided that (a) the owner is not a real estate investment trust, a corporation, or a limited liability company where one of the members is a corporation, and (b) the required statutory language is included in the lease agreement for tenancies commencing or renewing on or after July 1, 2020. (Civ. Code §§ 1947.12(d)(5), 1946.2(e)(8)).
Annual Increases Permitted Under California’s Rent Control Laws: Commencing on January 1, 2020, unless otherwise permitted by California law, a Landlord cannot increase the gross rental rate for a rental unit over a continuous 12-month period more than the change in the regional cost of living index where the property is located plus 5%, and gross rental rate increases are subject to a maximum cap of 10% over a continuous 12-month period regardless of the change in the cost of living index. (Civ. Code § 1947.12(a)(1)). The gross rental rate is determined using the lowest rental amount charged in any month in the immediately preceding 12 months. (Id.) Any incentives, discounts, concessions, or credits are not taken into account. (Id.) Even if a rent increase does not exceed the amount permitted under the statute, a Landlord is prohibited from increasing rent more than twice in any continuous 12-month period. (Civ. Code § 1947.12(a)(2)).
Retroactive Applicability of Restrictions on Rent Increases: Although the statute took effect on January 1, 2020, the statute retroactively applies to all rent increases that occurred on or after March 15, 2019. (Civ. Code § 1947.12(h)(1)). If a landlord increased the rent amount more than the amount permitted under California Civil Code Section 1947.12(a)(1) after March 15, 2019, and prior to January 1, 2020, the rent amount on January 1, 2020, is reduced to the amount of the rent on March 15, 2019, plus the maximum permissible increase under California Civil Code Section 1947.12(a)(1). (Civ. Code § 1947.12(h)(2)). The Landlord does not have to refund the tenant any rent payments that were in excess of the permissible rent increase that the tenant made prior to January 1, 2020. (Id.)
Vacant Units and Removing Tenants: If a rental unit is vacant, a landlord is permitted to reset the gross rental rate for the unoccupied unit to market rental rates. (Civ. Code § 1947.12(b)). The statute, however, prevents a landlord from terminating the tenancy of a tenant that has continuously occupied a rental unit for at least 12 months, unless the landlord has “just cause” for removing the tenant. (Civ. Code § 1946.2(a)). The statute establishes two different “just cause” standards.
At-Fault Just Cause: A landlord is permitted to terminate a tenancy for “at-fault just cause,” which includes, among other reasons, the tenant’s (a) failure to pay rent, (b) criminal activity or use of the rental unit for an unlawful purpose, (c) breach of a material term in the lease, or (d) refusal to execute a written renewal or extension of the lease after a landlord’s written request. (Civ. Code § 1946.2(b)(1)). If a lease violation is curable (i.e., late payment of rent), a landlord must give a tenant the reasonable opportunity to cure as mandated by § 1161 of the California Code of Civil Procedure. (Civ. Code. § 1946.2(c)).
No-Fault Just Cause: A landlord may also terminate a tenancy for “no-fault just cause,” which includes, among other reasons, (a) if the landlord or a member of the landlord’s family wants to occupy the unit, (b) if the landlord wants to demolish or substantially remodel the property, or (c) if the landlord must comply with a local ordinance or order issued by a governmental agency. (Civ. Code. § 1946.2(b)(2)(A)-(D)). If a landlord wants to terminate a tenancy for “no-fault just cause,” it must compensate the tenant with relocation assistance equivalent to one month’s rent. (Civ. Code. § 1946.2(d)(2)-(3)).
Notice to Tenants of California’s Rent Control Laws Required: A landlord is required to give a tenant notice of certain rights under the rent control laws by providing the tenant with the required statutory language. (Civ. Code. § 1946.2(f)) For leases entered into on or after July 1, 2020, the statutory language must be included as an addendum to the lease or as a separate written notice signed by the tenant. (Id.) For leases existing prior to July 1, 2020, the notice must be provided to the tenant no later than August 1, 2020, or an addendum to the lease can be added by said date. (Id.)
Expiration of California’s Rent Control Laws: The rent control laws will expire on January 1, 2030, unless the legislature extends or reenacts them. (Civ. Code §§ 1947.12(j), 1946.2(j)).
California’s Rent Control Laws Does Not Preempt Local Rent Control Ordinances: California’s new rent control laws do not preempt existing municipal rent control ordinances that are stricter (as long as they comply with Costa-Hawkins, which prohibits local governments from establishing rent control on apartment units built after the earlier of (a) February 1, 1995, or (b) the date established by a municipality’s local rent control ordinance to exempt newly constructed properties). As such, landlords must ensure they cross-reference any local ordinances (such as rent control laws in the City of Los Angeles and the City of San Francisco) against the larger framework of California’s new statewide rent control laws.