CALIFORNIA STATE RENT CONTROL RESIDENTIAL LANDLORDS AND THEIR RESPONSIBILITIES UNDER THE TENANT PROTECTION ACT (TPA) OF 2019

This article is intended to provide an overview of the 2019 Tenant Protection Act (TPA) that became effective January 1, 2020. This article is not intended to give the reader legal advice on how Landlords should terminate their Tenant's tenancies. This article serves to provide a summary of the TPA, serving to outline answers to reoccurring questions Landlords are asking since the TPA went into effect. At Last & Faoro, our landlord clients (property owners and property management companies) oversee and manage several hundred residential units, ranging from single family homes and condominiums to multi-building, multi-unit apartment complexes.

As noted previously, this article is intended to provide basic explanations as to the TPA and is not intended to give the reader legal advice regarding landlord-tenant law. Last & Faoro represents residential landlords, as well as, commercial landlords and tenants. This article is not intended to substitute for the advice of an attorney, nor is it intended to respond to a specific problem or transaction. If the reader has a specific legal question or need legal, the reader should contact an attorney.

The Tenant Protection Act of 2019 (TPA) was signed by Governor Newsom and went into effect on January 1, 2020, with a stated expiration date of January 1, 2030. However, given the ongoing housing shortage in California, it is anticipated that the future legislature and Governor will renew the TPA as a matter of course. With this anticipated renewal, it is our recommendation that Landlords adjust their business model of being passive property owners and understand their need to actively manage their residential rental properties.

As discussed below in more detail, with limited outlined exceptions, the TPA serves two principal concepts: (1) landlords are now generally required to have "just cause" in order to terminate a tenancy and (2) there are now statutory limits on the amount rents may be increased.

Addressing the second point first, on residential units subject to the TPA, annual rent increases are now limited to no more than 5% + the Consumer Price Index and is designed to protect tenants. The TPA generally applies to multi-unit buildings; and, not stand alone single family homes, condominiums or duplexes -- where one of the occupants is the Landlord.

JUST CAUSE EVICTIONS

In California, prior to the TPA, in most jurisdictions across the State without a rent control ordinance, landlords could terminate tenancies by merely serving tenants with 30 or 60-day notices, depending on the length of the tenant's occupancy.

As of January 1, 2020, if a landlord wanting to terminate a tenant's tenancy, landlords are now required to identify a "valid" reason for terminating a tenancy. In part, the "Just Cause" rules apply if the tenant has continuously occupied a "rent controlled" residential property after the tenant has 12 months of tenancy or 24 months if a new tenant is added. As noted before - the Just Cause rules do not apply to properly noticed single family homes, condominiums or duplexes where the landlord is an occupant.

The TPA breaks down and identifies two categories of Just Cause" (1) "No Fault" and (2) "At Fault". If the bases for terminating a tenancy is premised upon a "No-Fault" basis, no matter the amount of the tenant's income, the landlord must pay relocation expenses to the tenant equal to the last month's rent.

NO FAULT TENANCY TERMINATIONS

AT-FAULT TENANCY TERMINATION

Landlord or family member intends to

occupy the unit

Non-Payment of Rent

Withdrawal of unit from rental

market

Breach of material term of the lease

Compliance with a government,

court order, or local ordinance that

requires vacancy

Nuisance

Intent to demolish or substantially

remodel the unit

Waste (damage to the property)

Refusal to execute similar new lease

Criminal activity

Subletting in violation of the lease

Denying access to landlord after property notice of lawful entry

Using the premises for an unlawful purpose

Employee, agent, or licensee's

failure to vacate after termination

as employee, agent, or licensee

Failure to vacate after tenant

provides owner written notice of

intent to terminate tenancy, or after

making a written offer to terminate

tenancy which is accepted by

landlord

UNITS EXCLUDED FROM TPA-2019 REGULATIONS

The new rent control law will apply mostly to apartment buildings and multi-family buildings. There are exclusions for landlords who own "single family" homes, condominiums and duplexes where the landlord is one of the occupants. The following is a list of housing that is excluded, and the landlord does not need to provide "Just Cause" to evict tenants.

  • New housing with a Certificate of Occupancy within the past 15 years
  • Government subsidized or below-market housing in which rent is based on income
  • Single family homes or condos with no corporate ownership
  • Owner-occupied single-family homes with no more than two tenants
  • Duplexes if the owner already lives in the other unit
  • Short term stay hotels, motels and hostels
  • Non-profit hospitals, religious facilities, care for the elderly, and adult residential facilities
  • Tenants who share bathroom and kitchen facilities with the owner in the owner's home
  • K-12 or college dorms

RELOCATION

If a landlord terminates a tenancy on a basis of "no-fault" of the Tenant, the TPA requires the landlord to pay for the tenant's relocation expenses. The TPA defines the "relocation payment" to be equal to one month's rent. Payment must be made within 15 days of the no-fault termination notice. Or, alternatively, a landlord can waive the last month's rent. There are additional notice requirements that need to be followed.

NOTICE

If the property is subject to the TPA "Just Cause" requirements, Landlords must apprise their tenants with proper notice, outlining to the tenant the tenant's rights pursuant to the TPA.

RENT INCREASE

As originally stated, the TPA limits rent increases on an annual basis to 5% + the local Consumer Price Index (CPI). Initially, current and near term rental increases will be retroactively measured in the context of the rent amount charged on March 15, 2019.

The TPA DOES NOT provide a rent "catch-up" provision. In other words, if a landlord or property manager fails to or decides NOT to increase rent in one given year, the landlord is not allowed in subsequent years to make up for the missed increase (until there is a new tenant). Therefore, if a property is not actively managed, it is possible for a landlord to have rental rates fall below market values.

UNITS EXCLUDED FROM TPA RENT CONTROL INCREASES

Certain units are excluded from rent increases under the TPA. The following is housing that is excluded from the rent increase restrictions:

  • New housing with a Certificate of Occupancy within the past 15 years (rolling)
  • Housing with local rent control where the annual allowable increase is lower than 9%
  • Government subsidized or below-market housing in which rent is set based on income level
  • Single family homes or condos with no corporate ownership
  • Duplexes - if the owner lives in the other unit
  • College dorms
  • Mobile homes and RVs in mobile home parks that are owned by the occupants.

CONCLUSION

The foregoing article was intended to provide a general overview of the Tenant Protection Act of 2019. If the reader of this article has specific issues requiring specific analysis in the context of the Act, the reader should seek out the advice of counsel.

Mr. Faoro is a partner at Last & Faoro specializing in Real Estate and Construction Law for over 30 years, assisting owners, property managers, developers, contractors and realtors in real estate and construction matters. He can be reached at (650) 696-8356, or by email at [email protected]. The foregoing article is intended only to provide a general overview of the TPA. This article is not intended to contain legal advice, is not intended to discuss or address any specific situation or problem and should not be relied on in making any legal decisions. If the reader has a specific legal question or needs legal advice, the reader should contact a qualified attorney.

Last & Faoro

177 Bovet Road, Suite 550

San Mateo, CA 94402

[email protected]

Tel: (650) 696-8356

Fax: (650) 696-8365