In a move by California’s legislature, the most prolific change to landlord-tenant law has come about with the passage of AB 1482. AB 1482 will cap annual rental increases by 5% plus the rate of inflation which, at this time, comes close to 7.5-8% for much of the state’s rental housing stock. The new law will also apply to a “Just Cause” requirement for termination of tenancies for qualifying rental housing across California. To give you an idea of the underpinning of this sweeping move by legislature, the new law is called “The Tenant Protection Act of 2019.”
While tenant advocacy groups may call this legislation “tenant protection,” some outspoken landlords say this new law creates a “California welfare state.” The law takes effect January 1, 2020 and “sunsets” in 2030. California will become the second state in the union to pass a statewide rent cap following on the heels of Oregon, which passed a similar law. Here is a summary and legal analysis of various provisions of the new law.
AB 1482 “Occupies the Field”
This raise “occupies the field,” meaning that AB 1482, a statewide measure, states that local governments should not be allowed to impose stricter rent caps on housing regulated by this legislation. Thus, the 5% plus inflation rent cap imposed by this state law would pre-empt local municipalities from going stricter then this allowable rental increase number. This is something, at least for San Diego County landlords (where rent control has not been approved), that would impose stricter caps than what AB 1482 is authorized.
Vacancy De-Control Strengthened
When a tenant moves out of a unitregulated by AB 1482, the owner would be allowed to adjust the new rent to market and then resume enforcing inflation plus 5%.
Rental Increases Applied in Increments: More Than Two Increases Per Twelve Month Period Not Allowed
The rental owner is now prohibited from increasing the rental rate for the unit in more than two increments in a twelve month period. Two increases per year would be allowed but, remember, when you add the two raises together, they must not exceed the annual cap of 5% plus inflation. In our experience, this is not a serious issue since most owners usually, although not required to, raise rent just once per twelve month period.
The Laws Retroactive Effect on Rent Hikes: Rental Increases Before January 1, 2020
Lawmakers were one step ahead of us in making sure no one jumped their rents prior to the effective date of the new law. First, all rental increases prior to March 15, 2019, are approved. They stay as-is. The line in the sand is a rental increase that is dated on or after March 1, 2019. Rental increases after this date are treated as follows. First, the Apartment Associations valiantly, and partially successfully, obtained a modified approach to this issue. For post March 1, 2019 rental increases that exceed 5% plus inflation, the difference may be retained by the landlord and does not have to be refunded. There is bad news, however. On January 1, 2020, the rent must be reduced to the approved rate of 5% plus inflation. Another way of calculating this would be to multiply the rent before the increase (that occurred after March 1, 2019) and multiply it by 107.2%. This would then reduce the rate to the acceptable level. In these cases, don’t forget to give tenants an advance written notice that you are decreasing the rent to the acceptable level starting January 1, 2020.
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