The State of California has recently enacted Assembly Bill 1482, deemed the “Tenant Protection Act of 2019”, regarding tenant’s rental rights, rent caps, and just cause terminations of tenancy. While the law took effect as of January 1, 2020, the Rent Cap and Just Cause addendum notifying tenants of AB-1482 does not legally have to be put into new rental leases until July 1, 2020, or by August 1, 2020, for existing tenancies not exempt from AB-1482. As of now, it is recommended to start including the addendum in new leases, lease renewals, or any 30/60 day notices of lease changes as they come available.
The first thought when researching this Bill is if it pertains to your rental property. There are instances where AB-1482 does not apply. The most common exemptions regarding rental properties are:
- “Single-family owner-occupied residences, including a residence in which the owner-occupant rents or leases no more than two units or bedrooms, including, but not limited to, an accessory dwelling unit or a junior accessory dwelling unit” (such as a Granny Flat/In-Law unit),
- A duplex where the owner lives in one of the units and has lived there since the beginning of the tenant’s occupancy, to which the owner will continue to live in the one unit,
- Housing that has been built in the last 15 years or “issued a certificate of occupancy” during that time,
- Any housing in agreement with a government agency in relation to low or affordable housing,
- A residential property that has separate title from any other property, and meets both the following criteria: A) the owner is not a corporation, real estate investment trust (REIT), or a LLC where one of the owners in the LLC is a corporation, and B) notice has been provided to the tenants about the property being exempt from the AB-1482 sections regarding the rent cap and just cause requirements. It should be defined that a residential property that has separate title means that it is a single dwelling and can be sold separately; that there are no other dwellings on the property, such as other duplex or apartment units, granny flats, in-law units, etc. Single-family homes, condominiums, and units in planned developments generally fall under this separate title clause.
If the last item is applicable to your situation, the following notice must be provided to the tenants:
“This property is not subject to the rent limits imposed by Section 1947.12 of the Civil Code and is not subject to the just cause requirements of Section 1946.2 of the Civil Code. This property meets the requirements of Sections 1947.12 (d)(5) and 1946.2 (e)(8) of the Civil Code and the owner is not any of the following: (1) a real estate investment trust, as defined by Section 856 of the Internal Revenue Code; (2) a corporation; or (3) a limited liability company in which at least one member is a corporation.”
If you have a rental property that is not exempt from AB-1482, here are a couple of key points that every owner or property management company should know:
1) The rent cannot be increased more than twice in a 12-month period, and there is a limit regarding how much the rent can be increased in that time. The base increase is 5% of the rent amount, plus a percentage of the cost of living increase from April to April each year. Since AB-1482 was enacted prior to April 2020, current CPI indexes are using either a March 2018 to March 2019 figure, or an April 2018 to April 2019 figure, depending on the property’s area location. There is some discrepancy regarding which CPI figure to use, however. Since the bill technically says to use the figures for the region where the property is located, some critics believe this means the Western Region CPI, which currently is at 2.9% for April 2018 to April 2019. Contrarily, however, the Assemblyman Mr. Chiu who wrote the bill states he actually meant area where the property is located, so more centralized versus broad. Here is a good website to reference for more area-specific CPI indexes.
To calculate CPI, take the newer index number and subtract the older index number, then divide by the older index number.
April 2019-April 2018
=.040 OR 4%
If the rent was $1,000, for example, add the 4% CPI index to the base 5% to total 9%, or a $90 increase. This would make the new rent amount $1,090 each month. That is the most you could raise the rent for a year. It must be noted, though, that the rent increase can only be a maximum of 10%.
2) Giving tenant(s) notice to terminate the tenancy must include a reason as to why they are being asked to vacate the premises. “At-fault just cause” reasons include items such as a default in rent, criminal activity, breach of the lease, etc. “No-fault just cause” reasons include the owner or a family member of the owner moving into the property, putting the property up for sale or removing it from the rental market, or any kind of government agency or local ordinance requiring the owner have the property vacated. There is an important thing to remember when giving tenants notice to vacate for “no-fault just cause” reasons, however. AB-1482 states that if an owner is asking tenant(s) to vacate for reasons not caused by actions of the tenant(s), the owner is due to either provide relocation assistance funds or waive the last month’s rent, equal to the amount of rent due at the time the notice was given to the tenant. Rental assistance is due to be paid to the tenant(s) within 15 days of the notice being served. If the termination of tenancy is being given due to “at-fault” reasons, no relocation assistance or rent waiver is necessary.
If your property is exempt from the Tenant Protection Act of 2019 for reasons listed prior, or even the few others not common regarding rental properties, we would suggest checking your local ordinances to verify there are not any other rent control laws in place. Our company manages units within Sacramento and San Jose and still have to abide by their own tenant protection ordinances.
This article was written as an interpretation of the Assembly Bill 1482 found and outlined here: https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201920200AB1482, and should not be taken as an exact representation of the meaning behind the Bill.