Rent Control Is A New Reality: AB 1482 & What It Means To You

rent control

Any real estate professional who occasionally handles rentals or the sale of properties subject to rent control laws should be familiar with rent control laws. This is particularly the case as Assembly Bill (“AB”) 1482, mandating certain statewide rent control policies, comes into effect, likely on January 1, 2020.  This article provides an overview of the effects of AB 1482 as well as current rent control laws within the city of Los Angeles.

AB 1482

AB 1482 is a bill passed by the California Assembly and State Senate in September 2019 and signed into law by Governor Newsom on October 8, 2019.  It provides for statewide rent control in units not already covered by city or county rent control ordinances.

For those in the real estate industry, the most important fact about AB 1482 is that it prevents landlords statewide from raising rent by more than 5% plus the Consumer Price Index (which has historically averaged around 2.5% in this state) per year, or about 7.5% a year give or take the fluctuation of the Consumer Price Index.

This law will apply to all buildings in California that are at least fifteen (15) years old and not otherwise covered by a rent control ordinance (see below for more information).  In the city of LA, buildings built before 1978 are already subject to rent control, so this will expand rent control provisions to all buildings — not otherwise exempt  built before 2005.  Estimates are that AB 1482 will affect over a million additional homes in LA that previously had no rent control protection.

There are a couple important exemptions.  First, this will not apply to buildings less than 15 years old. If a building is not that old, landlords can continue raising rents year over year without having to follow AB 1482 until the building is 15 years old.   It will also not apply in certain instances to landlords that own ten or fewer single-family homes. This is designed to protect smaller mom and pop landlords.

The law will most likely go into effect on January 1st, 2020 and terminate on January 1, 2030 unless further extended.  However, certain provisions will be made retroactive to March of 2019 to prevent landlords from price gouging in anticipation of the law coming into effect.

AB 1482 also requires landlords to show just cause when evicting tenants such as not paying rent, violating a provision of the lease, or committing a crime on the property.  Further, for tenants who have lived in a property for one year, landlords would have to give the renter the opportunity to “cure” the violation.

Additionally, if a landlord wants to convert the rentals to condos or remodel the property, they would have to pay relocation fees equal to one month of rent.

Importantly, the law will not otherwise override local rent control laws, but instead provide rent caps statewide (where not otherwise provided by city law) and work co-extensively with city laws already on the books.  Therefore, it is important to have an understanding of LA’s rent control laws that are already on the books.

LA’s Current Rent Control Ordinance and AB 1482

Even with AB 1482, LA’s rent controls also remain in effect. In some instances, the current rent control laws are actually stronger in protecting tenants than the provisions of AB 1482.  Where LA’s current rent control laws provide more protection than AB 1482, LA’s current rent control laws prevail and are still in force.  Where the current rent control laws don’t provide coverage and AB 1482 does, AB 1482 applies.

The main effect of AB 1482 on LA rent control laws is to bring rent control for a variety of newer buildings (LA’s current rent control law only covers buildings built prior to 1978).  AB 1482 effectively covers all non-exempt buildings built prior to 2005 and thereafter any building that is fifteen years old that is not otherwise exempt.  Essentially, LA city rent control laws still cover everything built prior to 1978, whereas AB 1482 rules cover anything from 1978 until 2005 and thereafter any building that reaches the fifteen-year mark.

The first thing one must do is determine if the neighborhood that the property is in is subject to rent control laws.  Places like the city of Los Angeles, Santa Monica, and unincorporated areas of Los Angeles County do have rent control laws, while other independent cities do not.  Further, as described below, within the city of Los Angeles, only certain types of housing stock are subject to rent control laws, even though there is a citywide ordinance.

One thing to keep in mind is that many areas that are colloquially referred to as independent towns such as: Sherman Oaks, Northridge, Studio City, and Bel Air are part of the city of Los Angeles and thus subject to the city of Los Angeles’s rent control laws.  If at all confused, the Los Angeles Times has a useful interactive map that will tell you if a neighborhood is an independent city, an unincorporated part of Los Angeles County, or a neighborhood within the city of Los Angeles.  It can be found at http://maps.latimes.com/neighborhoods/.

Even if the house in question is not covered by LA rent control laws, it will be covered by AB 1482. So, any area currently not covered will be covered by AB 1482, and any area that is covered now, will retain its current coverage and AB 1482’s coverage.

What Units are Subject to LA’s Current Rent Control Ordinance?

LA rent control laws apply to rental properties that were first built on or before October 1, 1978, replacement units under LAMC Section 151.28[1], and any of the following:

  • Apartment
  • Condominium
  • Townhome
  • Duplex
  • Two or more single family dwelling units on the same parcel
  • Rooms in a hotel, motel, rooming house or boarding house occupied by the same tenant for 30 or more consecutive days
  • Residential unit(s) attached to a commercial building
  • Certain mobile homes

What Does the Rent Control Ordinance Require?

If a building is subject to LA’s rent control laws, it changes things in several ways.  The first and most obvious one is the amount of allowable increases in the rent year over year.  Each year, the allowable increase is determined by a formula that is tied to the consumer price index.  The current allowable increase is a 3% increase over the past year for a tenant that was living in the property during the prior year.[2]  This number can and does fluctuate, but it is kept within a range of 3% to 8%.

How is this Different than AB 1482?

Note that this is typically less than the allowable increase provided for by AB 1482, and the stronger provision still prevails, so if a building is covered by LA’s current rent control laws, you typically can only raise the rent 3%, even though AB 1482 allows for up to 7.5% at current rates.

Thus, if a building was previously covered by LA rent control laws, that coverage remains, it is only if it is not covered that AB 1482 comes in and provides for a cap.  AB 1482’s cap is typically more favorable for landlords than the city of LA as it provides for a 5% increase and the Consumer Price Index percentage as opposed to being based solely on the Consumer Price Index.

Other Provisions in Current LA Rent Control Law

In addition to this baseline increase, a landlord can make additional percentage raises depending on the number of tenants and who pays the utilities.

The second and less obvious portion of the rent control ordinance is how evictions must be handled.  First, evictions generally must be done for cause for reasons such as:

  • Failure to pay rent
  • Failure to fix or address a violation of the rental agreement
  • Creating a nuisance or causing damage to the rental unit
  • Using the rental unit for an illegal purpose
  • Failure to renew a similar rental agreement
  • Failure to provide the landlord reasonable access to the rental unit
  • The person at the end of the lease term is a subtenant not approved by the landlord

There are other some exceptions under the law in which a property owner wishes to regain the use of the rental unit, as the result of a personal or business decision through no fault of the tenant in which the landlord may evict, but the property owner has to pay the tenant relocation assistance. These reasons include:

  • The property owner or eligible family member will move into the rental unit
  • A resident manager will move into the rental unit
  • Demolition and permanent removal from the rental market
  • Government order
  • Conversion to affordable housing

If that is the case, the landlord can still evict but must pay relocation existence after filing an application with the relevant authorities.  The amount of assistance is determined by several factors including age and income of the tenant.  Beyond the reasons listed above, you generally cannot evict a tenant in a rent-controlled building who wishes to stay.

Suffice it to say, the process of making such an application and paying assistance can be time consuming and costly.  Not only that, but the exceptions are very narrowly tailored and must be strictly observed.  That said, a rent-controlled building can avoid becoming a money pit, and obviously many have profited from rent controlled buildings, it simply pays to be informed beforehand.

AB 1482 will introduce rent control statewide to many buildings.  However, as it does not apply to buildings less than fifteen years old and allows for a 5% increase plus the Consumer Price Index, it need not necessarily be a hindrance to profitable rental properties.

 

[1] LAMC Section 151.28 is a convoluted statute involving replacement units that may be subject to rent control laws, an agent need not necessarily be familiar with the ins and outs of the statute as a unit must be registered as rent controlled and notice posted, so it simply important to check for the notice as opposed to trying to make an independent determination.  You can also look up any property in the city to check if it is subject to rent control at http://zimas.lacity.org/.

[2] This is an important distinction as if an old tenant moves out and a new one moves in; the landlord can raise the price beyond the caps for the new tenant.

About Blake McCay

As a licensed attorney, Blake dedicates his practice to all aspects of legal compliance. Prior to JohnHart, Blake was an associate at Baker Marquart LLP, where his practice focused on complex commercial litigation, labor and employment litigation, international litigation, and appellate law.

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