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California 2020 Rent Control / Eviction Protection Law

Starting January 1, 2020, a new set of laws takes effect in California limiting evictions and rents.

Civil Code 1946.2 and 1947.12 are contained within the Tenant Protection Act of 2019, sponsored by Assemblyman Chiu as AB 1482. It is the first major law passed by California since the housing crisis began, after the OPEC Oil Embargo of 1973, culminating in local rent and eviction laws.

It is a reaction to gouging rents after the California fires in 2018-2019 exacerbating the housing shortage. It was the product of heavy lobbying by the landlords, so to just get it passed at all, the law had to be weakened. A lot.

The two main parts to this new law are: Just Cause Eviction and Rent Control.

Just Cause Eviction

The essence of a Just Cause Eviction law is that the tenant cannot be unfairly evicted. This new law sounds like it is more than it is. It is Civil Code 1946.2.

What it is Not

1. It does not replace any existing local rent control or just cause eviction law
If a local ordinance limits evictions and provides greater tenant protection than this law, that local law’s protection would control instead of this law. Only one or the other applies, not applicable parts [CC 1946.2(g)] explained in 10 and 11 of the following section.

 

2. It does not apply at all, to these rental units unless prevented by a local law:

      1. during the first year of tenancy, or if tenants have been added to the lease, this law
        does not apply until everyone has lived there for a year or the original tenant has lived there for 2 years
      2. for an “unlawful” occupancy, such as an unapproved co-tenant, subtenant or AirBnB
      3. to property built after 2004
      4. to duplexes where the landlord lives in the other unit,
      5. to single homes and condos owned by other than a REIT or corporation or LLC, a
        specially worded notice of that exemption is in the lease (or a written notice between 1/1/20 and
        7/1/20) [“REIT” means Real Estate Investment Trust, where shareholders collectively are the landlord]
      6. rooms rented in the landlord’s home
      7. government sponsored housing, until those restrictions expire
      8. school dormitories, health care facilities, or religious facilities
      9. hotels/motels, for the first 30 days of occupancy, until the 1 year provision applies
      10. business tenants
      11. rentals already subject to a local Just Cause law as of 9/1/19, even if less protective
      12. rentals subject to a local Just Cause law enacted after 9/1/19, if it is more protective as to eviction restrictions, additional tenant protections, or higher relocation payments, it is “consistent” with this law, and the government declares it “more protective.” A less protective one is unenforceable.

 

3. It does not stop “for cause” evictions, where the tenant is accused to doing something wrong.
Not protected are evictions for (1) nonpayment of rent, (2) breach of an important part of the rental agreement, (3) causing a nuisance, (4) seriously damaging the property, (5) refusal to sign a lease extension on similar terms, (6) criminal activity including threats of serious violence against the landlord, (7) illegally assigning or subleasing, (8) refusing to let the landlord legally enter to make repairs or show the property, (9) using the premises for an illegal purpose, (10) a resident manager failing to leave when terminated, and (11) failing to move after giving notice to the landlord of that plan. To get around the “just cause” protections to conceal a retaliatory eviction, the landlord would try to evict for one of these reasons.

What it Does Do

1. Reason must be stated in the eviction notice
An important part of this new law is that the landlord must state the reason for the eviction on the eviction notice, itself. A retaliatory eviction has traditionally been concealed with an eviction for “no reason” or “I don’t have to give a reason.” Where the reason is stated in the notice, the tenant has a better chance to disprove that reason to expose the retaliation as the real motivation. It also gives the tenant a better chance to defend against unprotected reasons, by proving the claimed reason to be false. The new law only limits evictions where the tenant has done nothing wrong, but the landlord wants to evict anyway. Those situations are: (1) the landlord wants to move in a family member, (2) the landlord just doesn’t want to rent it any more, (3) the landlord has been legally ordered to vacate the property [e.g. condemned or illegal building], or (4) to “substantially remodel” the unit which will take at least 30 days to do and it is unsafe to continue occupancy.

 

2. Preliminary warning notice for fixable problems
As to evictions for breach of a term of the tenancy, if the tenant can fix the problem, the tenant must be given a preliminary warning notice permitting 3 business days to do so, in order to avoid the eviction. Nonpayment of rent also requires a notice of 3 business days to pay. The 3-day period does not include the day that the notice was served. This preliminary notice is an important new part of the law, which used to permit an eviction case to be filed at the end of that notice. Under this new law, if the tenant does not correct the problem identified in that warning notice, a second notice of another calendar days must be served and expire before an eviction lawsuit [unlawful detainer] can be filed. An eviction based upon just the first notice, which had been the practice until now, would not be valid.

 

3. Relocation assistance is only one month’s rent for “no fault” evictions
The new law permits evictions where the tenant has done nothing wrong, but the landlord wants to evict anyway, under four situations: (1) the landlord wants to move in a family member, (2) the landlord just doesn’t want to rent it any more, (3) the building is condemned or illegal or (4) to “substantially remodel” the unit which will take at least 30 days to do and it is unsafe to continue an occupancy. The new law does not permit an eviction without a reason for the rentals to which it applies. The notice of termination must advise the tenant of their right to relocation assistance, which is only one month’s rent. At the landlord’s option, that can be paid within 15 days of service of the notice or simply be a waiver of the last month of rent. Since the protections do not apply during the first year of tenancy, a 60-day notice of termination would be given, and either tell the tenant that the last month’s rent is their relocation assistance [most likely], or the tenant is required to pay rent through the 60th day, but gets one month’s rent within 15 days of receiving that 60-day notice. The security deposit can still be held until 21 days after the tenant vacates, so the relocation assistance is intended to cover that deposit at the new place, not to cover moving expenses, utility deposits, or help finding a place. If the tenant is already withholding rent due to the uninhabitable conditions which the landlord intends to repair by the “substantial remodeling,” the repair may never be done, and the eviction used as a means of punishing the tenant for complaining. If the notice is given and the tenant fails to vacate, the landlord can evict and claim the waived rent or money paid as money “damages” from the tenant for not leaving. If the landlord does not waive rent or pay relocation assistance, the notice of termination is canceled.

Rent Control

The idea of rent control is to put a cap on the amount of rent increase that a landlord can charge. This new law, Civil Code 1947.12, also sounds like it is more than it promises to be.

What it is Not

1. It is not an effective restraint on rents in a normal economy
Although it is called “rent control,” it permits annual rent increases of 5% plus the CPI per year, up to 10%. The CPI means the Consumer Price Increase, which is measure of inflation in the economy. A CPI of 3.2% means that things cost 3.2% higher than they did at the same time last year. It was 3.2% for California for all of California in 2019, but varies based upon the area of the State you are in.

Under this law, a rent controlled landlord can still raise the rent about 8.2% on the first day it takes effect. The landlord lobby didn’t “fight” this law because they effectively wrote it. It permits the landlord to raise rents 5% more than the rest of the economy. Compare that to your own.

Here is an example, assuming $1000 rent and 3% inflation: Since about 80% of the rent dollar pays the fixed rate mortgage, and 10% goes to profit, only the remaining 10% is for all operational costs and thereby subject to inflation. The impact of 3% inflation on the landlord is .3% [1/10th], so if he passed through just that impact, $1000 rent would go to $1003. By this rent control law, the landlord can raise rent 8%, from $1000 to $1080. That $73 discrepancy goes directly to profits, turning the $100 profit into $173 profit, approaching double. The landlord can do that every year, for “controlled” units.

Why this illusion of rent control? Landlords have fought rent control for over 40 years on the argument that it would stifle new rent construction. It was all a lie. Landlord were not going to build affordable apartments, anyway, and they knew it. In 4 decades only a few luxury apartments and condos have been built in communities, not the apartments normal people need. leading to runaway inflation in this basic necessity of life and increased homelessness. When the California fires of 2018 and 2019 had insurance companies pay gouging rents for insured homeowners to live in, while their home was rebuilt, the drastic shortage hit nightmare levels, and rents everywhere skyrocketed. This new “rent control” law was the reaction to how much the insurance companies had to pay, even though the original intention was greatly diluted by the landlord lobbyists. It is intended to give tenants the impression that their lawmakers are looking out for them, like a band aid for a heart attack.

2. It does not apply to all rental units, permitting gouging rents to continue
As with the Just Cause Eviction portion, there are many exemptions to this rent control law, so for these rental units, the landlord is only limited by local laws if they exist. The law does not apply to:

      1. a new tenancy. If the unit is vacant, the landlord can charge whatever they want, without limit
      2. rental units built after 2004
      3. single family homes and condos, unless the landlord is a REIT, corporation or LLC, and the
        tenant is advised by a written notice (until July, 2020) or in the lease that this exemption applies.
      4. a duplex where the landlord lives in the other unit
      5. units that are already under a local rent control law
      6. school dormitories
      7. government subsidized housing, until those restrictions expire
      8. business tenants
      9. during the first year of tenancy, except that the rent during that first year cannot be increased more than two times, but to any amount each time.
      10. rent increases prior to March 15, 2019, probably meaning the percentage increase for the prior year being calculated for no farther back than March 15, 2019.

That rent control technically applies to rooms in the landlord’s home, health care facilities, religious facilities and hotels or motels is inconsequential, because those landlords can evict for not agreeing to the illegal rent increase under the Just Cause Eviction law, unless a local Just Cause law prevents that. Local rent control laws that might be enacted after this law are still restricted to units built prior to 1995, excluding houses, condos and new tenancies. This rent control law automatically expires in 10 years.

3. Possibility of legal challenge suspending its effect
Every rent control law locally passed in California has faced an immediate lawsuit sponsored by the landlords to have the law thrown out as Unconstitutional under various theories. There is no reason to expect anything different where this is a statewide law. The Supreme Court of California itself might issue an injunction preventing the new law from taking effect while it takes its time deciding whether part or all of the law should be rejected. The current Supreme Court is dominated by conservatives.

The most vulnerable part of the law for such attack is its retroactive effect, a rollback, where if the landlord has increased the rent of a tenant by more than the 5% plus CPI limit between March 15, 2019 and January 1, 2020, the rent is automatically reduced starting January 1, 2020 to the March 15, 2019 rate. Even though the landlord does not have to refund any overcharges during 2019, they may claim that they changed their positions based upon the higher rent, such as borrowing money with the apartment building as collateral, or that they are “grandfathered in”, or an unconstitutional interference with contract, just to have something to stall the effect of the law. If the rent control law is suspended in effect, no doubt the rent gouging will continue throughout the state to lock in the much higher rents as a starting point for the New Era.

What it Does Do

1. Prevents gouging rent increases only
The new rent control law, for the units to which it applies, prevents rent increases over the 5% plus CPI. One reason that Los Angeles rent control has not been effective is that the permitted rent increases have kept pace with market rents in many cases. Landlords use the maximum allowed increase as their guide, raising the rent that maximum amount irrespective of the CPI, the market, or their tenants’ ability to pay it. A similar pattern can be expected here, where California landlords may all raise their rents by 8%, but not 10%. They now have the green light from our Legislature, and their greed button is stuck on. In effect, landlords are permitted, for those units affected, a huge rent increase but not a gouging one.

Should another disaster hit California like a fire or earthquake, and thousands of people suddenly needs somewhere to live, this law will somewhat limit the effect on the rental market. Single family homes and condos, all units build since 2004, and all tenancies of less than a year could see rents doubled what they had been, being exempt from rent control. Older apartments [pre-2005] with tenants in possession more than a year would still be subject to 8% rent increases, trying to force them
out to get the desperate refugees who insurance company will pay double the normal rate.

2. Retroactive effect of 2019 increases, permitting a 3 month temporary reduction
As noted above, if the landlord raised the rent on or after March 15, 2019 by more than the 8.2% permitted by this new law, the rent starting January 1, 2020 will automatically be reduced to the March 15, 2019 rate. If this provision is allowed to stand by the Court, this could provide substantial relief from the 2019 rent gouging for those protected tenants who stayed in possession and grudgingly paid the increases. The landlord does not have to refund the overcharged rent from 2019.

However, there does not seem to be any prevention of a rent increase as soon as the year is up. For example, if the landlord raised the rent on 4/1/19 by 10% from $1000 to $1100, on January 1, 2010, the rent would drop back to $1,000 because it was more than the 8.2% allowed. However, on 4/1/20, the rent could be increased by 8.2% [assuming 3.2% CPI] of that $1100 to $1190.20, recovering for the landlord in about 3½ months what was lost by that brief reduction period. The rent protected tenant is thereby paying nearly 20% more than 13 months earlier. The landlord’s profits from this increase go from $100 [of that $1000 rent] to $290, nearly tripling, under this rent control law.

If the landlord did not raise rent between March 15, 2019 and January 1, 2020 by more than the 8.2% allowed, that landlord can increase the rent to 8.2% higher that it had been on March 15, 2019. If for example the landlord had increase the rent from $1000 to $1050 [5%] since March 15, 2019, he could and is encouraged to by this new law raise it again up to $1082 [8.2%].

3. Waiver of rights is void
Anticipating that landlords would try to cheat the tenants out of their rights somehow, the rent control law expressly says that any waiver of these rights is void. On its face, that seems plain enough, but the devil is in the details. The landlord would not include in the lease “I hereby give up my rights under the rent control law,” for the tenant to sign. Instead, it would be concealed in automatic increases over a multi-year lease, mixed with additional services or rights, or treated as separate one year leases each requiring the tenant to vacate by the last day without renewal. If a landlord can evict for not agreeing to the illegal increase, the tenant agrees but under duress. A corporation owing a condo managed by a property management company falsely claims that it is a partnership, and therefore exempt from the rent control, where the tenant agrees to pay more than is legally required due to that fraud. Waiver is supposed to be a knowing surrender of rights, but that depends on whether the landlord
is honest and candid with the tenant. The possibilities are as boundless as the landlords’ imagination.

Register to Vote!

Your power starts with your registering to vote. Two thirds of California residents are tenants, but only a small percentage of the tenants actually vote. That means when the politicians are deciding whether to favor the landlords who give them money or the few tenants who might show up at the polls to vote for the name they see the most, they favor the landlords. This new law is an example of that. If tenants voted in the numbers that homeowners do, politicians would be tripping over each other to write strong laws for tenants. If you don’t register to vote AND VOTE, you are part of your own problem. And that’s the truth.

Tenants as a group are “disenfranchised,” excluded from consideration and the process, in that vicious cycle. We don’t register to vote, so when the politicians look at where their votes will be coming from, the R-4 apartment zones show very low registration. If tenants don’t register to vote, that means you don’t care what they do. If you don’t care, they don’t care. You end up with a choice at the polls between politicians who never mention the tenants’ needs, because they don’t want to offend the landlords who use your rent money to pay for the politicians’ campaign. You have nobody “worth” voting for, and so you don’t vote, and don’t even register. You need to break out of that vicious cycle.

You may have been registered to vote, but then forgot to re-register in the hassle of your move to a new place. Times goes on and it’s entirely forgotten until the election comes but you don’t get a ballot, because you’re not registered. Another election, another silence, and another signal to the politicians that you don’t care. Register. It takes only 5 minutes on line: https://registertovote.ca.gov.

There was a statewide rent control petition on the ballot recently, that got a 40% vote. That’s only 11% from winning. If tenants start registering to vote now, when that petition gets back on the ballot, we can win, and have a real rent control law that finally provides us with the protection we want and need. You are only one of 20 million tenants, but this sleeping giant can take control. It starts with you.

Our Economy and the Big Picture

Some tenants are against rent control because they are against government regulation, think most landlords are honest, that tenants are suffering their own consequences somehow, and that the free market will make everything OK. It is the conservative propaganda that big landlord money pays to keep shouting, much as Hitler’s propaganda worked. The repeated lie eventually sounds true.

Housing is a necessity of life, with food and water. It is different from normal things we buy for that reason. Housing has an “inelastic demand” and an “inelastic supply”, meaning that new housing construction is very slow to react to increased demand, and we don’t really have a choice as to whether we will have a place to live. In the 4 decades that landlords have fought rent control on the theory that it will discourage new construction, hardly any new construction has occurred, anyway, and most notably in cities where new construction is expressly exempted from rent controls. It is a lie, proven over time.

We regulate how much utilities can be charged because it is worth a lot more than we pay to have them, and our money should not be diverted away from other purchases by overcharging for them. No one questions that. Even the pure free market thinkers do not question whether the Securities and Exchange Commission should regulate the stock market, because it benefits them. Why not housing?

We have an entire economy to think of, not just tenants and landlords. Landlords are about 2% of the population, while tenants are 66%. The tenants’ money greatly affects the entire economy. Tenants want to buy clothes, food, entertainment, equipment, vacations, and gifts. The tenant dollar goes only so far. When the landlord raises the rent, the tenants have less money to spend elsewhere, which hurts all of the other businesses, as well as the tenants. The reduction in those sales has a “multiplier effect” which causes the total money in circulation to be reduced by 5 times that amount, in a chain reaction: A has less money to spend with B, who lacks that money to spend at C, and so forth. The entire economy suffers so that the richest 2% can get even richer.

Meanwhile, the employers of those tenants face not only the reduced sales, but are forced to pay higher wages to keep the tenants because their rents were increased. Indeed, when the minimum wage is increased, the benefit is immediately removed because the landlord takes it all. The employer still has to pay more, and either cuts profits or has to lay off the workers. In addition, the landlord of the employer’s business raises the employer’s rent, too, so higher rents and higher wages for the employer make survival difficult. Many businesses fail for that reason, and homeowners who were against rent control lose their business and then their home in foreclosure and become tenants, themselves, before becoming homeless. Add to this the mass relocation which has already started from rising ocean levels caused by global warming, and the housing crisis kicks into overdrive Meanwhile, American businesses who can survive by raising their prices to the consumer have gradually lost their competitive edge in the face of products overseas, leading to massive bankruptcies, layoffs and a severe depression from which we may never recover.

The growing homeless population itself is the natural result of laissez faire economics. In the economic terms of supply and demand, the market price is what sellers and buyers both agree on. If the price is too high, the buyer doesn’t buy, and the seller has to lower the price to sell. If the price of housing is too high, you become homeless, but the landlord does not have to lower rents because other people who can afford the higher price will fill the vacancy. Homeless people can get a free room and food by committing crimes and having the tax payers pay for their jail time and associated police and court expense. Why not? They have nothing to lose and at least room and board to gain? It is part of that free market, is it not? Wandering bands of homeless families trying to survive in this free market system are given few choices, and cannot be controlled. The free market says they should survive any way they can. Why interfere with the landlord’s profits with government regulation when we can have a society like that?

With the economy weakened by these factors, the gross national product plummets, and with it the tax base for our government to provide military defense, health care, schools, and infrastructure also collapses. We lose the middle class, and have in the end a feudal society, with the very few ultra rich and the helpless poor masses. Granted that is several years off, something only our children will have to face, not us.