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The Tenant Protection Act of 2019 – Rent Caps and Just Cause

AB 1482, the Tenant Protection Act of 2019, imposed rent caps and just cause eviction for certain residential rental properties throughout California, effective January 1, 2020. It added Civil Code §§1946.2, 1947.12 and 1947.13.

Rent Caps

Under new Civil Code §1947.12, in any 12-month period the “gross rent” for residential property may not increase more than the lowest gross rental rate charged for the immediately preceding 12 months by more than 5% + the regional percentage change in cost of living (CPI) (but not to exceed 10%). A maximum of 2 rent increases, the total of which are within the cap, may occur over a 12-month period.

These restrictions apply to all rent increases occurring on or after March 15, 2019. If rent increased more than the allowed amount between March 15, 2019 and January 1, 2020, the rent on January 1, 2020 must be rolled back to the rent as of March 15, 2019, plus the maximum permissible increase.

The gross rental rate does not include rent discounts, incentives, concessions, or credits. The gross per-month rental rate and any owner-offered discounts, incentives, concessions, or credits must be separately listed and identified in the lease or rental agreement or any amendments to an existing lease or rental agreement.

Disclosure Notice Required

If a property is subject to Civil Code §1947.12 rent caps, a written notice of the tenant’s rights in 12 point font must be given.

Exceptions to Rent Caps

Civil Code §1947.12 does not apply to:

(1) Housing restricted by deed, regulatory restriction contained in an agreement with a government agency, or other recorded document as affordable housing.

(2) School dormitories.

(3) Housing subject to local rent control that is more restrictive.

(4) Housing issued a certificate of occupancy within the previous 15 years (which is a rolling period).

(5) Property that is alienable separate from the title to any other dwelling unit (such as single family residences, condos or townhouses), and both of the following apply:

(A) The owner is not a REIT, a corporation, or a limited liability company in which at least one member is a corporation.

(B) The tenants have been provided written notice that the property is exempt.

(6) An owner-occupied duplex if the owner occupied a unit as the owner’s principal place of residence at the beginning of the tenancy and the owner continues in occupancy.

Vacancy Decontrol

Civil Code §1947.12 has a vacancy decontrol provision such that the rent cap does not apply to the initial rental rate for a new tenancy in which no tenant from the prior tenancy remains in possession.

Just Cause

Under new Civil Code §1946.2, when a tenant has occupied the property for 12 months, a tenancy may not be terminated without just cause (which must be stated in the notice). If additional adult tenants are added to the lease before an existing tenant has continuously and lawfully occupied the property for 24 months, then the just cause rules only apply if either of the following are satisfied:

(1) All of the tenants have occupied the property for 12 months or more.

(2) One or more tenants have occupied the property for 24 months or more.

If the landlord is terminating for a curable just cause reason, the landlord must give a notice of violation and an opportunity to cure (a Notice to Pay Rent or Quit or a Notice to Perform Covenant or Quit). If the tenant fails to cure, the tenant can then be served with a 3–Day Notice to Quit without providing an opportunity to cure.

What is Just Cause?

“Just cause” can be either “at-fault” or “no fault.”

At-fault just cause is any of the following:

(A) Default in the payment of rent.

(B) A breach of a material term of the lease.

(D) Waste.

(E) The tenant had a written lease that terminated on or after January 1, 2020, and after a written request or demand from the owner, the tenant refused to sign a written lease extension or renewal.

(F) Criminal activity.

(G) Assigning or subletting in violation of the lease.

(H) The tenant’s refusal to allow the owner to enter the property.

(I) Using the premises for an unlawful purpose.

(J) The employee, agent, or licensee’s failure to vacate after termination.

(K) When the tenant fails to deliver possession after the tenant has given their written notice to vacate or makes a written offer to surrender that is accepted in writing by the landlord.

(2) No-fault just cause is any of the following:

(A) Intent to occupy the property by the owner or their spouse, domestic partner, children, grandchildren, parents or grandparent. Leases entered on or after July 1, 2020 must specifically allow this.

(B) Withdrawal of the property from the rental market.

(i) A governmental or court order relating to habitability that necessitates vacating the property.

(ii) A governmental or court order to vacate the property.

(iii) A local ordinance that necessitates vacating the property.

(D) Intent to demolish or to substantially remodel the residential property. “Substantially remodel” means the replacement or substantial modification of any structural, electrical, plumbing, or mechanical system requiring a governmental permit, or abatement of hazardous materials (including lead-based paint, mold, or asbestos), that cannot be reasonably accomplished safely with the tenant in place and that requires the tenant to vacate for at least 30 days. Cosmetic improvements alone, including painting, decorating, and minor repairs that can be performed safely without having the property vacated, do not qualify as substantial remodeling.

Relocation Assistant Payments to Tenants Terminated for “No Fault” Just Cause Reasons

For no-fault just cause terminations, the owner must provide tenant relocation assistance (regardless of the tenant’s income) by paying the tenant one month’s rent, or by waiving in writing the tenant’s obligation to pay the last month’s rent before it becomes due.

If it is determined by a government agency or court that the tenant is at fault for the condition or conditions triggering the order or need to vacate, the tenant is not entitled to relocation assistance.

Just Cause Exceptions

The just cause requirements do not apply to:

(1) Transient and tourist hotel occupancy.

(2) Housing accommodations in a nonprofit hospital, religious facility, extended care facility, licensed residential care facility for the elderly, or an adult residential facility.

(3) School dormitories.

(4) Housing accommodations in which the tenant and owner share bathroom or kitchen facilities and the owner who maintains their principal residence at the property.

(5) Single-family owner-occupied residences, including a residence in which the owner-occupant rents or leases no more than two units or bedrooms, including an accessory dwelling unit (i.e. a “granny flat”).

(6) A duplex in which the owner occupied one of the units as the owner’s principal place of residence.

(7) Housing issued a certificate of occupancy within the previous 15 years.

(8) Property that is alienable separate from the title to any other dwelling unit, and both of the following apply:

(A) The owner is not a REIT, a corporation, or a limited liability company in which at least one member is a corporation.

(B) The tenants must be provided written notice that the residential property is exempt from this section.

(9) Housing restricted by deed, regulatory restriction contained in an agreement with a government agency, or other recorded document as affordable housing.

Civil Code §1946.2 also does not apply to property subject to a local just cause ordinance if enacted on or before September 1, 2019. For any ordinance enacted after September 1, 2019, the ordinance which is “more protective” applies.

TO DO LIST for Landlords, Property Managers and Their Attorneys

Add lease language:
- using statutory language, disclose that AB 1482 applies (by 7/1/2020 for new and renewal leases, and/or a notice by 8/1/2020 for existing tenancies)
- specific disclosure if AB 1482 doesn’t apply if the unit is separately alienable, and the owner is not a: (1) a real estate investment trust; (2) a corporation; or (3) a limited liability company in which at least one member is a corporation) by notice before termination for existing tenancies, and in a lease or lease addendum by 7/1/2020 for new and renewal leases)
- if the landlord wishes to reserve the right to terminate for occupancy by an owner or relative (for leases entered into on or after 7/1/2020)
Make changes to termination notices, if required, including a new notice to quit form for use after expiration of curable notice.
New notice of tenant’s right to relocation assistance/waiver of last month’s rent.
Calculate when rent can be increased, and calendar those dates. Landlords who do not utilize available increases in a timely manner cannot “make up” those increases later.
Calculate maximum rents using the regional CPI.
If AB 1482 applies, consider strategies to terminate tenancies of problematic tenants before the tenant has been in possession for a year (when the just cause provisions of Civil Code §1947.12 become effective). e.g. 9 month lease terms or month-to-month tenancies, removing auto-renewal provisions, and calendaring dates to consider sending termination notices for problem tenants.

Steven Mehlmanand Jaime Sternberg

Steven Mehlman is a Partner with the Law offices of Kimball, Tirey & St. John LLP, where he manages the Business Real Estate Group for Northern California. Steve has been in practice for over 35 years and has successfully represented business clients and individuals in a wide variety of civil lawsuits in both the California state and federal courts, as well as arbitration. His practice emphasizes real estate and business matters, and in addition to litigation, he drafts all types of contracts and transactional documents in his practice areas, drawing on his litigation experience. Steve frequently represents commercial investors/owners and rental housing owners and managers (landlords) in landlord tenant disputes. He also has substantial experience involving neighbor disputes, including property line and easement disputes, harassment injunction / work place violence restraining order proceedings, disputes between property owners and disputes between business owners. Steve also has substantial experience in land use and zoning issues, both as an attorney and as a past planning commissioner for Contra Costa County and the City of Walnut Creek.

Jamie Sternberg has been the Managing Partner of Kimball, Tirey and St. John LLP’s Business Real Estate Group since 1999. Her areas of practice include, Real Estate and Business Litigation and Transactions, Department of Real Estate Compliance, Commercial Lease Negotiations, Property Disputes and Purchase Sale Transactions. Ms. Sternberg is the author of the KTS Lease, “Commercial Preventive Law Handbook” as well as numerous articles and legal alerts on the topic of real estate law.