The ABCs of AB 1482
Learn how AB 1482 will affect banked increases and single family homes.
Q. I have not raised the rent in a rent-controlled unit for 10 years. I’d been planning on raising the rent 15% in 2020, which includes banked increases. Is this allowed under AB 1482? Are banked increases now limited?
A. As many SFAA readers will know, AB 1482 is Assembly-member David Chiu’s bill that Governor Newsom signed into law to enact California’s first statewide rent and eviction controls. As of January 1, 2020, rent increases are capped at the lesser of ten percent or five percent plus the percentage change in the cost of living. (This is generous compared to San Francisco’s annual allowable increase, which only allows 60% of the percentage change in the cost of living ever year.)
AB 1482 is situated within an existing scheme of long-established local rent control laws and statewide decontrol (the Costa-Hawkins Rental Housing Act). Rent boards and courts have been interpreting these laws—and how they interact with each other—for decades, but AB 1482 will apply throughout California, in cities that never had rent control ordinances, and (in places like San Francisco) to rental units that were previously exempt from local rent control ordinances. Even seasoned practitioners struggle to predict how AB 1482 will work in practice.
That said, your situation is actually straightforward. Statewide price controls will fill in the empty space in California where tenancies had no price controls, but they do not supersede existing rent control regimes. AB 1482 specifically does not apply its price controls to housing subject to local rent control regulations, provided that (1) they are consistent with Costa-Hawkins, and (2) they are stricter than state law. If your unit is subject to the San Francisco Rent Ordinance, this exemption will apply, and AB 1482 will not inhibit your banked increase.
Going forward, it is generally a good idea to impose your annual allowable increases once a year. You correctly estimated the total of ten years’ worth of allowable rent increases (which would be 15.30% through 2020). But if you had increased the rent every 12 months (on the “anniversary date”) instead of banking, you would have raised the rental rate faster, by compounding the individual increases.
Q. How will family-owned, single family homes in San Francisco be affected by AB 1482?
A. The Tenant Protection Act of 2019 marks a new era of rent and eviction control in California, and it goes into effect on January 1, 2020. The Act, or TPA, does not replace any of the rent laws in San Francisco. Instead, it extends rent controls into areas that were previously exempt by local rent laws, including some single family homes.
For instance, before the TPA, all single-family homes were exempt from rent control under the Costa-Hawkins Act. Costa-Hawkins is still on the books, but the TPA narrows its application. Now, whether a single family home is exempt depends on who owns the property. If a real estate investment trust, corporation, or limited liability company with a corporation as a member owns the single family home, then that home is not exempt from the TPA.
If the home is held by owners individually, or in a trust, then the exemption can continue, but only if the tenant receives a written disclaimer, in 12-point type, stating:
“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 (c)(5) and 1946.2 (e)(7) 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.”
This disclaimer may be given to the tenant as a stand-alone notice before July 1, 2020. After July 1, 2020, all new leases must have this disclaimer in the lease, or the property will not be exempt. This means that the familiar Costa-Hawkins exemption for single family homes will depend not only on the physical structure of the property, but also how it is rented to the tenant. Single family homes rented with oral agreements after July 1, 2020 will therefore not have exemption from TPA rent control.
If a property is covered by TPA rent control, then rent increases are limited to not more than 5% plus CPI, or 10%, whichever is lower, within any 12 month period. So if the CPI was 3.5%, rent could not rise more than 8.5% in a 12-month period. There also cannot be more than two individual increases within that 12-month period, if the same tenant is in residence for that time. This limitation does not apply to new tenancies in vacant units, consistent with the familiar rule in Costa-Hawkins. The TPA also prohibits subleases, which (even in aggregate) rent for more than the master lease. However, this does not create a cause of action by landlords to evict or increase rents on master tenants who gouge their subtenants.
To summarize, the exemption for family-owned, single-family homes is no longer automatic. It also requires taking the affirmative step of giving the written notice exactly as required by law, and soon that notice must be embedded into the lease as part of a new tenancy. Landlords can protect themselves now by proactively changing the terms of their rental agreements to include the statutory notice printed above, and consult with an attorney to help ensure that your single family home properties will maintain their exemption under the Tenant Protection Act.
Q. Residents have moved out, but they left behind a full apartment’s worth of furniture. They are not responding to my emails or phone calls. What are my options?
A. The answer to this question depends in large part on whether the rental unit is a residential or commercial unit. If the unit is a residential unit, the landlord’s options would be governed by Civil Code Sections 1951.3, 1987 and 1988. Taken together, these sections provide that when a tenant has abandoned personal property (i.e., furniture, papers, personal effects, etc.) at the rental unit, the landlord must post and mail a notice describing the personal property left behind by the tenant. The notice is called a Notice of Belief of Abandonment or a Notice of Right to Reclaim Abandoned Property. The notice should affix pictures of the personal property in question and accurately list the items.
If the notice is personally served, the tenant has 15 days to respond to the notice and reclaim the abandoned property. If the notice is mailed, the tenant has 18 days after the notice is deposited in the mail to respond.
If the tenant responds within the above referenced period, the landlord must return the tenant’s personal property to the tenant. If the tenant fails to respond by the above referenced period and the landlord “reasonably believes” the personal property is worth more than $700.00, the landlord must sell the property at a public sale by competitive bidding. However, if the landlord reasonably believes the property is worth less than $700, the landlord may retain the property for their personal use or dispose of it in any manner.
For commercial real property, the process is fairly similar, but is governed by Civil Code Section 1993. The key difference is that the landlord cannot retain for his own use or dispose of a tenant’s personal property after the above referenced period unless he reasonably believes the personal property is worth less than $2,500.00—a much higher threshold than the $700.00 figure for residential property.
Landlords should be careful to follow the letter of the law with regard to the disposition of abandoned tenant property.
The information contained in this article is general in nature. Consult the advice of an attorney for any specific problem. Justin A. Goodman is with Zacks, Freedman & Patterson, P.C. and can be reached at 415-956-8100. Susan Breed is with The Offices of Denise A. Leadbetter and can be reached at 415-572-5015.