A.D. Cantelmo Property Management
Our Business is Property Management Orange County California
Unnecessary Confusion
On October 8, 2019 The Governor of California
signed Assembly Bill 1482 into Law. There are Hundreds of bills that are signed
into Law every year, but most go without notice. This Law has been noticed by
many.
The first people to get excited about the new
law, may want to think twice about it. Tenants may be thinking that they are
going to be protected from what they may think of as predatory rent increases,
but is that true.
This new law has two parts to it. The first
part is a “Rent Cap” and the second is “Just Cause”.
Rent Cap
What does the “Rent Cap” part of the Law
mean? The Law Caps rent increases in California to 5% plus inflation per year,
and it is retroactive from March 15 2019, even though the Law does not
technically take effect until January 1, 2020.
Just Cause
The next part of the Law is “Just Cause”. The
“Just Cause” part of the law has to do with Evictions. The Law now is that once
a Tenants Lease is up, or if a Tenant is on a Month to Month Rental Agreement,
a Landlord can for no reason remove the Tenant from the property. So, for
example, a Tenant has Been in a property for a year and wants to remain. The
Tenant has paid rent on time, and has been a very good Tenant. The Landlord,
has an “Aunt Harriet” who needs a place to live, so the Landlord decides to
allow “Aunt Harriet” to move into the rental property. The Landlord notifies
the Tenant that they need to Vacate the property. The Tenant must leave.
The New Law does not allow for an eviction
without “Just Cause”. This means that is if “Aunt Harriet” want to move into the
property, the Landlord cannot remove the Tenant from the property if the tenant
is in good standing. If the Landlord really wants “Aunt Harriet” to move into
the property, then the Landlord must pay the Tenant relocation compensation,
which is equal to one month’s rent.
What is the Confusion
This is how I started the article
“The
first people to get excited about the new law, may want to think twice about
it. Tenants may be thinking that they are going to be protected from what they
may think of as predatory rent increases, but is that true”?
I ask the question, because any time
government steps in to help, if usually does just the opposite. You now may
ask, “How will this hurt Tenants”?
First, let’s talk about the confusion about
the Law.
Many Landlords really don’t understand how
the law will Affect them, so there may be an over reaction.
Exemptions
The interesting part of the Law, is that most
Single Family homes and Condo’s are exempt from the law unless they are owned
by corporations, REITs, or LLC’s that are owned by corporations. This means
that many of the Landlords in California, are not Affected by the Law, but they
are still reacting by raising the rent, or thinking of raising the rent. I have
had clients who had no thought of raising the rent before the Law, are now
ready to raise the rent, even when I explain to them that they are exempt from
the Law.
Long Term Ramifications
There are going to be long term ramification
to this Law and many Tenants will not be happy about it. Since the Law Caps the
rent increase every year to 5% plus inflation, many if not most Landlords are
going to raise the rent the maximum allowed, just to be safe. Many Landlords,
when they do raise the rent, try and keep it manageable, so they keep good
Tenants. Let me give you an example of how Tenants are going to be hurt.
If the rent on a property is $3000.00 per
month. In the past, when the lease is up, The Landlord may increase the rent $100
and most of the time, the Tenant is able to absorb that increase. That increase
is a little over 3%. Now, if the Landlord raises the rent to the maximum cap of
the new Law, 5% plus inflation, let’s say that comes to 7%, the rent increase
will be $210.00. That increase is a big difference. Believe me, this is going
to happen.
As far as the Just cause eviction, most
Landlords rarely evict good Tenant, so this part of the Law will have little effect
on most of my clients and since most of my clients are exempt, it will have no
effect.
Conclusion
This is another example of trying to fix
things for a few and in the end, hurt the many. I understand that renting in
California is very expensive, but trying to get in the way of the natural
market, may make some people feel good, but these kinds of Laws rarely work the
way they are intended. We are already seeing in Los Angeles, they are passing
emergency measures to prohibit Landlord’s from taking action before the law takes
effect. Believe me, this will not be the end of it and Many Landlords are going
to do what they have to do, to protect themselves and their investment before
the next shoe falls.
If you have any questions, Please feel free to contact me.
Tony Cantelmo
714-313-7413
A.D. Cantelmo Property Management
Our Business is Property Management Orange County California