Most landlords in Orange County and the surrounding Southern California communities are unfamiliar with rent control, as only a handful of municipalities have enacted such measures. It’s natural to assume all the benefit enures to the tenant, because, in fact, tenant protection regarding rent increase and evictions are the main impetuses behind the legislation. However, some landlords have found that despite less flexibility in maintaining rent at what would otherwise be market levels, tenants soon realize rent control units are to their advantage. Consequently, they become better tenants for fear of losing that protected status. How this will play out with more universal protection will begin to be unveiled as the Tenant Protection Act of 2019 goes into effect on January 1, 2020.
No termination without just cause
One of the main provisions of the Act provides that tenants who have lived in a rental unit for at least 12 months cannot have their lease terminated but for “just cause.” The provision applies only if all tenants have lived continuously in the unit for 12 months or if one tenant has done so continuously for 24 months. Terminations are permissible where tenants are “at fault” in terms of their obligations under the lease, such as rent payment and typically expected behavior. Additionally, “no fault” causes are permissible, such as the landlord’s intent to occupy the unit or withdraw it as a rental unit.
Limitation on rent increase
Although the Act does not address the issue of base rent for new tenancies, it does limit the amount a landlord can increase rent during a 12 month period to the increase in the Consumer Price Index for that region plus 5% to a maximum increase of 10% of the monthly rent. For this provision, the law is retroactive to March 1, 2019.
There are a variety of complete or partial exemptions, that is just cause termination or rent control but not both, based on a number of factors.
As with any new law, how this will impact the players is uncertain. However, Primior has extensive experience with residential and investment properties with a proven record of success. We understand the ever-changing landscape and know that if investors follow our best practices advice, residential real estate will continue to be an attractive investment option. Contact us today to see how it may fit in your portfolio.