New California Rent Cap Law
Here’s what tenants and landlords need to know about it.
This new law restricts residential rent increases to 5% plus inflation, with a hard cap at 10%. That 5% is based on the lowest gross rent charged during the previous 12-month period.
While landlords can still increase the rent this year, any rent increases made since March 15, 2019 will count towards the new maximum rent cap. If landlords go above the permissible rent cap, they will have to roll it back, effective January 1, 2020.
What landlords need to do now
Provide tenants with a “Rent Cap and Just Cause Addendum” (Form RCJC) by January 1, 2020.
If a tenant is month-to-month, incorporate an addendum into their rental agreement using “Notice of Change in Terms of Tenancy” (Form CTT) by January 1, 2020.
Include the addendum with any new or renewed leases or rental agreements.
Exemptions to the rent cap include single-family properties and condos where the owner is not a Real Estate Investment Trust (REIT), a corporation, or an LLC where at least one member is a corporation. Notice of the exemption must be given to tenants.
Other exemptions include housing that’s been issued a certificate of occupancy within the last 15 years (new construction), owner-occupied duplexes, higher education dormitories, housing already subject to a more restrictive local rent control ordinance, and low, very low or moderate-income housing.
Inflation
Inflation is based on the Consumer Price Index. If the regional index is not available, then the California Consumer Price Index for All Urban Consumers applies.
Evictions
The new law also restricts evictions. There are 15 “just cause” reasons for evictions, divided into two categories—”at fault” and “no fault.”
“At fault” terminations
“At fault” terminations mean a tenant has breached their lease and do not require a landlord to pay for relocation assistance.
Reasons include:
Non-payment of rent
Continuing to breach a material term in the lease after receiving notice to correct the violation
Nuisance
Using the property for an unlawful purpose
Criminal activity on the property or in common areas, or criminal threats against the owner or agent
Refusal to allow entry
Damage to the property
Assigning or subletting the property in violation of lease
If lease terminates on January 1, 2020 or later and tenant to execute a written extension or renewal for an additional term of similar duration and provisions that is in line with just cause law or any other law
Failure of an employee or agent to vacate after termination of employment
When a tenant fails to vacate after providing owner with their own termination notice or agreed upon surrender
“No fault” evictions
“No fault” evictions mean the tenant has not breached the lease and will require the landlord must pay the tenant one month’s rent in relocation assistance.
Reasons include:
Owner occupancy
Withdrawal from the rental market
Substantial remodeling or demolition
Compliance with a government order to vacate
If a property is exempt from just cause, then an eviction can be based on no cause or any cause. The cause does not need to be stated in the notice and a standard 30- or 60- day notice may be used to terminate the tenancy.
Disclaimer: The information contained herein is believed to be accurate as of December 5, 2020. It is intended to be a brief educational summary and is not intended as a substitute for individual legal advice. Advice in specific situations may differ depending upon a wide variety of factors. For more information about your specific situation please contact a licensed real estate attorney.