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Looking for an summary of AB 1482? Look no further.
If you’re managing properties in California, it’s hard to avoid discussing AB 1482. This new law has probably taken center stage as you help the landlords and investors you’re working with comply with it’s requirements.
We asked Keith Becker (DRE License #01201067) of DeDe’s Rentals & Property Management to help us understand what’s happening in California with rent control, and what other markets and states are thinking as we implement new standards here.
Keith is heavily involved in the National Association of Residential Property Managers (NARPM) and extremely active in property management legislation.
When it comes to managing homes in California, Keith gets around. So, his insights are worth listening to.
Keith Becker: A Brief Bio
We’d be very surprised if you don’t know Keith already, but in case you don’t, here are a few things you should know about him:
- Keith has been managing residential rental homes for 25 years.
- DeDe’s Rentals in Santa Rosa has been around for nearly 50 years.
- Keith has been the president of the California state chapter of NARPM.
- He’s been NARPM’s regional vice president for Hawaii and California.
- Presently, Keith is on the NARPM board for the North Bay area and he’s also on the board of the California Apartment Association.
Keith still loves when he does, and when he’s not running DeDe’s, he spends his free time focused on property management. He loves this industry, and he follows everything that happens in it.
A Summary of AB 1482 and Getting Good Advice
AB 1482 is also known as the California Tenant Protection Act. If you own a property management company – even outside of California – you need to know what this law is and why it’s considered the minimum standard right now.
This is rent control. There are two things to think about right away:
We are discussing some heavily legal information today. Like most of you paying attention to this podcast, Keith is a property manager not an attorney. A lot of information surrounding this topic has legal implications, especially when you execute the laws.
If you have a legal question, talk to an attorney who specializes in landlord-tenant law. It’s complicated, and we expect it will only get more complicated.
Politics has shaped much of what’s going on in California and with rent control. We aren’t going to get into politics. We’re talking today about process. This has already happened. While there’s always a threat that Costa Hawkins, one of the primary rental housing laws in California, will be overturned in the future, we’re not dealing with that today. We’re dealing with the current law and what it means for you, the properties you manage, and the tenants you work with.
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Baseline Rent Control: California State Law and Local Laws
This statewide rent control law is the baseline for any rent control ordinances throughout California. What you need to know when we’re balancing the state law against rent control laws in cities throughout California is that whichever law is more onerous to the owner and more favorable to the tenants will always apply.
Some cities already have rent control laws in place that are more arduous than AB 1482. Their stricter laws apply.
For example, let’s look at Richmond.
In Richmond, landlords cannot raise the rent on their tenants any more than the Consumer Price Index, or CPI. The new law, AB 1482, says you cannot raise the rent more than five percent plus the CPI.
This does not mean that Richmond owners can now raise the rent five percent plus CPI. The Richmond law is more onerous for landlords, so that law applies.
But – the rent control law in Richmond only applies to properties that were built before 1995.
With AB 1482, the only properties that are exempt are those have been built in the last 15 years. So, you may have a property that was exempt from the Richmond local law but is now pulled in through this statewide law.
It’s very much a situation of “if this, then that.”
You must know AB 1482 but you also need to know your local laws. If you have a portfolio of 100 properties, you’ll need to look at each property individually and determine how the law applies.
Exemptions to AB 1482
There are a few automatic exemptions to AB 1482:
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Commercial properties
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Tourist or hotel accommodations
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Hospitals
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Religious facilities
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Extended care or residential care facilities
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Dorms owned and operated by colleges or schools
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Deed restricted low or moderate income and affordable housing
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Housing already subject to stricter rent control laws.
These properties are automatically, by statute, excluded from AB 1482.
If any of your properties fall under those categories, set them aside. But, these are probably not what you manage.
Next in the exclusion algorithm is the age of your property.
The law is written with an expiration date of 2030, so it’s only going to last 10 years. There were some concerns that no one would build in California with this law hanging around. So, the bill includes an exclusion for the first 15 years of a property’s life.
The rent control law does not apply to any residence that was constructed in the last 15 years. It doesn’t matter what type of property it is or who owns it. Buildings younger than 15 are exempt.
Costa Hawkins said rent control only applies to buildings constructed before 1995. But now, AB 1482 says it applies to buildings older than 15 years, and the exclusion has a rolling date. The problems get complicated when owners cannot establish what their property’s starting date is.
According to the law, it depends on the date the initial certificate of occupancy was registered. You’ll have to pull the assessment and find out when your property was granted the certificate of occupancy. This will tell you if and when you’re subject to the rent control in AB 1482.
If you own a property that was built in 2010, it’s exempt now, but it won’t be in 2025.
Exemption Examples for the California Tenant Protection Act
Writing contracts will only get more complicated, and when we run into situations that aren’t clear, those questions are going to be answered by litigation.
Let’s presume your property has been around for more than 15 years. The next question in the exemption algorithm is this: is your property a single-family home or a multi-family property? Condos are treated as single-family.
If you have a single-family property, the next question is – who owns it? If it’s owned by a REIT or a corporation or an LLC in which one of the members is a corporation, the rent control law will apply to you. If you’re an independent landlord or an individual or even a family trust, then your single-family property is exempt.
Why would that matter?
Well, when the market collapsed in 2008, giant companies like Homes for America and Blue Mountain and other large corporations swept through California and bought up a lot of single-family homes for pennies on the dollar. These investment firms now own a lot of rental real estate, and they’re making big money. So, AB 1482 was written to say that those corporations and investment firms don’t get the benefit of exemption.
But, individual landlords renting out a property can benefit from the single-family home exemption.
If you’re not renting out a single-family residence, your next question is – does the owner reside in one of the units in a duplex or a multi-family property? If the answer is yes, that property is also exempt from AB 1482. This applies to duplexes and main homes with another unit in the back.
Everything that remains is non-exempt.
AB1482 Rent Control Exemption Questions:
Navigating through the intricate exemption guidelines can be a lot of work. To help you with this process, Keith created the questionnaire below that should make this more manageable.
1.) Is your property classified as a long-term residential (domicile) rental?
Examples of properties that do NOT classify as domiciles: commercial property; transient and tourist hotel rooms; hospitals; religious facilities; care homes; college or boarding school dormitories.
If answer to #1 is “no,” the unit is exempt by statute.
If YES, continue to question 2.
2.) Has it been significantly LESS THAN fifteen years since the first “certificate of occupancy” was granted for the building, no matter how many units it may include or how ownership is held?
If answer to #2 is “yes”, property is statutorily exempt ONLY through the fifteenth anniversary of certificate of occupancy.
If answer is “no,” continue to question 3. (See NOTE below.)
3.) Is the building a single-family residence or a condominium (“separately alienable unit”)?
NOTE: The property is identified as a duplex, whether it’s a single-family residence (SFR) with an in-law, two separate units of somewhat similar size, or an SFR with an Accessory Dwelling Unit (ADU) or junior ADU on premises.
If answer to #3 is “yes,” continue to question 4.
If “no,” continue to question 5.
4.) Is the single-family residence or condo owned by a corporation, an REIT, or an LLC where one or more members of the LLC is a corporation?
If answer to #4 is “yes,” PROPERTY IS NOT EXEMPT.
If answer is “no,” continue to ADVISORY below.
5.) Does the property have three (3) or more residential units on one parcel?
If answer to #5 is “yes,” PROPERTY IS NOT EXEMPT.
If answer is “no, continue to question 6.
6.) Does legal owner maintain one of the two units as their primary residence, did they do so at the commencement of the other unit’s tenancy, and does the owner maintain their primary residence at this location throughout the entirety of tenant’s residency?
NOTE: The property is identified as a duplex, whether it’s an SFR with an in-law, two separate units of somewhat similar size, or an SFR with an ADU or junior ADU on premises.
If answer to ANY of these questions is “no,” PROPERTY IS NOT EXEMPT.
If answer is yes, continue to ADVISORY below.
Specific Lease Agreement Verbiage Protects Your Exemption
Did you know that you can lose your exemption? Yes, you read that right.
According to AB 1482, properties that are exempt must be identified as such. You must notify your resident. If you have someone new moving in, put that exemption in the new lease. If you have an existing resident, the law indicates the exact verbiage you need to provide, and it gets so specific that it instructs you to use 12-point font in the notice.
Required Disclosure for AB 1482 Exempt Properties:
ADVISORY: Even for properties that are nominally exempt, the Housing Provider can LOSE that exemption by lack of action. To protect exemption, Lessor must provide to Residents the following written disclosure, in no less than 12-point type:
“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 (d)(5) and 1946.2 (e)(8) 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.”
All new EXEMPT rental contracts and renewals occurring on or after July 1, 2020 MUST include this disclosure. For tenancies existent BEFORE July 1, 2020, this disclosure must be provided as a written addendum no later than August 1, 2020.
IMPORTANT NOTE: Question #2 above asks whether certificate of occupancy was “significantly less” than fifteen years. This is likely to be an immediate issue for properties constructed in the mid-2000s. Nominally, the age-related exemption ceases AS OF THE EXACT ANNIVERSARY of the date of permit sign off.
Accordingly, Housing Providers will need to be able to obtain that information, even if it’s not presently easily available. City Building and Permit Departments will likely need to make this information available with a reasonable degree of accuracy. During the first 14 years or so, the “non-exempt” disclosure is not applicable – but potentially, neither is the EXEMPT notice itself, since the very last portion of the disclosure MIGHT NOT BE ACCURATE: “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.”
Once your property reaches the fifteen year mark – or anywhere close to it – restart the questionnaire at #3 above.
How to Keep Your AB 1482 Exemption
To stay exempt, you have to put the exemption in your lease.
The tenant has to sign to acknowledge having received it or you can document that it was provided to them. Keith and DeDe’s Rentals handles it the same way they handle the service of a Three Day Notice. They mail it and tape it to the door with a proof of service so everything’s documented.
If you don’t provide this notice, your tenant can come back in eight years and say they never got that disclosure. If you can’t provide proof that you made the disclosure, every rent increase since then can theoretically be scrutinized and limited.
This is the one warning Keith wants to broadcast far and wide. Just because a property is exempt, doesn’t mean no action is required. Make sure you’re sending out those disclosures, and make sure you can prove you sent them. Also, the owners you work with may not be knowledgeable about this matter, and so it’s important to educate them on what is happening and where their property stands.
Understanding the Look Back Implications
Most of us knew this was coming, and some owners might have tried making a large rental increase before the law went into effect.
If an owner increased rent by 30 percent before AB 1482 went into effect, there’s a “look back” provision that requires the owner to comply.
The look back is March 15, 2019. If you increased rent by more than what the law currently allows on or after March 15, you need to dial back the increase so that it’s in compliance with current rent control law. You don’t have to give the money back, but you do have to reduce the increase to the allowable levels.
Do not let your owners ignore this.
Be honest and ethical and let them know that if they try to ignore any part of this law, their lives are only going to become more difficult.
Align yourself with the NARPM code of ethics and standards of professionalism. These standards are pretty clear about being ruthless with clients and owners who misbehave.
What AB 1482 Means for Other States
Owners and property managers in Georgia and New Jersey and Kansas are watching California carefully and getting nervous about what’s possible in their own markets. California is not unique. Big tenant protections are in place or moving towards law in states like Washington, Oregon, Colorado, and even Florida.
Some states have constitutions that emphatically void any type of rent control laws. In 23 states, rent control is unconstitutional. So owners in those states are feeling pretty relieved. But, what we do in California often trickles outward to the rest of the country. There’s a lot of dialogue in other states and tenant advocacy groups have been more and more energized. Even in states where rent control is voided, advocacy groups are examining what they can do to make renting out a home harder for landlords and easier for tenants.
These regulations are bad for owners and ultimately bad for tenants. In 2019, the average rental increase in California was 3 percent. Now, it will be 8 percent when you include CPI. So, tenants will pay the price for bad laws as much as landlords.
The one shining light here is that this makes rental property owners less capable of managing their own homes. A good property management company can really stand out as an important ally and a necessary service.
What You Can Do To Affect Rent Control Laws
It’s a good time to remind property managers that you have to get involved. These laws happen at a state, county, and city level. The California Apartment Association is very active politically. Make sure you’re a member. At NARPM, there’s a lot of talk about how to be politically active and energized and motivated to be able to influence the decisions that are being made locally and on a state level.
NARPM is good at many things, but as fee-based single-family residence property managers, you have unique priorities and constituencies. You’ll need to be much more politically active within NARPM to be able to create the influence you need.
One of the challenges of being a property manager is that it can feel very lonely.
But, there’s a whole tribe of property managers out there who understand the frustrations and the challenges of dealing with these complex situations. The industry is stronger when property managers are reaching out to one another.
This has been a very basic summary of AB 1482, and you can expect us to do a deeper dive in the future with Keith. We have a lot more to talk about.
As Keith mentioned at the start of our discussion, he is not an attorney. These are complicated issues we are dealing with, so he strongly advises that property managers reach out to lawyers who specialize in Landlord-Tenant Law. He says that if Prop 10 2.0 comes to pass next November, it will only get worse.
As a final note, Keith says, “Whenever you have the opportunity to do so, VOTE. And tell your owner-clients to do the same.”
While you wait for our deeper dive into this topic with Keith, check out some of his own videos on AB 1482:
- Property Age Exemptions
- Rent Caps and Vacancy Decontrol
- Single Family Home Exemptions
- No Fault Just Cause Notices & Tenant
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