Statewide Rent Control: California’s Tenant Protection Act of 2019

Most residential tenancies in California are covered by some form of rent and eviction control. The Tenant Protection Act of 2019 (Protection Act) extended a rent "cap" (on rent increases but not initial base rents) and eviction controls to anywhere in the state where rent control didn't already exist. When the law took effect on January 1, 2020, about 47 cities and counties already had strict rent control and eviction protections—many with more safeguards than the new state law. Those pre-existing local laws remain unaffected by the Protection Act, and whenever one applies the landlord must follow the rule that best protects the tenant.

This article explains the basic provisions of the Protection Act—who it affects, how it works, and how it affects both the advice and forms in current editions of The California Landlord's Law Book: Rights & Responsibilities, The California Landlord's Law Book: Evictions, and California Tenants' Rights.

Contents

• Exemptions
• Exempt From Both Rent Control and Just Cause
• Exempt From Just Cause but Not Rent Control
• Just Cause Termination Protections
• Terminations When the Tenant Is at Fault
• Terminations When the Tenant Is Not at Fault
• Rent Control Rules
• A Brave New World for California
• COVID-19 and Rent Control

Exemptions

A few types of housing are exempt from just cause limitations, rent control, or both (an exempt unit is one that isn't covered by the law). They are described below.

Exempt From Both Rent Control and Just Cause

These properties and situations are exempt from rent control and just cause restrictions.

• Tenancies where none of the tenants have resided in the unit for 12 months or more. The law does not provide any tenant protection for short term occupancies of less than one year. (Cal. Civ. Code §§ 1946.2(a) and 1947.12(a) (2022).)
• Housing that is restricted as affordable housing. (Cal. Civ. Code §§ 1946.2(e)(9) and 1947.12(d)(1) (2022).)
• Owner-occupied properties containing two separate dwelling units within a single structure. One example of this type of property is a duplex (neither unit can be an accessory dwelling unit or a junior accessory dwelling unit). The owner must have occupied one of the units as their principal residence at the beginning of the tenancy, and must continue to live there during the tenancy. (Cal. Civ. Code §§ 1946.2(e)(6) and 1947.12(d)(6) (2022).)
• Multi-family residences whose certificates of occupancy were issued 15 years or less before a particular date. (Cal. Civ. Code §§ 1946.2(e)(7) and 1947.12(d)(4) (2022).) Unfortunately, the law isn't clear when the 15 years should begin: Is it 15 years from when the Governor signed the law (in September 2019), from when the law takes effect (January 1, 2020), or from the date that a particular property received its certificate of occupancy? If the answer is the first or second possibility, then the new construction exemption will apply only until late 2034 or 2035, and new buildings constructed from 2020 and later will enjoy a smaller and smaller period of exemption. If the answer is the third option, then every new building will have 15 years of exempt status. The unofficial consensus among attorneys favors the third interpretation — that the 15 year exemption applies to every new building, exempting the building for 15 years, and expiring when the building reaches its 16th year. However, no judge or court decision has endorsed the consensus.
• Properties that are already subject to a local rent control and just cause ordinance. The rent control ordinance must be one that restricts annual increases in the rental rate to an amount less than provided for in the Protection Act. (Cal. Civ. Code § 1947.12(d)(3) (2022).) The just cause ordinance must have been either adopted on or before September 1, 2019, or if it was adopted or amended after September 1, 2019, it must provide greater tenant protections than the Protection Act provides. (Cal. Civ. Code § 1946.2(g) (2022).) Under the Protection Act, properties that had been exempt under local law may now be subject to control under the state law. This occurs where a local law exempted properties older than 15 years.
• Non-owner occupied single-family homes, condominiums, and other properties that are "separately alienable from title." In other words, a standalone property that can be sold on its own. In order to take advantage of the exemption, the title must be held by a natural person, a partnership or limited liability company owned by natural persons, or another form of natural person, such as a revocable trust for individuals. The exemption does not apply to corporately held property, such as a real estate investment trust ("REIT"), a corporation, or a limited liability company with corporation members. In order to claim the exemption, landlords must include a specific notice to the tenants in the lease of the exemption. (Cal. Civ. Code §§ 1946.2(e)(8) and 1947.12(d)(5) (2022).) The exemption's purpose is to limit the exemption to so-called "natural persons," not corporate entities. In other words, only landlords who are real people get relief from the just cause restraints.
  • EXAMPLE: An owner has made a revocable ("living") trust and has transferred title of the property to the trust. Because the owner (the trustor) is still the owner (albeit under a different legal umbrella), the property will continue to enjoy the exemption from just cause. The same will be true for a limited liability company or partnership, as long as all the members and partners are people, not entities.

• Dormitories owned and operated by schools. (Cal. Civ. Code §§ 1946.2(e)(3) and 1947.12(d)(2) (2022).)

It's unclear whether a local exemption continues to cover a rental property when the Protection Act does not exempt that property. Unfortunately, based on two provisions in the Protection Act, which we will not discuss, two possible answers (yes and no) exist for that question. We'll have to wait for a court (or the Legislature in "clean-up legislation") to provide the answer.

In view of the Protection Act's overall intent, though, we think the Provision Act should prevail over the local exemption. In those limited cases where the local law completely exempts the property, the better operating assumption is the Provision Act applies and exempts only those properties where the state law specifically provides the exemption.

Exempt From Just Cause but Not Rent Control

Some properties are exempt from just cause requirements but not rent control. This partial exemption applies to:

• Owner-occupied housing where the tenant and owner share bathroom or kitchen facilities. Must be the owner's principal residence. (Cal. Civ. Code § 1946.2 (e)(4) (2022).)
• Single-family, owner-occupied properties. This includes residences in which the owner-occupant rents no more than two units or bedrooms. The rented units or bedrooms can be accessory dwelling units or junior accessory dwelling units. (Cal. Civ. Code § 1946.2(e)(5) (2022).)

In these situations, the owner can terminate the tenancy without just cause but cannot raise the rent on the tenants more than the maximum permitted amounts.

These exemptions do not apply, however, between tenants and subtenants (where the tenant, known as the "master tenant," is also a landlord to a subtenant). The reason is because the master tenant is not an "owner" under the law.

Just Cause Termination Protections

California Civil Code Section 1946.2 limits the reasons for terminating tenancies where all tenants have occupied the unit continuously for 12 months. When the tenants have changed over time, just cause protections attach when at least one of the tenants has occupied the unit for 24 months or more.

Terminations When the Tenant Is at Fault

The main "at fault" causes are similar to traditional reasons why a landlord might terminate a tenancy: Tenants must still pay the rent, uphold their obligations under the lease, and not cause problems for the landlord or neighbors. Failure to perform the terms of the lease still constitutes cause to terminate and, if necessary, evict a tenant.

The causes listed in the Protection Act therefore include the usual suspects:

• non-payment of rent
• an uncured or incurable material breach of the lease after a written notice to correct the breach
• maintaining or committing a nuisance or waste
• criminal activity on the property or threats of harm to the landlord or agents, and
• assigning or subletting in violation of the lease.

Additional "at fault" causes involve tenant behavior that is at odds with California's laws for tenant behavior (known as "statutory causes"):

• refusal to allow a lawful entry under Civil Code Section 1954
• failing to move out after giving the landlord a notice to terminate under Code of Civil Procedure Section 1161
• using the unit for an unlawful purpose (illegal activity like drug dealing, or zoning code violations like operating a business), or
• for resident managers and maintenance or cleaning staff, failing to move out after the landlord has terminated the tenant's employment, agency, or license.

In addition to the usual just causes and the statutory ones, the Protection Act added one very important just cause of its own: refusing to sign a new lease that is similar to the old lease.

(Cal. Civ. Code § 1946.2(b)(1) (2022).)

Terminations When the Tenant Is Not at Fault

Landlords can also terminate the lease for certain "no-fault" reasons (when the tenant has done nothing wrong), but must compensate the tenant with one month's rent for relocation expenses. The compensation is one month's rent, and can be in the form of waiving the last month's rent or making a payment to the tenant. (Cal. Civ. Code § 1946.2(d) (2022).)

No–fault termination causes include:

• an owner's or relative's intent to occupy the unit; provided that the lease contains a notice of that possibility
• the landlord's planned withdrawal of the unit from the rental market
• notice from the government to vacate based on the need to address a violation of health or safety or other codes, or any other court or administrative order that requires vacating the unit, and
• the planned demolition or substantial remodeling of the unit (substantial remodeling does not include cosmetic upgrades). The landlord does not have to pay relocation compensation if the tenant's behavior caused the government to issue the abatement order.

(Cal. Civ. Code § 1946.2(b)(2) (2022).)

The Protection Act addresses one potential loophole concerning notice of the possibility of an owner (or relative) move-in. As explained above, the landlord can terminate an otherwise just-cause protected tenancy if the tenant refuses to sign a new lease that is "similar" to the old lease. But suppose the landlord's proffered new lease includes the move-in notice, as it must if the landlord wants to preserve its right to take advantage of this ground for termination? Does the notice, not present in the tenant's old lease, render the new one not "similar," thus excusing the tenant's refusal to sign it (and preventing the at-fault termination)?

The answer is no. Merely adding the move-in warning, without more additions or changes, will not make the new lease dissimilar to the old one, and the tenant who refuses to sign it can be terminated for cause.

All termination notices for no-fault terminations must include a statement of the cause that forms the basis for termination, as well as the tenant's rights to relocation assistance. If the tenant fails to vacate, the landlord can recover the relocation assistance if the landlord sues and lists that assistance as damages in an unlawful detainer action.

Rent Control Rules

California Civil Code Section 1947.12 limits annual rent increases as well as total rents charged by a master tenant (someone who rents all or part of the leased premises to a subtenant).

• For all tenancies: The statute limits increases during a 12 month period to five percent plus the increase in the consumer price index (our shorthand is "CPI plus 5") up to a maximum of 10% of the monthly rent. In addition, the landlord can impose only two increases per year to reach the maximum increase. (Cal. Civ. Code § 1947.12(a)(1) (2022).)
• For subtenancies: The rent paid by the tenant plus the rent paid by the subtenant cannot exceed the amount of rent allowable under the Protection Act (in other words, tenants can't make money by subleasing). Many leases prohibit subleasing without the landlord's consent; the Protection Act is careful to point out that the "no profiteering" rule on subleasing does not mean that tenants have a right to sublease. (Cal. Civ. Code § 1947.12(c) (2022).)

The Protection Act does not regulate the amount of rent the landlord may charge for new tenancies. The landlord can establish the initial rental rate with no maximum, and only the future increase amounts are limited.

A Brave New World for California

As happens with most legislation, negotiations with interest groups greatly affected the final version of the Protection Act (a situation almost guaranteed to introduce confusion). How the Protection Act plays out in real-life is difficult to predict, and the uncertainties will likely last over the next few years (during this time, lawmakers will probably pass clean-up legislation, and trial court decisions will be appealed and decided by appellate courts). Many challenges confront landlords, tenants, and judges. Among them are:

• Short-term rentals. How the Provision Act applies to short term tenancies is not entirely clear.
• The 15-year exemption for new construction. As explained above, the 15-year period could last only until late 2034 or 2035, or it could apply to any new building for the first 15 years after the certificate of occupancy has been granted for that building. This question will need to be answered by a court decision or clarifying legislation.
• Many lawyers and judges are new to rent control. The subject of rent control in general represents a body of law unfamiliar to most lawyers and judges (after all, if your city or county did not have rent control, you would have no reason to be familiar with those laws).
• This is new law with little guidance on the books. Novice lawyers and judges can‘t turn confidently to "rent control law" when trying to decide matters of statewide law. While existing decisions on local rent control ordinances might be helpful, no two rent control ordinances are the same, and none of them are the same as the new state law. In other words, the new state-wide law is one more entry into this crowded and disparate field. Because the Protection Act is similar to some local ordinances but different from many, we can expect the application and interpretation of the Protection Act to vary from county to county, or even judge to judge.

COVID-19 and Rent Control

For more information, see COVID-19 California Eviction Moratoriums (Bans) and Tenant Protections.