California landlords must follow specific state rules when it comes to renting to tenants, including how much you can charge as a credit check fee and security deposit, when you must hire a residential property manager, and the timeline and procedures for ending a tenancy and returning security deposits. Several federal laws also affect landlords, such as requirements to disclose lead-based paint hazards.
And if you own rental property in one of the sixteen California communities with rent control, you'll need to comply with local ordinances that limit how much rent a landlord may charge and set other restrictions.
Failure to meet your legal responsibilities can lead to costly disputes with tenants and hefty financial penalties—for example, if you illegally discriminate when choosing tenants.
Here are ten ways to stay out of legal trouble and run a successful property management business in California.
Before you advertise a vacant apartment, it is crucial that you understand fair housing laws and what you can say and do when selecting tenants. This includes how you advertise a rental, the questions you ask on a rental application or when interviewing potential tenants, and how you deal with tenants who rent from you. Failure to know and follow the law may result in costly discrimination complaints and lawsuits.
While California landlords are legally free to reject applicants—based on a bad credit history, negative references, from previous landlords, past behavior, such as consistently paying rent late, or other factors that make them a bad risk—this doesn't mean that anything goes. You are not free to discriminate against prospective tenants based on their race, religion, national origin, sex, familial status (such as having children under age 18) or physical or mental disability. These are “protected categories” under the federal Fair Housing Act of 1968, as amended (42 U.S. Code § § 3601-3619 and 3631). There are a few exemptions to federal anti-discrimination rules, including owner-occupied buildings with four or fewer units, and single-family houses, as long as the owner owns no more than three rental houses at a time.
State law in California also prohibits discrimination on the basis of a person's sexual orientation, gender identity, or receipt of public assistance. It is also illegal in California to discriminate against someone because of their personal characteristics or traits.
The HUD website provides extensive details on fair housing laws. Be sure to also check with California's state fair housing agency for additional laws prohibiting discrimination or limiting landlord exemptions. See links below to these resources.
All landlords want their tenants to pay rent on time and without hassle. If you need to raise the rent or evict a tenant who hasn't paid rent, you'll want to be sure you comply with the specific rules and procedures in California. State law regulates several rent-related issues, such as how much you can charge for a bounced check ($25 for the first bounced check and $35 for subsequent ones), and how much notice (three days) you must give a tenant who has not paid rent to pay up or move. If you own rental property in San Francisco, Berkeley, Los Angeles, or one of the 16 California cities with rent control, be sure to check local rules. For details on state rent rules, see California Late Fees, Termination for Nonpayment of Rent, and Other Rent Rules.
Security deposits are among the biggest sources of dispute between landlords and tenants. To avoid problems, be sure you know California rules, such as the deposit limit (two to three months' rent, depending on whether or not the rental property is furnished, plus an additional one-half month's rent if the tenant has a waterbed) and any local interest requirements. Using a landlord-tenant checklist when a tenant moves in (and moves out of) a rental, and sending a written security deposit itemization when the tenant leaves will go a long way in avoiding disputes.
You are legally required to keep rental premises livable in California, under a legal doctrine called the “implied warranty of habitability.” If you don't take care of important repairs, such as a broken heater, tenants in California may have several options, including the right to withhold rent or “repair and deduct.”
The California Landlord's Law Book: Rights & Responsibilities, by David Brown, Janet Portman, and Ralph Warner (Nolo) includes extensive advice on establishing a repair and maintenance system that will help California landlords prevent problems, such as tenant rent withholding or injuries to tenants due to defective conditions in the rental.
The rental agreement or lease that you and your tenant sign sets out the contractual basis of your relationship with the tenant, and is full of crucial business details, such as how long the tenant can occupy the rental and the amount of the rent. Taken together with federal, state, and local landlord-tenant laws, your lease or rental agreement sets out all the legal rules you and your tenant must follow.
Problems arise when landlords include illegal clauses in the lease, such as a waiver of landlord responsibility to keep premises habitable, or when landlords fail to make legally required disclosures (discussed in the next section). And even if it's not required that you cover a particular issue in your lease, such as how when and how you can enter rental property, you can avoid all kinds of disputes by using an effective and legal lease and rental agreement that clearly informs tenants of their responsibilities and rights.
Under California law, landlords must make certain disclosures to tenants (usually in the lease or rental agreement), such as whether or not the rental property poses a mold threat and whether a tenant is paying for others' utilities. Landlords must also comply with required federal disclosures regarding lead-based paint on the property, or face hefty financial penalties.
California landlords must provide 24 hours' notice before entering rental property to make repairs or show the property to prospective tenants (you must give 48 hours for an initial move-out inspection). To avoid problems, include a lease or rental agreement clause that complies with the law and lets the tenant know your right of entry; also, keep written records of your requests to enter rental units.
It is illegal to retaliate in California —for example, by attempting to raise the rent or evict a tenant for complaining about an unsafe living condition. To avoid problems, or counter false retaliation claims, establish a good paper trail to document how you handle repairs and other important facts of your relationship with your tenant.
State laws specify when and how a landlord may terminate a tenancy. Failure to follow the legal rules may result in delays (sometimes extensive) in terminating a tenancy. For example, California laws are very specific as to the amount (three days) and type of termination notice landlords must give tenants who have engaged in illegal activity on rental premises. See State Laws on Unconditional Quit Terminations and State Laws on Termination for Violation of Lease for more information on these types of termination notices in California.
Be sure to check out government agencies, such as the U.S. Department of Housing and Urban Development (HUD) and the California Department of Fair Employment and Housing which provide useful legal information and publications on their websites. You'll also find helpful guides to tenant rights and landlord-tenant law on the website of the California Department of Consumer Affairs.
Finally, if you have legal questions about your rental unit, you should consult with an experienced landlord-tenant attorney in California.