Rent Control and California Single Family Homes

Statewide Rent Control – The Tenant Protection Act of 2019

The Tenant Protection Act of 2019 (the “TPA”) applies to all rent increases occurring on or after March 15, 2019[1]. Among other things, the TPA imposes rent control on certain residential real property; it does not apply to commercial, industrial or agricultural properties. Before then, California had no statewide law limiting the amount of rent that a landlord could charge.

Under the TPA, the owners of certain residential real properties may not, over the course of any 12-month period, increase the gross rental rate for a dwelling more than five percent plus the percentage change in the cost of living , or ten percent, whichever is lower.[2] Rent increases are compared to the lowest gross rental rate charged for the dwelling at any time during the 12 months prior to the effective date of the increase.[3] The TPA does not limit residential rents for new tenancies.[4]

The TPA excludes single family homes from its rent control and other tenant protection provisions so long as the following two conditions are both met:

First, the owner of the single family home may not be a real estate investment trust, a corporation or a limited liability company in which at last one member is a corporation.[5]

Second, the tenants have been provided written notice that the home is exempt from the TPA using the following statement:

“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.”[6]

For a tenancy existing before July 1, 2020, such notice may be, but is not required to be, provided in the lease.[7] For a tenancy commenced or renewed on or after July 1, 2020, such notice must be provided in the lease.[8]

The TPA is automatically repealed as of January 1, 2030.

Costa-Hawkins’ Limitations on Local Rent Control Ordinances

Enacted in 1995, the Costa–Hawkins Rental Housing Act ("Costa–Hawkins") established state-wide vacancy decontrol in California. That is, subject to narrow exceptions, when a tenant vacates a residential rental unit, local rent control ordinances may not restrict the amount of rent charged to the new tenant.[9]

Costa-Hawkins also exempted the following properties from local rent control ordinances:

·       property with a certificate of occupancy issued after February 1, 1995 (the so-called “new construction” exemption),[10]

·       property already exempt from a local residential rent control ordinance on or before February 1, 1995, pursuant to a local exemption for newly constructed units,[11] and

·       single family homes and condominiums.[12]

The exemption for single family homes and condos does not apply where the preceding tenancy was terminated by the owner giving a 30-day or 60-day notice or was terminated upon the owner’s change in the terms of the tenancy.[13] In addition, if the single family home or condo was subject to a local rent control ordinance on January 1, 1995 and was subject to an existing tenancy as of December 31, 1995, then the dwelling remains subject to local rent control laws so long as such existing tenancy continues.[14]

In short, a single family home is exempted from local rent control laws unless:

(1) the home was built (and issued a certificate of occupancy) on or before February 1, 1995, and

(2) (a) the home was subject to local rent control laws on January 1, 1995 and the current tenancy was in effect as of December 31, 1995 or (b) the preceding tenancy was terminated by the owner giving a 30-day or 60-day notice or was terminated upon the owner’s change in the terms of the tenancy.   

[1] Cal. Civ. Code §1947.12(h)(1).

[2] Cal. Civ. Code §1947.12(a)(1).

[3]  Id.

[4] Cal. Civ. Code §1947.12(b).

[5] Cal. Civ. Code §1947.12(d)(5)(A).

[6] Cal. Civ. Code §1947.12(d)(5)(B)(i).

[7]  Cal. Civ. Code §1947.12(d)(5)(B)(ii).

[8] Cal. Civ. Code §1947.12(d)(5)(B)(iii).

[9]  Cal. Civ. Code §1954.53(a).

[10] Cal. Civ. Code §1954.52(a)(1).

[11] Cal. Civ. Code §1954.52(a)(2).

[12] Cal. Civ. Code §1954.52(a)(3).

[13] Cal. Civ. Code §1954.52(a)(3)(B)(i).

[14]  Cal. Civ. Code §1954.52(a)(3)(C).