Over the last 5 years or so, we’ve seen major changes in the California residential landlord tenant world, including one of the most impactful changes to California residential landlord tenant law in recent memory – the Tenant Protection Act of 2019 (“TPA”). As discussed in previous publications, the TPA created statewide rent control and just cause eviction protections for most residential properties in the State. Now, through the passing of SB 567 and AB 12, California has further revised the code sections related to the TPA to broaden protections for tenants. In this article we will discuss the changes and how to prepare for them.
Both AB 12 and SB 567show a continued trend of the State making efforts to balance the landlord-tenant relationship, providing more and more protections. Of course, like with most law changes involving tenancies, there are compelling arguments in opposition to these changes. Below we will breakdown each bill so you can be prepared, the pros and cons of each, and what to look out for moving forward to help avoid issues.
SB 567
Senate Bill 567, which went into effect on April 1, 2024, made changes to a few of the no-fault causes under Civil Code Section 1946.2, as well as alter the damages available for a tenant when a housing provider violates the protections provided for within the bill.
Explanation
Beginning April 1, 2024, this bill made changes to the available no-fault causes for a housing provider to remove tenants in certain instances. The two sets of housing providers affected includes:
- property owners and their close family members who plan to move into an occupied/leased property before the expiration of the lease term with the tenant; and
- “fix and flip” investors planning on substantially remodeling or rebuilding an occupied/leased property for resale.
Additionally, the bill increased the damages available to tenants if a housing provider violates the tenant’s rights concerning this bill, allowing tenants to demand up to three times the damages amount, as well as punitive damages and attorney’s fees and costs.
No-Fault Eviction Changes
- Owner Move-In: for housing providers wanting to utilize this no-fault cause, they must now move into the unit within 90 days and remain for at least 12 continuous months, using the unit as their primary residence.
- Substantial Remodel: housing providers wanting to utilize this no-fault cause must now provide the tenant with not only valid notice of termination, but a description of the remodel to be performed, the expected duration, and a copy of the permits required to perform the work.
Changes to Damages
As described in the foregoing, tenants whose rights have been violated under this new bill are now entitled to demand damages up to three times the actual damages amount, punitive damages, and attorney’s fees/costs. This new change is significant as many leases cap attorney fee recovery, if at all available, at $1,000. Now, tenants would be able to recoup their fees as provided by statute, overriding the terms of the lease.
Pros
SB 567 does provide some much-needed clarity on no-fault evictions wherein there was not a lot of guidance previously. Before, there was no universal timeline for owner move-in evictions, making the situation ripe for dispute. Additionally, while the substantial remodel no-fault cause was helpful to many housing providers, the new supporting documentation requirement will help mitigate disputes concerning this cause. Previously, without documentation being required, tenants questioned whether the intended remodel met the requirements under the statute. Both of the changes provided by this bill will hopefully help prevent disputes, alleviating the Court of additional litigation.
Cons
Many housing providers are opposed to the changes provided by SB 567 as it further restricts their rights concerning their real property. While the no-fault causes provided by the TPA already restricted their right to remove a tenant, the changes provided for under this bill increase the number of steps necessary for a housing provider to utilize these no-fault causes. Additionally, the increased damages available to tenants for violation of these rights causes a great deal of exposure for housing providers, which can be a deterrent to them utilizing the causes at all out of fear of being wrapped into a costly dispute.
AB 12
Assembly Bill 12, which goes into effect July 1, 2024, made changes to the rules surrounding security deposits for residential tenancies. Beginning July 1, 2024, most housing providers (w/ limited exceptions) are prohibited from demanding a security deposit more than one month’s rent.
Explanation
Beginning July 1, 2024, housing providers are prohibited from demanding more than one month’s rent for a deposit, regardless of whether the unit is furnished or unfurnished. Per Civil Code Section 1950.5(c (5), the new rules shall not apply to a security collected or demanded by the housing provider before July 1, 2024. If you have any questions about the implementation of this bill, please reach out as we handle this situation daily.
Exceptions
Like with most of the rules surrounding the TPA and these recent changes, there is an exemption from the security deposit limit for what the law describes as “small housing providers”. Housing providers are exempt from the one month’s rent limitation so long as they 1) are a natural person or a limited liability company wherein the members are natural persons; and 2) own no more than 2 residential rental properties that collectively include no more than 4 dwelling units offered for rent.
Pros
As described by the legislature, the bill will make it easier for a number of tenants to locate housing as they will no longer be required to come up with a large sum of money at the inception of the tenancy. Before the passing of this bill, the housing provider could arguably request up to 4 month’s rent in some instances (first, last, and deposit), putting a large burden on tenants. With the current rent rates in the Bay Area, the changes provided by this bill could make housing more available to tenants in the area.
Cons
One of the biggest arguments in opposition to the changes created by AB 12 is that one months’ worth of rent is not sufficient to compensate housing providers for the typical charges incurred when a tenant moves out of a residential property. Not only are repair costs more expensive than ever, but it is also not uncommon for a tenant to request that a housing provider use their deposit for last month’s rent. While this is not allowed per the terms of the standard lease agreements we use, it is also contrary to statutes in this area. Nonetheless, housing providers are stuck with the bill and expected to now pay the bill with only one month’s worth of rent. The legislature stressed that housing providers can still seek additional damages from tenants beyond the deposit amount, but that does not factor in the collection difficulty associated with most tenants. The housing provider can end up ‘throwing good money after bad’ chasing a tenant for damages beyond the security deposit amount provided, likely not seeing any additional funds from their efforts.
Conclusion
While the changes provided by AB 12 and SB 567 are significant, this is likely not the last set of bills to be passed related to residential tenancies. Being that our firm practices real estate exclusively, we deal with these most recent law changes, as well as the previous bills passed over the years, daily. Should you need assistance or have any questions concerning your real property, please contact us to discuss further. We advise property owners and managers all over California with everything from lease drafting to unlawful detainers, making our firm a one-stop shop for all your landlord-tenant needs.
DISCLAIMER
The information provided in this article does not constitute legal advice and is being provided for informational purposes only. No attorney-client relationship is established or assumed by reading this article and the information in this article is presented as a broad overview and may not apply to your specific circumstances.
