There are Many Exceptions to Statewide Rent Control
It is important to realize that the new Civil Code Section which establishes Statewide rent control, § 1947.12, does not apply to every kind of rental property. The following list of rental properties are excluded from the restrictions.
Affordable Housing that is subsidized by the Government. (Housing restricted by deed, regulatory restriction contained in an agreement with a government agency, or other recorded document as affordable housing for persons and families of very low,low, or moderate income, as defined in Section 50093 of the Health and Safety Code, or subject to an agreement that provides housing subsidies for affordable housing for persons and families of very low, low, or moderate income, as defined in Section 50093 of the Health and Safety Code or comparable federal statutes).
University Dorms (Dormitories constructed and maintained in connection with any higher education institution within the state for use and occupancy by students in attendance at the institution)
Rental units that are already rent controlled by local enactment (Housing subject to rent or price control through a public entity’s valid exercise of its police power consistent with Chapter 2.7 (commencing with Section 1954.50) that restricts annual increases in the rental rate to an amount less than that provided in subdivision (a)).
Housing that has been issued a certificate of occupancy within the previous 15 years – (Certificates of occupancy are issued at the time construction on multifamily buildings are completed)
Residential real property that is alienable separate from the title to any other dwelling unit, provided that both of the following apply:
The owner is not any of the following:
A real estate investment trust, as defined in Section 856 of the Internal Revenue Code.
A corporation.
A limited liability company in which at least one member is a corporation. (Civil Code §1947.12(d)).
The tenants have been provided written notice that the residential real property is exempt from this section 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 (c)(5) and 1946.2 (e)(7) 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.”
The Slippery Description of Lawful Rent Increases
Civil Code §1947.12(a) prohibits landlords from increasing the gross rental rate for a rental unit more than 5 percent, plus the percentage change in the cost of living, or 10 percent above pre-existing rent, whichever is lower, over the course of any 12-month period.
To determine which is the “lowest gross rental amount” any rent discounts, incentives, concessions, or credits offered by the property owner, which have been accepted by the tenant, shall be excluded.
The gross per-month rental rate and any owner-offered discounts, incentives, concessions, or credits must be separately listed and identified in the lease or rental agreement or any amendments to an existing lease or rental agreement.
How landlords and property managers will attempt to use “discounts, incentives, concessions or credits” to make it easier to increase rents up to the maximum ten percent annual increase remains to be seen.
How to Calculate the Lowest Gross Rental Amount
Civil Code §1947.12(g)(2) supplies the definition and source to determine the change in the cost of living. “Percentage change in the cost of living” means the percentage change from April 1 of the prior year to April 1 of the current year in the regional Consumer Price Index for the region where the residential real property is located, as published by the United States Bureau of Labor Statistics. If a regional index is not available, the California Consumer Price Index for All Urban Consumers for all items, as determined by the Department of Industrial Relations, shall apply.
There are no bad landlord police – It’s up to Tenants to Demand Landlords Respect Limits on Rent Increases
Whether landlords succeed in getting around mandated limits on rent increases will come down to the will of their tenants to stand up and demand respect for their rights.
Civil Code Section 1947.12 says nothing about how, or where tenants faced with unlawful rent increases can get relief. The questions surrounding whether a landlord is exempt from the limits on rent increases, or whether any particular increase exceeds the lawful limits allowed will ultimately be decided by the courts called upon to interpret the law.
The easiest way for a landlord to avoid the rent cap limits is to simply assert that he is not bound to respect them, and then see which tenants will acquiesce and go along. Even though the law says tenants don’t have to pay more than a certain amount based upon the formula described in Civil Code Section 1947.12 (a), landlords are still free to assert that they want more.
If you are a month to month tenant, and your landlord asks you to pay an excessive rent increase, then it is up to you to stand your ground and refuse to pay it.
Otherwise, your landlord may very well argue that the increase was not imposed, but was rather the product of a negotiation.
To make this argument all the more plausible in front of a judge, it is anticipated that many landlords will simply withhold benefits from their tenants who refuse to pay unlawful rent increases, but will reward those that agree to them. This is in and of itself unlawful retaliation, which is already illegal in California, but once again, it is up to the tenants who are impacted by such practices to stand up and call out those landlords and property managers who are doing it.
Take Nothing for Granted. Insist on Your Rights. Get Legal Guidance Before You Agree to Pay any Rent Increase
Notwithstanding the exceptions to the new caps on rent increases, California State law now imposes limits on the amount that landlords can increase rent annually, and educated tenants who insist upon landlords respecting their rights could save a lot of money over the next decade.
It is important to realize that the limitations on rent increases are not going to enforced by any independent authority.
The State of California has not established any kind of government agency to administer rent control.
Keeping money in the pockets of tenants and out of overly ambitious landlords will not come without a fight. There is no shortage of lawyers who are eagerly offering their services to help landlords and property managers attempt to circumvent the rent caps.