The Tenant Protection Act, AB 1482, is a new law affecting all of California. It can be broken out into five major subject areas, and today we are focused on rent caps and vacancy decontrol.
First off, we are so early in the process that we’ll be working out the details for months. Processes, recommendations, and impacts are likely to change as this legislation is implemented and better understood. Every housing situation is unique. Please contact an attorney for specific legal advice.
AB 1482: An Overview
AB 1482 is a rent control law. It caps rent increases to no more than 5 percent plus the amount of the Consumer Price Index (CPI). If CPI exceeds 5 percent, the cap is a maximum 10 percent. Additionally, there is just cause required for those properties that are impacted, which restricts a housing provider’s authority to remove residents to a limited list of reasons. And in some of those instances, relocation costs are required to be made payable by the owner to the resident.
AB 1482: Updating Lease Agreement Verbiage
If you have a property that is not exempt, and we have spoken previously about the various exemptions, it is mandatory that you put in your rental contracts the following lease verbiage in 12 point font:
“EFFECTIVE AS OF JANUARY 1, 2023, California law limits the amount your rent can be increased. See Section 1947.12 of the Civil Code for more information. California law also provides that after all of the tenants have continuously and lawfully occupied the property for 12 months or more or at least one of the tenants has continuously and lawfully occupied the property for 24 months or more, a landlord must provide a statement of cause in any notice to terminate tenancy. See Section 1946.2 of the Civil Code for more information.”
For new and renewing lease agreements, this must be in place by July 1, 2020. For existing contracts, it must be in place by August 1, 2020.
Consumer Price Index
The CPI is a measure of inflation. It is established and measured by the Bureau of Labor Statistics. In order to get the information, you can actually go online and search for “Bureau of Labor Statistics CPI Western Cities Summaries.” That will bring you the CPI Statistics page which you are looking for.
It’s an archive page going back months and years, and you want the report for April of whatever year is in question. While rates are measured and reported throughout the year, the only statistic that matters is the annualized CPI rate reported for April. There are certain metro areas in California that measure for their specific metro area:
- San Francisco-Oakland-Hayward
- Los Angeles-Long Beach-Anaheim
- Riverside-San Bernadino-Ontario
- San Diego-Carlsbad
What happens if you’re not in one of these areas?
In that instance, you are going to be measured by West. West A or West B/C is determined by the population of the county.
Understanding Permissible Rent Increases
Rent can be increased in no more than two increments during any 12-month period, and the cumulative total is not to exceed the allowable annual cap. For example, let’s say as of January 1, you increase the rent 5 percent because you know you are allowed to increase it by five percent. Then, on July 1, and I say July 1 because April’s report is released in May, and you need to provide a 30-day notice before raising rent. So, your next rental increase wouldn’t go into effect until July 1.
Vacancy Decontrol and the Law
When a property is vacant, rent caps do not apply.
If you have a property that is vacated, you can adjust it to whatever the “fair” market rate is, even if the increase is more than 5 percent plus CPI. Once the unit is re-occupied, rent caps once again apply.
Rent Cap “Look Back”
The writers of this law did not want evil landlords to increase the rent more than the allowable amount.
AB 1482 establishes rent caps based on actual rent charged as of March 15, 2019. If, prior to AB 1482 but after March 15, 2019, a housing provider increased rent on a qualified unit by more than 5 percent plus CPI, rent must be adjusted down as of January 1, 2020 to no more than the allowable 5 percent plus the CPI increase. Owners do not need to remit to residents any excess payments (above 5 percent plus CPI) received in 2019.
These are the links for AB 1482 and the Bureau of Labor Statistics. You can type these in and get right to the information yourself.
AB 1482 Text:
Bureau of Labor Statistics, Western Region Summaries
Please contact us at DeDe’s Rentals for more information on this complicated law, which will likely only grow more complex. As I said before, I am not an attorney, so please contact your lawyer for legal advice.