Licensed Child Care Homes are an often-unexpected challenge for landlords. Many landlords are unsure of their rights in relation to this use of the property. The simple answer is that you cannot refuse to allow an existing tenant to operate a licensed child care home in your residence, and you cannot decline a potential applicant solely because of their intention to operate a licensed child care home in your rental property. However, there are a few things you can do to protect yourself, your property and your tenant.
Licensing Requirements
If the proposed or existing child care home is not properly licensed, these requirements do not apply. The protections provided by California Health and Safety Code and by the California Insurance Code are only for service providers properly licensed by the state. If you have a tenant or applicant who isn’t licensed, but wants to provide childcare services in your property, you do not have to permit it.
Number of Children
The number of children allowed depends on whether it’s classified as a “Small” or “Large” Child Care Home. Small homes are statutorily authorized to serve as many as six children, with the option for an additional two children. Large homes are statutorily authorized to serve twelve children, also with the option for an additional two children. As the landlord, you have no authority to limit the initial numbers of either a small or large home, but if an operator of either size child care home wants to expand beyond the statutory allowance, they need to request permission from you. You are permitted to independently decide whether or not you are willing to accept that increased number. This gives you some small input regarding the number of children that might be cared for at your property.
Security Deposit
You are also permitted to increase the security deposit for tenants planning to operate a licensed child care home, even if it is in excess of what you would normally charge other tenants. In California, the maximum that you are permitted to collect for a non-furnished home is two times the monthly rent. Even if you would normally require less, you may, and should, require the maximum allowed. For example, if you collect $1,800 in rent, the allowable maximum security deposit would be $3,600. While you typically might not charge this much security deposit, statutes allow you to do so, and this becomes another measure offering you somewhat more protection.
Insurance Coverage
If you were running a retail business in a commercial rental location, you’d be required to maintain a substantial insurance policy. However, Licensed Child Care Homes do not require anything remotely similar to a typical commercial rental use. As the landlord, you are only allowed to request, and the tenant is only required to provide, one of the following:
- Liability insurance at a minimum of $100,000 per occurrence and $300,000 total coverage; or
- A bond in the aggregate amount of $300,000; or
- A file of affidavits signed by the parents of each child being cared for that acknowledges each parent understands and accepts there is no insurance coverage for this operation.
Most licensed child care providers already have a policy providing at least the minimum amount of insurance required, but it is not mandatory. It’s important that your tenants provide you with one of the three packets above. If your tenant does have liability insurance, you can request to be named as an additional insured. However, your request to be added as additional insured cannot result in the cancellation of the provider’s policy. Also, if there is a premium increase adding you, you are required to pay the difference.
Finally, require that the tenant ensure continual compliance with all requirements of the State Fire Marshall. As the property owner or landlord, you should inspect all of your rental properties on a regularly-scheduled periodic basis. It is as important – if not more so – to be sure that you regularly inspect the location of any Licensed Child Care Home. Of course, the tenant is entitled to appropriate advance notice of your intention to inspect.
In our experience, tenants operating these homes are typically as responsible – or even more so – than other tenants. They are licensed by the state of California, and they’ve granted the state authority to inspect their business for compliance. Licensed Child Care Home providers typically recognize that they could jeopardize their license – and livelihood – if they do not suitably maintain their residence to appropriate standards. This further ensures that they are likely to keep your property safe and well cared for.
Final thoughts
If you are notified that a tenant or applicant wants to operate a licensed child care home, you can provide yourself with some level of confidence and protection. However, you should never decline an applicant solely because they want to run a licensed child care home. Likewise, don’t try to evict, raise rent or take punitive action against a 
tenant solely because they are presently operating a licensed child care home in a rental residence, or they’d notified you of their intent to do so in the future.
Property management is complicated, but we’re here to help simplify it. Contact us at DeDe’s Rentals if we can be of any assistance.
