Disclaimer: I am not an attorney and this article is not intended as a substitute for advice from the appropriate legal, zoning, financial, construction and/or tax professionals. This information is provided for educational purposes only and is made without warranties or representations
If you’ve been a landlord in California for any time, it should be no surprise that the Golden State is very tenant-friendly. One of the first states across the nation to put statewide rent control laws in place, legislators in California are still hard at work passing new laws– many of which impact what it means to be a landlord here.
Of course, California real estate also presents tremendous opportunities for investors due to its strong rental market and the potential for appreciation. The key is really to stay on top of new laws as they are proposed and passed so that you can pivot with the ever-changing landscape of California landlord-tenant law.
In 2023, several laws are in motion and set in stone that landlords will want to know about. Let’s take a look at the most important ones to help you keep your finger on the pulse.
Before we look at the specific laws proposed and passed in 2023, let’s step back and look at the general landscape of landlord-tenant law in California.
Rental agreements in California can be written or verbal, but it’s advisable to have a written lease or rental agreement outlining the terms and conditions of the tenancy, including rent amount, due date, security deposit details, and rules and regulations.
California law limits the amount a landlord can charge as a security deposit, usually to no more than two months’ rent for an unfurnished unit and three months’ rent for a furnished unit.
Landlords must provide tenants with a written itemized statement of deductions within 21 days of the tenant vacating the property.
Some cities in California have rent control ordinances that limit how much a landlord can increase rent and under what conditions. These ordinances vary by city, so it’s essential to know the rules in your specific location.
Furthermore, statewide rent and eviction control laws were put in place with California’s Tenant Protection Act of 2019. Most residential tenancies in the entire state are impacted by this act. It’s important to note that this law doesn’t override local rent control laws that are more restrictive but does override local rent control laws that are less restrictive.
California law requires landlords to maintain rental properties in a habitable condition. This means providing essential services like heating, plumbing, and electricity and addressing necessary repairs promptly.
Tenants have the right to withhold rent or repair and deduct if the landlord fails to make essential repairs. Beyond that, tenants also have the right to sue the landlord, move out without notice, or call state or local health inspectors if the landlord fails to make essential repairs.
Wondering what you can do to keep your California rentals in good working order? Check out our list of fifteen preventative maintenance tips for CA rental properties.
Landlords must follow specific legal procedures to evict a tenant. Common reasons for eviction include non-payment of rent, lease violations, or the expiration of a lease term.
Different types of notices must be delivered through specific means depending on the reason for the eviction– for example, landlords must give tenants a three-day notice to pay rent or quit if they fail to pay rent before they can file an eviction lawsuit.
Tenants have various rights under California law, including the right to a safe and habitable living environment, the right to privacy, and protection from discrimination and retaliation. Landlords cannot enter rental units without proper notice, usually 24 hours in advance, except in emergencies.
As mentioned above, tenants also have the right to withhold rent if the landlord isn’t holding up their end of the bargain and maintaining a habitable living space.
Landlords must provide proper notice when making changes to the rental agreement, entering the property, or terminating the tenancy.
The notice periods can vary depending on the situation and the length of the tenancy, and it’s important to be well-versed in how you are required to give notice and within what timeframe.
If a rental agreement does not specify the duration of the lease or rental period, landlords must provide at least 30 days’ notice for rent increases for month-to-month tenants.
For a rent increase of more than 10% of the annual rent charged to the tenant, ninety days of prior written notice is required.
In cases of domestic violence or stalking, tenants have the right to request a lock change or security upgrade, and landlords are generally required to grant these requests within a certain timeframe.
One of the new laws we’ll be talking about in the next section also has to do with the rights of tenants who are domestic violence victims, expanding their early termination rights.
Landlords are prohibited from retaliating against tenants who exercise their legal rights, such as complaining about habitability issues, joining a tenant association, or requesting repairs.
If a landlord is found to have illegally retaliated against renters who were simply exercising the rights afforded to them by the law, they might have to pay the tenant’s damages and punitive damages.
Are you thinking about selling a multi-family unit, but you’re not sure what to expect? Check out my recent post about how long it takes to sell commercial property in California.
So, what’s new this year? Landlords will want to know about the new reusable tenant screening reports bill, laws surrounding pets in affordable housing units, and potential changes to wage garnishment laws.
Through this bill, tenants who are applying for apartments can pay for only one screening report that they can use as a part of multiple apartment applications. Applicants pay for one screening report to be produced, and the landlord can either access it through an online portal or the tenant can provide it directly to the landlord.
If landlords choose to accept a reusable screening report, they are not allowed to charge an application screening fee.
At this point, landlords are not required to accept reusable tenant screening reports. They can require applicants to fill out their own unique application and do not have to accept these reports. However, many people speculate that this will become mandatory down the road, and landlords will no longer have the option regarding whether or not to accept reusable screening reports.
There are some clear benefits here for tenants. Rather than having to pay multiple different fees, they only have to pay one time and can reuse the same screening report for all of the apartments they apply to.
For landlords, there are some equally obvious downsides. Any California landlord is aware of just how common fraud is when it comes to apartment applications. For example, it is not uncommon to receive altered income documents or pay stubs. Many landlords are worried that these reusable screening reports would be similarly easy to alter, making it possible that unqualified applicants could slip through the cracks.
Another new law that impacts landlords in California has to do with offers on real estate owned properties. According to this bill, any institution that forecloses on a certain number of properties each year can only accept offers from certain buyers for the first 30 days after the property is listed. Institutions that foreclose on more than 175 properties within a calendar year have to accept offers only from government entities, prospective owner occupants, qualified nonprofits, and other affordable housing providers.
This means that investors are not able to make offers on REO properties until they have already been sitting on the market for a month.
Landlords are obligated to permit tenants who are victims of domestic violence and provide the required documentation to terminate their lease with just 14 days’ notice. However, this legislation introduces an additional measure, imposing penalties of up to $5,000 on landlords who attempt to hinder tenants from exercising their rights under this law.
Furthermore, this bill introduces a novel concept known as “partial eviction,” a previously nonexistent legal provision. Essentially, in cases where both the abuser and the victim are tenants and an eviction lawsuit is initiated, the abuser may face eviction while the victim is allowed to remain on the property as a tenant. This marks a groundbreaking development in eviction procedures, and its practical implications will become clearer with time.
This particular legislation is currently in the process of becoming law. The proposed bill tasks the Department of Housing and Community Development with conducting research and formulating mandatory building standards. These standards would apply to both new multi-family buildings (comprising more than four units) and existing multi-family structures that obtain permits for modifications or expansions of their parking facilities. The aim is to ensure that these buildings incorporate level 2 or higher electric vehicle (EV) charging stations during initial construction or renovation.
California has set a goal of prohibiting the sale of internal combustion engine (ICE) vehicles by the year 2035. One of the primary concerns people have about adopting electric vehicles is the availability of charging infrastructure. To address this concern and promote broader EV adoption, California intends to pass legislation mandating the installation of EV charging stations whenever possible in order to try and meet the demand for charging infrastructure and facilitate the transition to electric vehicles.
This is another law that currently does not impact most California landlords but is likely to do so in the future. Essentially, this bill is coming from the standpoint that many California residents view pets as integral members of their families. Consequently, affordable housing units must now permit at least one household pet without imposing any restrictions based on breed or size.
This seems to mark the initial stage in granting household pets more recognition and rights within rental properties. It’s possible that, eventually, landlords may no longer be allowed to advertise their properties as “no pets allowed.”
Furthermore, affordable housing units are prohibited from imposing pet rent or additional fees on tenants with pets. Notably, the bill also holds landlords accountable for ensuring the safety of third parties in relation to tenant’s pets, despite the absence of breed or size restrictions.
This presents a noteworthy concern regarding insurance coverage, as some insurance companies may decline to cover liability claims associated with specific dog breeds, potentially putting landlords in a challenging position when accepting dogs on their insurance company’s restricted breed list.
Under current law, if you have successfully obtained a financial judgment against a tenant, you have the option to garnish their wages, albeit with certain restrictions. This proposed bill reduces the allowable percentage of wages that can be garnished when you’ve obtained a judgment against a tenant.
This essentially means that it could become more difficult and time-consuming to collect debts from tenants who have been evicted.
This legislation introduces a mandate for conducting research to assess the necessity of eliminating the terms “landlord” and “tenant” from real estate terminology.
In a parallel effort, AB 1096 also seeks to eliminate the utilization of the term “alien” from all sections of the California Code.
Whether the new landlord-tenant laws have pushed you over the edge and you’re ready to unload your California real estate, or you’re motivated to expand your portfolio and generate more passive income, I’m here to help. As the top-ranked broker in the state and ranked in the top 1% of brokers across the country, I’m uniquely posited to help you with all of your commercial real estate needs.
No matter what your goals are, I am dedicated to helping you achieve the best possible outcome. If you’re ready to get started, get in touch today.
If you have any questions about this post or anything related to commercial real estate in California, I’m always here to help. You can always feel free to reach out; I’d be more than happy to assist in any way I can.
Erik Egelko is a veteran of the commercial real estate business with a specialized focus on Investment Property Sales. In 2021 and 2022, Erik was the #1 ranked Broker in California for one of the largest CRE Firms as well as ranked in the Top 1% of brokers nationwide. He has extensive experience in a variety of asset types including: Retail Shopping Centers, Medical Office Buildings, Industrial Properties, and Multifamily Apartment Complexes. Over the course of his career, Erik has closed over $100,000,000 of commercial property sales throughout Southern California.