SPECIAL REPORT: Real estate related law changes for the New Year.

Source: California Assn of Realtors – by Huntington Beach Realtor Scot Campbell – 714-336-0394

As always, there are many new laws going into effect for the New Year. There are some that homeowners and landlords should be aware of.

Below is a summary of laws going into effect in 2024:

GENERAL HOUSING LAW CHANGE:

Increases the exemption limit for improvements otherwise subject to the California Coastal Act

The California Coastal Act previously exempted improvements of $25,000 or less if necessary to protect life and public property from imminent danger.

This exemption limit is now increased to $125,000 which amount will be adjusted annually for inflation pursuant to the consumer price index.

The California Coastal Act of 1976 (Coastal Act) requires those wishing to facilitate development within the coastal zone to obtain a permit from both the California Coastal Commission and the local government. Previously, the Coastal Act exempted improvements necessary to protect life and public property from imminent danger from seeking a permit if the improvements are valued under $25,000. AB 584 increases this exemption to $125,000 and permits that amount to be adjusted annually for inflation pursuant to the consumer price index. C.A.R. supported AB 584, which facilitates improvements necessary to protect life and property from loss resulting from natural weather events through a reasonable increase in the Coastal Act’s permit exemption cap. This law seeks to assist coastal landowners in their efforts to protect their homes in an economy experiencing rising costs due to rising interest rates and materials costs.

Assembly Bill 584 is codified as Public Resources Code § 30611. Effective January 1, 2024

LANDLORD / TENANT LAW CHANGE:

Security deposits limited to one month’s rent.

Landlords may collect no more than one month’s rent for either furnished or unfurnished units in addition to first month’s rent.

There is an exception (two months rent allowed) for small landlords, defined as a landlord who is a natural person or LLC and owns no more than two residential rental properties with no more than a total of four units offered for rent.

AB 12, beginning July 1, 2024, prohibits a landlord from demanding or receiving security for a rental agreement for residential property in an amount or value in excess of an amount equal to one month’s rent, regardless of whether the residential property is unfurnished or furnished, in addition to any rent for the first month paid on or before initial occupancy.

Exception for small landlords: A small landlord may demand or receive a deposit in an amount or value not in excess of 2 months’ rent, whether or not the unit is furnished, in addition to any rent for the first month, if the landlord (1) is a natural person or a limited liability corporation in which all members are natural persons and (2) owns no more than 2 residential rental properties that collectively include no more than 4 dwelling units offered for rent. The exception for small landlords includes family trusts.

This small landlord exception does not apply if the prospective tenant is a service member.

Landlords who currently hold a security deposit or demand or collect a security deposit in excess of one month’s rent prior to July 1, 2024, may continue to retain the security even if it is more than one month’s rent.

Assembly Bill 12 is codified as Civil Code 1950.5. Effective July 1, 2024.

LANDLORD / TENANT LAW CHANGE:

Landlord must offer “ability to pay” in lieu of reliance on credit history and reports in assessing a tenant’s rental application when prospective tenant is receiving a government rent subsidy such as a Section 8 rental voucher

SB 267 makes it unlawful, in instances where there is a government rent subsidy, for a landlord to use a person’s credit history as part of the application process for a rental accommodation without offering the applicant the option, at the applicant’s discretion, of providing lawful, verifiable alternative evidence of reasonable ability to pay the portion of the rent to be paid by the tenant, including, but not limited to, government benefit payments, pay records, and bank statements.

When so offered, the applicant may elect to provide alternative evidence of reasonable ability to pay.

In which case the landlord must:

Provide the applicant reasonable time to respond with that alternative evidence and

Reasonably consider that alternative evidence in lieu of the person’s credit history in determining whether to offer the rental accommodation to the applicant.

Nonetheless, the landlord may still request information or documentation to verify employment, to request landlord references, or to verify the identity of a person.

Senate Bill 267 is codified as Government Code § 12955. Effective January 1, 2024.

LANDLORD / TENANT LAW CHANGE:

Tenant Protection Act: Tightens up requirements for no fault evictions; adds damages, penalties, attorney fees and enforcement mechanisms for violations.

This law tightens up the requirements for a landlord to terminate a tenancy under the Tenant Protection Act (i.e., California statewide rent cap and just cause eviction law) for no-fault evictions based upon owner move-in or substantial remodeling.

Additionally, an owner who violates the TPA by improperly terminating a tenancy or by raising rent beyond the maximum amount is liable for actual damages, reasonable attorney’s fees and costs (at the discretion of the judge), up to three times actual damages for willful violations and punitive damages. The Attorney General et al is authorized to seek injunctive relief. Effective April 1, 2024.

Background: The Tenant Protection Act of 2019 is a statewide rent cap and just cause eviction law. Under the TPA, there are only four permissible reasons on which a landlord may base a no-fault termination of tenancy. Senate Bill 567 seeks to close perceived loopholes in two of them: terminations based on owner-move and those based on demolishing or substantial remodeling. SB 567 also seeks to address the question of remedies for a violation of the TPA. Currently, the TPA does not specify damages or enforcement mechanisms.

Termination of tenancy based on owner move-in:

Under SB 567 in order to lawfully evict a tenant for just cause on the basis of an owner move-in:

The owner must identify in the written eviction notice the name and relationship to the owner of the intended occupant and include notification that the tenant may request proof that the intended occupant is actually an owner or related to the owner.

The owner or their family member would have to move in within 90 days after the tenant vacates and then occupy the unit for at least one year

The owner or their family member could not already occupy a unit and there could not be another vacant unit at the property.

If the intended occupant does not actually move in within 90 days or use the unit as their primary residence for at least a year, the owner must offer the unit back to the tenant who was evicted at the same rent and lease terms in effect at the time they vacated and reimburse the tenant for reasonable moving expenses incurred in excess of the required relocation assistance payment that may have been made in connection with the eviction.

If the former tenant does not move back in, and the owner subsequently identifies a new tenant still within the yearlong period after the eviction, the unit must continue to be offered at the lawful rent in effect at the time the eviction occurred and

The owner has to be a natural person holding at least a 25% ownership interest in the property (in order to prevent someone who holds a very small share of the property from evicting a tenant), a natural person who co-owns the property entirely with family members either outright or via a family trust, or a natural person who meets the 25% ownership threshold and whose recorded interest in the property is owned through an LLC or partnership.

Termination based on intent to demolish or to substantially remodel the residential real property:

Remodeling must require the tenant to vacate for 30 Consecutive Days. The remodel must not be able to be reasonably accomplished in a safe manner that allows the tenant to remain living in the place and must require the tenant to vacate the property for at least 30 consecutive days.

However, the tenant is not required to vacate the property on any days where a tenant could continue living in the property without violating health, safety, and habitability codes and laws.

Written Notice. A written notice terminating a tenancy must include all of the following:

A statement informing tenants of the intent to demolish or substantially remodel the unit, The following statement verbatim:

“If the substantial remodel of your unit or demolition of the property as described in this notice of termination is not commenced or completed, the owner must offer you the opportunity to re-rent your unit with a rental agreement containing the same terms as your most recent rental agreement with the owner at the rental rate that was in effect at the time you vacated. You must notify the owner within 30 days of receipt of the offer to re-rent of your acceptance or rejection of the offer, and, if accepted, you must reoccupy the unit within 30 days of notifying the owner of your acceptance of the offer”,

A description of the substantial remodel to be completed, the approximate expected duration of the substantial remodel, or, if the property is to be demolished, the expected date by which the property will be demolished,
A copy of the permit or permits required to undertake the substantial remodel. However, if the renovation is to abate hazardous materials then no permit need be given unless legally required.
A notification that if the tenant is interested in reoccupying the rental unit following the substantial remodel, the tenant must inform the owner of their interest and provide to the owner their address, telephone number, and email address.

SB 567 further provides that any termination notice that does not comply with any provision of the just cause rules is void.

Damages and enforcement mechanisms: Recovery of possession

An owner who attempts to recover possession of a rental unit in material violation of the just cause provisions will be liable for:

Actual damages.
In the court’s discretion, reasonable attorney’s fees and costs.
Upon a showing that the owner has acted willfully or with oppression, fraud, or malice, up to three times the actual damages. An award may also be entered for punitive damages for the benefit of the tenant against the owner.

The Attorney General et al is authorized to seek injunctive relief based on violations of the just cause rules.

Damages and enforcement mechanisms: Collecting or demanding rent beyond the maximum.

An owner who demands, accepts, receives, or retains any payment of rent in excess of the maximum rent shall be liable in a civil action for all of the following:

Injunctive relief.
Damages in the amount by which any payment demanded, accepted, received, or retained exceeds the maximum allowable rent.
In the court’s discretion, reasonable attorney’s fees and costs.
Upon a showing that the owner has acted willfully or with oppression, fraud, or malice, damages up to three times the amount by which any payment demanded, accepted, received, or retained exceeds the maximum allowable rent.

The Attorney General et al is authorized to 1)Enforce the provisions of this section and 2)Seek injunctive relief based on violations of this section.

Note on “actual damages” for material violation in termination of tenancy rules:

A tenant who has been wrongfully evicted is now authorized to recover actual damages. How might one calculate actual damages? The case of DeLisi v Lam, (2019) 39 Cal.App.5^th 663, which involved the San Francisco rent control ordinance, is illustrative of how open ended the calculation can be. In the DeLisi case, the judge permitted the jury to weigh two competing (and mutually exclusive) methods of determining actual damages, as set forth by the expert witnesses for each side.

First, according to the expert for the tenant, actual damages are the difference between the rent being paid by the tenant and the market rate rent, multiplied by the tenant’s intended length of occupancy. The tenant testified that she intended to stay five or ten years. Under the San Francisco ordinance, a triple damage penalty is automatically applied. Taking into account the present value of a ten-year tenancy, the expert arrived at a figure of $287,180. That figure multiplied by three would allow for total damages of approximately $860,000.

The expert for the landlord took a different view. In his view, the value of the rent-controlled tenancy was not an asset the tenant could monetize. Instead, damages would be the amount the tenant was out-of-pocket beyond what she would have been if she had stayed in the rent-controlled apartment. This included moving expenses, the difference between her monthly rent at the rent-controlled property and her monthly rent at her new apartment, and any differences in expenses for items such as commuting to work. All in all, “actual damages” would be $23,139 for a five-year period and $48,183 for a 10-year period. Multiplied by three these dollar figures are still considerable, but a far cry from amount calculated by the tenant’s expert.

The jury returned a verdict for $120,000 which multiplied by three equals $360,000. Which theory of “actual damages” did the jury base their decision on? No one knows for sure. Juries are not required to report the basis of their decisions. (They can be asked to answer specified questions. But even there, they are not reporting the reasoning behind their decision).

Mind you, in many legal cases the attorney fees are staggering, often in excess of the actual damages awarded. Under SB 567 attorney fees may be awarded to the tenant at the discretion of the judge.

Senate Bill 567 is codified as Civil Code §§ 1946.2 and 1947.12.

Effective April 1, 2024.

LANDLORD / TENANT LAW CHANGE:

Tenants may keep bicycles, e-bikes and other “micromobility” transport devices in their units.

SB 712 prohibits a landlord from prohibiting a tenant from owning personal micromobility devices or from storing and recharging up to one personal micromobility device in their dwelling unit for each person occupying the unit, subject to certain conditions and exceptions.

Personal micromobility devices are things like bicycles, scooters, hoverboards, skateboards, and their electric counterparts such as an e-bike or e-scooter.

SB 712 prevents landlords from prohibiting tenants from owning personal micromobility devices and also prevents landlords from banning the storage and recharging of personal micromobility devices in their dwelling units if the devices meet certain criteria as follows:

either,

They are not powered by an electric motor, or

They comply with certain safety standards for e-bikes and e-scooters (see below), or

Failing compliance with such safety standards, the tenant has insurance covering storage of the device within the unit.

Batteries for e-bikes should comply with either the UL 2849 standard, recognized by the United States Consumer Product Safety Commission, or the EN 15194 European Standard for electrically powered assisted cycles. E-scooters, on the other hand, need to align with the UL 2272 standard from the U.S. or the EN 17128 European Standard for personal light-electric vehicles.

However, landlords have the option to provide tenants with exterior “secure, long-term storage” for their devices. If such storage is offered without charge, landlords can prohibit the in-unit storage of these devices.

A landlord is not required to modify or approve a tenant’s request to modify a rental dwelling unit for the purpose of storing a micromobility device inside of the dwelling unit. A landlord may prohibit repair or maintenance on batteries and motors of personal micromobility devices within a dwelling unit. A landlord can require a tenant to store a personal micromobility device in compliance with applicable fire code.

Question: Can the landlord prohibit a tenant from storing a bike on the balcony?

A: Unclear. A landlord cannot prohibit a tenant from storing a device “in their dwelling unit.”

Senate Bill 712 is codified as Civil Code 1940.41. Effective January 1, 2024.