New California Laws Affecting The Rental Housing Industry In 2020

The following is a summary of selected new laws affecting the rental housing industry in 2020.

Discrimination on the Basis of Military or Veteran Status (Senate Bill 222). This law makes it illegal under the Fair Employment and Housing Act (FEHA) for an owner of any housing accommodation to discriminate on the basis of veteran or military status. An owner may not make any written or oral inquiry concerning veteran or military status, or publish or print any notice or advertisement indicating a preference based on military status. This law also prohibits landlords from discriminating against a tenant on the basis that the tenant pays part or all of the rent using a Veterans Affairs Supportive Housing (VASH) voucher. Under the FEHA, “Military and veteran status” means a member or veteran of the United States Armed Forces, United States Armed Forces Reserve, the United States National Guard, and the California National Guard. “Veteran” is defined as “a person who served in the active military, naval, or air service and who was discharged or released under conditions other than dishonorable.” (Codified as Government Code §§12920, 12921, 12927, 12930, 12931, 12955, 12955.8, 12956.1, and 12956.2)

Family Daycare Homes (Senate Bill 234). This law requires large family daycare homes with up to 14 children to be treated as a residential use for purposes of all local ordinances. This also clarifies that apartments may be used as family daycare homes. This law prohibits property owners and managers from refusing to sell or rent, or refusing to negotiate for the sale or rental of, or otherwise making unavailable or denying a dwelling unit for residential use to a person because that person is a family daycare provider. This law further provides that remedies under the Fair Employment and Housing Act are available to family daycare home providers, family daycare home provider applicants, or persons who are claiming that any of these protections have been denied. (Codified as Health and Safety Code §§1596.72, 1596.73, 1596.78, 1597.30, 1597.45, 1597.54, 1597.41, 1597.42, 1597.455, 1597.40, 1597.46, and 1597.543)

Discrimination on the Basis of Source of Income (Senate Bill 329). Expands the definition of “discrimination” on the basis of “source of income” to include a refusal to rent to a tenant based on the tenant’s receipt of federal, state or local housing subsidies, including HUD Section 8 Vouchers. (Codified in Government Code §§12927 and 12955)

Reduced Security Deposit for Service Members (Senate Bill 644). This law reduces the security deposit a landlord may collect from a service member to one month’s security for an unfurnished unit or two month’s security for furnished units, unless (a) the tenant has a history of poor credit or of causing damage to the rental property or its furnishings, in which case the landlord may collect two month’s security for an unfurnished unit or three month’s security for a furnished unit. Also, the reduced security deposit rules do not apply if the property is rented to a group of individuals and one or more of them is not the service member’s spouse, parent, domestic partner, or dependent. “Service member” means a member of an active or reserve component of the Armed Forces who is ordered into active duty pursuant to federal law or a member of the militia called or ordered into active state or federal service. (Codified in Civil Code §1950.5)

Recycling Bins (Assembly Bill 827). This law requires a multi-family dwelling of five or more units, and other businesses, to provide customers with a recycling bin or container for a waste stream that is visible, easily accessible, adjacent to each bin or container for trash other than that recyclable waste stream (except in restrooms) and clearly marked with educational signage. The Department of Resources Recycling and Recovery will, on or before July 1, 2020, develop model signage that commercial and organic waste generators may utilize to mark the recycling bins provided to customers. (Codified as Public Resources Code §§42649.1, 42649.2, 42649.8 and 42649.81)

Religious Items May be Displayed on Entry Doors (Senate Bill 652). This law generally prohibits a residential property owner and a common interest development from enforcing or adopting a restriction that prohibits the display of religious items on an entry door or entry door frame of a dwelling. Exceptions include religious displays that: (a) threaten the public health or safety, (b) hinder the opening or closing of any entry door, (c) violate any federal, state, or local law, (d) contain graphics, language or any display that is obscene or otherwise illegal, or (e) individually or in combination with any other religious item displayed or affixed on any entry door or door frame that has a total size greater than 36 by 12 square inches, provided it does not exceed the size of the door. (Codified in Civil Code §§1940.45 and 4706)

Arbitration Agreements with Consumers and Employees (Senate Bill 707). This law provides that the drafting party of an employment or consumer arbitration agreement who is required, either expressly or through application of state or federal law or the rules of the arbitration administrator, to pay certain fees and costs before the arbitration can proceed, is in material breach of the agreement if the fees are not paid within 30 days after the due date, and waives its right to compel arbitration pursuant to existing law. In the event of such a breach, an employee or consumer may generally withdraw the claim from arbitration and proceed in a court of appropriate jurisdiction, or compel arbitration in which the drafting party shall pay reasonable attorney’s fees and costs related to the arbitration. Under this law, “Consumer” means an individual who seeks, uses, or acquires, by purchase or lease, any goods or services for personal, family, or household purposes. Under this law, “employee” means any current employee, former employee, or applicant for employment. The term also includes any person who is, was, or claims to have been misclassified as an independent contractor or otherwise improperly placed into a category other than employee or applicant for employment. (Codified as Code of Civil Procedure §§280, 1281.96, 1281.97, 1281.98, and 1281.99)

Sexual Harassment Training Deadline Extended Until January 1, 2021 (Senate Bill 778). The sexual harassment training deadline required for employers with five or more employees has been postponed until January 1, 2021. The new law allows employers already offering compliant training in 2019 to delay refresher training until two years after the date of their training, rather than having to retake the training again before January 1, 2021. (Codified in Government Code §12950.1)

90 Days’ Notice Required to Increase Rent by More Than 10% (Assembly Bill 1110). Under existing law, if a landlord of a residential dwelling with a month-to-month tenancy increases the rent by 10% or less of the amount of the rent charged to a tenant annually, the landlord must provide at least 30 days’ notice before the effective date of the change. If a landlord of a residential dwelling with a month-to-month tenancy increases the rent by more than 10% of the amount of the rent charged to a tenant annually, the landlord must provide at least 60 days’ notice before the effective date of the change. Effective January 1, 2020, this bill requires 90 days’ notice if a landlord of a residential dwelling with a month-to-month tenancy increases the rent by more than 10% of the amount of the rent charged to a tenant annually. (Codified in Civil Code §827)

Tenant Allowing Occupancy of Property to Person at Risk of Homelessness (Senate Bill 1188). This law authorizes a tenant to temporarily permit the occupancy of a rental unit by a person who is at risk of homelessness, with the written approval of the owner or landlord of the property, regardless of the terms of the lease or rental agreement, and subject to extension under certain circumstances. Nothing in this law compels a landlord or property owner to agree to permit the occupancy of the person at risk of homelessness in the unit. This law authorizes an owner or landlord to adjust the rent payable under the lease during the time the person who is at risk of homelessness is occupying the dwelling unit, as compensation for the occupancy of that person, and requires the terms regarding the rent payable in those circumstances to be agreed to in writing by the owner or landlord and the tenant. This law establishes the rights and obligations of the person at risk of homelessness, the tenant, and the owner applicable under these circumstances. These conditions include making the tenant liable for the actions of the person at risk of homelessness to the extent those actions are subject to the terms of the lease or property agreement and requiring a written agreement between the parties. The law requires that the landlord give 7 days’ notice to the tenant in order to evict a person at risk of homelessness from the unit, unless specified exceptions apply. The law gives the tenant an opportunity to cure any violations cited by the landlord for evicting the person at risk of homelessness. The law also provides that occupancy by a person at risk of homelessness is not permissible if the addition of another person in the dwelling unit would violate the building’s occupancy limits or other applicable building standards. The law does not apply to any federally funded or assisted low-income housing. This law sunsets January 1, 2024. (Codified as Civil Code §1942.8)

Change to The Ellis Act (Assembly Bill 1399). The Ellis Act applies when an owner seeks to remove all rental units within a building or all rental units on a property within a building containing three or fewer units from the rental market. The Ellis Act authorizes local governments to place restrictions on how property owners can “Ellis” a property and exit the rental property market. An owner can be required to give tenants 120 days’ notice that the property is being withdrawn from the rental market. Tenants who are over 62 or disabled must receive one year’s notice, provided they have lived in the accommodations for at least one year. A number of restrictions apply to situations where owners offer units for rent within certain time frames (two years, five years, and 10 years) after removing a property from the rental market pursuant to the Ellis Act. This law makes changes to the Ellis Act to: (1) clarify that owners may not pay prior tenants liquidated damages in lieu of offering them the opportunity to re-rent their former unit; and (2) clarify that the date on which the accommodations are deemed to have been withdrawn from the rental market is the date on which the final tenancy among all tenants is terminated. (Codified as Government Code §§ 7060.2, 7060.4, and 7060.7)

Statewide Rent and Eviction Control (Assembly Bill 1482).

(a) Rent Control

• • Rent Cap. Yearly rent increases capped at 5% plus CPI; Not to exceed 10% per year.
  • Concessions Excluded from Base Rent. In determining the base rent, any rent discounts, incentives, concessions, or credits (“Concessions”) are excluded. The base rent and any Concessions must be separately listed in the lease/rental agreement or in an amendment.
  • CPI. The 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 or, 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.
  • Maximum of Two Rent Increases Per Year. If the same tenant remains in rental unit over any 12-month period, the rent for the unit cannot be increased in more than two increments over that 12-month period.
  • Applies to Rent Increases Occurring on or after March 15, 2019. If an owner increased the rent by more than the amount permissible under the rent cap law between March 15, 2019, and January 1, 2020, then the rent on January 1, 2020 is the rent as of March 15, 2019 plus the maximum permissible increase under the rent cap law and the owner is not required to refund the overpayment.
  • Vacancy Decontrol. For a new tenancy in which no tenant from the prior tenancy remains in lawful possession of the residential real property, the owner may establish the initial rent. The rent cap will apply to subsequent increases.
  • Rent Cap Applies to Subleases. A tenant subject to this rent cap law may not enter into a sublease that results in a total rent for the premises that exceeds the allowable rental rate authorized by this rent cap law.
  • Written Notice of Rent Increase. Written notice of a rent increase must be given in accordance with Civil Code Section 827 (i.e., 30 days prior written notice for increases of 10% or less and 60 days prior written notice of increases over 10%. Under a separate bill, the 60-day period for rent increases over 10% will be changed to 90 days prior written notice).
  • Exemptions from Rent Cap
    • Certain Affordable Housing. 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.
    • Dormitories. Dormitories constructed and maintained in connection with a higher education institution within the state for use and occupancy by students in attendance at the institution.Housing Subject to a More Restrictive Local Rent Control Ordinance. Housing subject to rent or price control by a public entity that restricts annual increases in the rental rate to an amount less than that provided under California’s rent cap law.
    • New Housing. Housing that has been issued a certificate of occupancy within the previous 15 years.
    • Single Family Dwellings and Condominiums. This exception does not apply if the owner is a real estate investment trust, a corporation, or a limited liability company in which at least one member is a corporation. For this exception to apply the tenants must be provided with written notice that the residential real property is exempt 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.” For a tenancy existing before July 1, 2020, the notice may be provided in the rental agreement. For a tenancy commenced or renewed on or after July 1, 2020, the notice must be provided in the rental agreement.
    • Owner Occupied Duplexes. A duplex in which the owner occupied one of the units as the owner’s principal place of residence at the beginning of the tenancy, so long as the owner continues in occupancy.

(b) Just Cause for Eviction

• • Applies Only If Tenant Has Lawfully Occupied Property For 12 Months. If any additional adult tenants are added to the lease before an existing tenant has continuously and lawfully occupied the residential real property for 24 months, then this law applies if either: (1) all tenants have continuously and lawfully occupied the residential real property for 12 months or more, or (2) one or more tenants have continuously and lawfully occupied the residential real property for 24 months or more.
  • Definition of Just Cause. Just cause includes either of the following:

• 1.  At Fault Just Cause
  • • Default in the payment of rent.
    • A breach of a material term of the lease, including, but not limited to, violation of a provision of the lease after being issued a written notice to correct the violation.
    • Maintaining, committing, or permitting the maintenance or commission of a nuisance.
    • Committing waste.
    • The tenant had a written lease that terminated on or after January 1, 2020, and after a written request or demand from the owner, the tenant has refused to execute a written extension or renewal of the lease for an additional term of similar duration with similar provisions, provided that those terms do not violate the law.
    • Criminal activity by the tenant on the residential real property, including any common areas, or any criminal activity or criminal threat on or off the residential real property, that is directed at any owner or agent of the owner of the residential real property.
    • Assigning or subletting the premises in violation of the tenant’s lease.
    • The tenant’s refusal to allow the owner to enter the residential real property as authorized by law.
    • Using the premises for an unlawful purpose.
    • The employee, agent, or licensee’s failure to vacate after their termination as an employee, agent, or a licensee.

    • When the tenant fails to deliver possession of the residential real property after providing the owner written notice of the tenant’s intention to terminate the hiring of the real property, or makes a written offer to surrender that is accepted in writing by the landlord, but fails to deliver possession at the time specified in that written notice.

• 2. No-Fault Just Cause

• • • • Intent to occupy the residential real property by the owner or their spouse, domestic partner, children, grandchildren, parents, or grandparents. For leases entered into on or after July 1, 2020, this section applies only if the tenant agrees, in writing, to the termination, or if a provision of the lease allows the owner to terminate the lease if the owner, or their spouse, domestic partner, children, grandchildren, parents, or grandparents, unilaterally decides to occupy the residential real property.
      • Withdrawal of the residential real property from the rental market.
      • To Comply with Court Order, Government Order or Law. The owner complying with any of the following: (i) an order issued by a government agency or court relating to habitability that necessitates vacating the residential real property, (ii) an order issued by a government agency or court to vacate the residential real property, (iii) a local ordinance that necessitates vacating the residential real property.
      • Intent to demolish or to substantially remodel the residential real property. For purposes of this section, “substantially remodel” means the replacement or substantial modification of any structural, electrical, plumbing, or mechanical system that requires a permit from a governmental agency, or the abatement of hazardous materials, including lead-based paint, mold, or asbestos, in accordance with applicable federal, state, and local laws, that cannot be reasonably accomplished in a safe manner with the tenant in place and that requires the tenant to vacate the residential real property for at least 30 days. Cosmetic improvements alone, including painting, decorating, and minor repairs, or other work that can be performed safely without having the residential real property vacated, do not qualify as substantial rehabilitation.
    • Opportunity to Cure Certain Lease Violations. Before an owner issues a notice to terminate a tenancy for just cause that is a curable lease violation, the owner must first give the tenant a Three-Day Notice to Perform Covenant or Quit. If the violation is not cured within the time period set forth in the notice, a three-day notice to quit without an opportunity to cure may thereafter be served to terminate the tenancy.
    • Relocation Assistance for No Fault Just Cause Termination. For a tenancy for which just cause is required to terminate the tenancy, if an owner issues a termination notice based on a no-fault just cause, the owner must do one of the following: (1) assist the tenant to relocate by providing a direct payment to the tenant, or (2) waive in writing the payment of rent for the final month of the tenancy, prior to the rent becoming due.
      • Amount of Relocation Assistance. The amount of relocation assistance or rent waiver is equal to one month of the tenant’s rent that was in effect when the owner issued the notice to terminate the tenancy.
      • When Paid. Any relocation assistance must be provided within 15 calendar days of service of the notice. If an owner issues a notice to terminate a tenancy for no-fault just cause, the owner must notify the tenant of the tenant’s right to relocation assistance or rent waiver. If the owner elects to waive the rent for the final month of the tenancy, the notice must state the amount of rent waived and that no rent is due for the final month of the tenancy.
      • Tenant’s Failure to Vacate. If a tenant fails to vacate after the expiration of the notice to terminate the tenancy, the actual amount of any relocation assistance or rent waiver is recoverable as damages in an action to recover possession.
      • No Double Recovery of Relocation Assistance. The relocation assistance or rent waiver required by this law is to be credited against any other relocation assistance required by any other law.
      • Tenant at Fault for Causing Condition Triggering Need to Vacate. If it is determined by any government agency or court that the tenant is at fault for the condition or conditions triggering the order or need to vacate, the tenant is not entitled to relocation assistance.
  • Failure to Comply Voids Notice. An owner’s failure to strictly comply with the just cause for eviction requirements renders the notice of termination void.
  • Exemptions from Just Cause for Eviction
    • Transient and tourist hotel occupancy.
    • Housing accommodations in a nonprofit hospital, religious facility, extended care facility, or licensed residential care facility for the elderly.
    • Dormitories owned and operated by an institution of higher education or a kindergarten and grades 1 to 12 school.
    • Housing accommodations in which the tenant shares bathroom or kitchen facilities with the owner who maintains their principal residence at the residential real property.
    • Single-family owner-occupied residences, including a residence in which the owner-occupant rents or leases no more than two units or bedrooms, including, but not limited to, an accessory dwelling unit or a junior accessory dwelling unit.
    • A duplex in which the owner occupied one of the units as the owner’s principal place of residence at the beginning of the tenancy, so long as the owner continues in occupancy.
    • Housing that has been issued a certificate of occupancy within the previous 15 years.
    • Residential real property that is alienable separate from the title to any other dwelling unit, provided that both of the following apply: (a) The owner is not any of the following: (i) a real estate investment trust, (ii) a corporation, (iii) a limited liability company in which at least one member is a corporation; and (b) The tenants have been provided written notice that the residential 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 (d)(5) and 1946.2 (e)(8) 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.” For a tenancy existing before July 1, 2020, the notice may be provided in the rental agreement. For any tenancy commenced or renewed on or after July 1, 2020, the notice must be provided in the rental agreement.
    • 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.
  • Required Notice of Just Cause Protections. An owner of residential real property subject to this just cause law must provide notice to the tenant as follows. For any tenancy commenced or renewed on or after July 1, 2020, as an addendum to the lease or rental agreement, or as a written notice signed by the tenant, with a copy provided to the tenant. For a tenancy existing prior to July 1, 2020, by written notice to the tenant no later than August 1, 2020, or as an addendum to the lease or rental agreement. The notification or lease provision must be in no less than 12-point type, and shall include the following: “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 a tenancy. See Section 1946.2 of the Civil Code for more information.” The notice requires a translation if the lease is negotiated in a language other than English.
  • Effect of Local Just Cause for Eviction Ordinance. The just cause for eviction protections do not apply to: (1) Residential real property subject to a local ordinance requiring just cause for termination of a residential tenancy adopted on or before September 1, 2019, in which case the local ordinance shall apply; (2) Residential real property subject to a local ordinance requiring just cause for termination of a residential tenancy adopted or amended after September 1, 2019, that is more protective than this section, in which case the local ordinance shall apply. A residential real property is not subject to both a local ordinance requiring just cause for termination of a residential tenancy and this law. A local ordinance adopted after September 1, 2019, that is less protective than this section shall not be enforced unless this section is repealed..
  • No Waiver of Tenant Rights. Any waiver of the rights under AB1482 law is void.
  • Sunset Date. The just cause for eviction law will remain in effect until January 1, 2030.
    (Codified as Civil Code §§1946.2, 1947.12 and 1947.13).

Arbitration Agreements as Condition of Employment Prohibited (Assembly Bill 51). This law prohibits employers from requiring employees or applicants for employment to waive a right, forum, or procedure for a violation of the Fair Employment and Housing Act or the Labor Code as a condition of employment or an employment-related benefit. This law also prohibits employers from threatening, retaliating discriminating against, or terminating employees or applicants because they refused to waive any such right, forum, or procedure. Existing contracts for employment entered into, modified or extended on or after January 1, 2020 are exempt. (Codified as Gov’t Code §12953 and Labor Code §432.6)14.

$20 Million Budgeted Toward Legal Services for Eviction Defense (Assembly Bill 74). The Budget Act of 2019 allocates $20 million to be distributed by the Judicial Council through the State Bar of California pursuant to qualified legal service projects and support centers to provide eviction defense or other tenant defense assistance in landlord-tenant rental disputes, including pre-eviction and eviction legal services, counseling, advice and consultation, mediation, training, renter education, and representation, and legal services improve habitability, increasing affordable housing, ensuring receipt of eligible income or benefits to improve housing stability, and homelessness prevention.

Consumer Privacy Protection Act. California Civil Code Sections 1798.100 to 1798.198, added June 28, 2018, enacts the California Consumer Privacy Act of 2018 (“CCPA”), and provide that beginning January 1, 2020, a consumer has the right to request certain businesses disclose the categories and specific pieces of personal information that the business collects about the consumer, the categories of sources from which that information is collected, the business purposes for collecting or selling the information, and the categories of third-parties with which the information is shared; require a business to make disclosures about the information and the purposes for which it is used; grant a consumer the right to request deletion of personal information and require the business to delete upon receipt of a verified request, as specified; grant a consumer a right to request that a business that sells the consumer’s personal information, or discloses it for a business purpose, disclose the categories of information that it collects and categories of information and the identity of third parties to which the information was sold or disclosed, and require certain businesses to provide this information in response to a verifiable consumer request, authorizes a consumer to opt out of the sale of personal information by a business and prohibit the business from discriminating against the consumer for exercising this right, including by charging the consumer who opts out a different price or providing the consumer a different quality of goods or services, except if the difference is reasonably related to the value provided by the consumer’s data; authorize businesses to offer financial incentives for collection of personal information; provide for enforcement by the Attorney General, as specified, and would provide a private right of action in connection with certain unauthorized access and exfiltration, theft, or disclosure of a consumer’s nonencrypted or nonredacted personal information.

The law firm of Wallace, Richardson, Sontag & Le, LLP represents landlords, property management companies, institutional and private lenders, employers and insurance companies throughout the State of California in real estate, business and employment litigation. The information provided herein is for general interest only and should not be relied upon or construed as legal advice.