Tenant Protection Act (Law Changes: AB1482)

California Has changed a number of laws this year. The most significant of these laws is AB 1482. There are many aspects to AB 1482 that affect both the small independent property owner and a large management company. AB 1482 is called the Tenant Protection Act, and you should be aware of the provisions in the law, how they are applied, and what it means for you and your rental property.  

The first and most important aspect of this law is the rent cap. The rent cap states that the maximum rent increase in a total year is five percent plus the percentage rise in the cost of living, established by the local Consumer Price Index or CPI. The number is set on March 15th, and you are to use that until the following year. The rent raise can be spread out over two rent raises but can’t exceed the total set by the 5% plus the CPI. The maximum rent raise is set at 10%, no matter how high the CPI.

As of right now, the amount isn’t completely restrictive. If you have been keeping up with market rents or recently rented a vacant unit or you, you should be able to keep pace with current prices. This will really affect people who are far behind in rent or rent their units at a low point in the market if you are significantly behind in market rent in the range of 25% and up. You could be talking about years of rent raises before you return those units to a market rate.  

AB 1482 rent cap does not apply to every property. There a number of exemptions which are single-family homes, condos, duplex’s where the owner lives in one unit, and any multi-unit property built within the last 15 years. You are also not subject to any restrictions when the unit comes vacant on its own. You may re-rent the unit at any price you see fit. This is true throughout California due to protections under the Costa-Hawkins act, which I will detail in a future post.  

Our Verdict:  

Rent control laws of any form are restrictive and unduly influence the rental market in an unnatural way. In some instances, it will benefit property owners, and in some instances, it will benefit a select few tenants. No matter who it helps, it hurts the majority of renters and reduces all owners’ ability to effectuate control over the property as they see fit. 

Also, more laws will be put into place as the initial laws put into place do not have the desired effect.    

Affects:  

You see that in almost all desirable cities where they have restrictive rent control law, there is an increase in not only rents but property values. It may benefit the tenant who plans to live in the unit for the next 30 years, but anyone moving into the building at a much higher rent is affectively subsidizing their neighbors. As rent control takes effect, it slows the rate of turnover, so people wanting to move into a nice area will drive the prices up.  

Also, the quality of rental units usually diminishes as scarcity in the market drives prices up for the vacancies. The rented unit doesn’t; therefore, the owner neglects them. As a landlord, higher prices sound fantastic, but you lose significant control over your rental property.  

Note: The above blog post is our opinion only. It is not to be constructed as legal advice. If you need legal advice, please contact an attorney.

For more information on the law please see: California’s Legislative Information Website

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