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3 Significant New Laws for California Landlords in 2024

3 Significant New Laws for California Landlords in 2024

It’s a new year and with it comes a variety of new landlord/tenant laws that California landlords must get up to speed on quickly and begin complying with.

The purpose of this article is to address the most significant law changes for the types of landlords that we serve, which are primarily single-family, condo, and small multi-family property owners. There were quite a few minor laws that went into effect this year, but this article is not meant to be an exhaustive description of all laws affecting landlords. Here, I am just covering the big ones with the most significant changes.

If you want an exhaustive list of new laws, I recommend checking with a local association such as the California Apartment Association or the Apartment Owners Association.

Before going into detail on these new laws, I think it’s important to point out what I believe is the dominant mindset, or worldview, of the California Legislature.

California is indeed in the midst of a housing crisis. Affordability is at an all time low whether you are buying or renting a single-family residence. Lack of supply is obviously the issue, but a combination of NIMBYism and the massive amounts of California government imposed red tape for builders continues to exasperate the issue.

Instead of making it easier for builders to create more supply, the Legislature has decided to target landlords with a variety of laws, rules, and regulations in an attempt to ease the obstacles that renters run into when searching for new housing.

California sees the world through the lens of those who have power and those who do not. In a landlord/tenant relationship, no matter the actual financial or economic position of the parties, California will always view the landlord as the stronger party and the tenant as the weaker party. Understanding that this is their worldview will help make sense of the laws that they both propose and pass. When renters are unable to obtain housing as a result of their income, credit, criminal history, or any other reason, California views the landlord as the problem in that equation, not the renter. So laws that go after those very categories - income, credit, and criminal history - will continue to come about in the Legislature’s efforts to ease the housing crisis.

Probably the most discussed law on this blog has been AB1482, which is now more commonly referred to as the Tenant Protection Act or TPA. There have been some changes to the TPA this year and I expect that we will continue to see incremental changes to it on an ongoing basis. I’ve been predicting the removal of the single family exemption clause for a while, and I continue to hold to that prediction. So even if your property is not subject to the TPA right now, you should pay attention to these changes because they may apply to you one day.

California’s current “Top Cop” (Attorney General) is Rob Bonta. You may not know a lot about him but what you should know is that prior to becoming AG, he was a member of the California State Assembly. During his time there, he co-authored the TPA.

It’s important to understand this because the man primarily responsible for enforcing compliance with the TPA is the same one who came up with it to begin with. He cares a lot about it. He has made it very clear that he is intent on enforcing it and all California landlords have been put on notice that Bonta is not messing around when it comes TPA enforcement.

There were two high profile TPA related suits brought by Bonta in 2023. One was against Green Valley Corporation in the amount of almost $400k which I wrote about here and a more recent one was against Invitation Homes to the tune of $3.7M which you can read about here.

Both of these corporations were in violation of the law. No question about it. But these are significant settlements and California’s Top Cop has made it clear that he is ready and willing to enforce his brainchild law. If you don’t know anything about the TPA and you own a property that is subject to it, now is the time to educate yourself. I wrote about it in depth here when it first came out and there have been a few changes to it since then, some of which will be discussed below.

With all that as preamble, here are the three most significant new laws affecting California landlords in 2024.

SB 567 - Changes to the TPA

This law adds teeth to the TPA, allowing the AG or local official to bring action against a landlord who violates it as well as the ability for a tenant to bring a civil action against a landlord for a violation. Damages can be up to three times the amount of excess rent charged and can include punitive damages as well. This goes for violations of the rent increase provisions as well as the just cause provisions.

With damages like this, it is conceivable to have a six or even seven figure suit brought against a landlord once attorney fees are factored in. You do not want to get this wrong! Understand the TPA and abide by it.

This law also makes changes to the owner move-in just cause provisions requiring the notice of termination of tenancy to state the name of the person moving in and their relationship to the owner and prohibits owner move-in terminations if another unit is available.

Additionally, the law makes changes to the substantial remodel just cause provision, making it much more difficult to terminate a tenancy on the basis of wanting to conduct a substantial remodel. This one is now so complicated that we recommend having an attorney look at the situation and draft all tenant notices since a violation carries such serious consequences.

This law goes into effect on April 1, 2024.

SB 267 - Alternative Qualification Options for Tenants With a Housing Subsidy

One of the biggest obstacles for renters with a housing voucher, such as Section 8, to obtaining housing, are credit requirements. As a result of this, landlords must now offer rental property applicants with a housing voucher the option to prove their ability to pay the rent by providing “lawful, verifiable alternative evidence of the applicant’s 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.”

This is a super vague law with no guidelines for what the term “reasonable” might mean. We don’t know exactly what compliance with this law looks like but expect more guidance from the California Civil Rights Department in the coming months. We will have to wait for litigation to set precedence for how this will be interpreted and enforced.

For now, landlords should know that they cannot use a credit report as a reason for denial of a housing voucher holding applicant without first offering that applicant the option to provide alternative evidence of their ability to pay.

This law went into effect on January 1, 2024.

AB 12 - Single Security Deposits for Owners of More Than Two Properties

Current law allows for landlords to collect up to two times the monthly rent as a security deposit for an unfurnished rental and three times the monthly rent for a furnished rental.

If you own more than two rental properties or more than four units, you will now only be able to collect one month’s rent as a security deposit, regardless of whether the unit is furnished or not.

Owners of only one or two rental properties or less than four units (for example, an owner with two duplexes or a single family home and a triplex) can still collect a double security deposit for unfurnished rentals or a triple security deposit for furnished rentals.

This law goes into effect on July 1, 2024.

Compliance is Important!

Rental property owners often see bad tenants, long vacancies, or expensive repairs as their biggest exposures in owning rental property. As these new laws continue to unfold and as penalties for failing to comply continue to increase, I see rental property owner’s biggest exposures coming from compliance issues with landlord/tenant law more than any other source. Landlords should be more concerned about legal compliance than they are about lower vacancy times, higher quality tenants, and cheaper repairs. Those things are all still extremely important but we hear landlords expressing concern over these issues but rarely over legal compliance. As a matter of prioritization, legal compliance comes first.

It is getting increasingly difficult to own and manage rental property on your own without a professional handling these finer details for you. Especially when the AG himself has proudly proclaimed that he has his sights set on landlords.

A good property management company should be well aware of these laws and have updated policies and procedures to ensure compliance. California is still a very profitable place to own rental property. We still have some of the best appreciation in the country. But you must know the rules and you must play by the rules. The stakes are too high to act like these laws don’t apply to you.