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California AG Sets His Sights On Landlords

California AG Sets His Sights On Landlords

The California Tenant Protection Act of 2019 (TPA), otherwise known as AB 1482, continues to be largely unknown to California landlords, even though it has been the law of the land for three and a half years.

We’ve talked a lot about it on our website and continue to track legislation such as SB 567 (which Senator Durazo has dubbed the “Homelessness Prevention Act”) which seek to make modifications to this law. Currently, the TPA limits rent increases and requires “just cause” for tenancy terminations and evictions unless the property is exempt.

Landlords of newer build properties and single-family homes, condos, and townhomes are generally exempt as long as they include the correct exemption clause in their lease. The problem is, many self-managing landlords (and even property management companies!) are not including the correct clauses in their lease which means they are subject to this law while having limited understanding of what it is.

Up to this point, this hasn’t been too much of an issue because there haven’t been any enforcement efforts or case law surrounding it.

That all changed last month, when none other than the California Attorney General himself, Rob Bonta, announced that they had settled a case against Bay Area developer, Green Valley Corporation, for violating the TPA to the tune of almost $400,000.

California DOJ To Tenants - “We Have Your Back”

In the announcement of the settlement, Bonta said the following:

“I co-authored the Tenant Protection Act during my time as an assembly member because of the urgency of California’s housing crisis. As Attorney General, I still feel that same sense of urgency, making today especially meaningful. Today’s settlement represents the first public action by the California Department of Justice in which it is enforcing the Tenant Protection Act. Because of that critical legislation, impacted Green Valley employee tenants are getting financial relief. In addition, they are being protected from skyrocketing rent increases and evictions without just cause, including pre-textual evictions that do not meet the Act’s requirements. There should be no doubt: Tenants have housing rights in California, and we have your back.”

Now, there is nothing wrong with the California DOJ enforcing laws that are on the books, especially three and a half year old laws. There is also nothing wrong with the California DOJ wanting to protect tenants from having their rights violated.

The problem is that landlords are still unaware of the existence of this law and how to comply with it. We know this because we ask prospective clients that call our office what they know about it and the answer is almost universal - they have no idea what it is. We also review their leases and often find that if even if they are exempt under the law, the required exemption clause is missing.

You can make an argument that the law is unfair and shouldn’t exist in its current form, which may be a fair point, but that doesn’t change your responsibility as a landlord to comply with it. As we said in our post from last month, you also need to understand the lens through which the government in California views you as a landlord (or “housing provider” as is becoming the more common term) - you are the problem and the reason rents are so high in California.

And it’s also important to understand that the California AG now has his sights set on you - the California housing provider.

In an interview with CalMatters, Bonta said the following:

“When the Legislature writes a law and the governor signs it, it’s the law, it’s not a suggestion, it’s not a recommendation, it’s not a ‘if you want to.’” He then continued to say, “This is a first for my office. But it won’t be the last.”

The TPA is not a toothless law, as tenant’s rights groups have claimed. It is real, it’s in effect, and its being enforced by the California AG with severe penalties for landlords.

What Should Landlords Do?

If you decide to own and/or manage rental property in California, you must understand the environment in which you are operating in. You have to know the laws as well as what’s coming down the pike so you can adjust your policies and leases accordingly. You have to understand the ideology that the California Legislature, Department of Justice, Civil Rights Department, etc operates on. You don’t have to agree with it or think its fair. But you have to comply with it when the ideology manifests itself in the form of a law.

In short, you need to set risk mitigation as one of your top priorities.

We are increasingly encouraging our clients to adopt as long-term of a view as possible and have one of their main decision making criteria’s be risk mitigation.

Whether its choosing which vendor to use, how much to increase the rent by, negotiating with tenants when things don’t go as they should, or deciding if terminating a tenancy is the right thing to do, risk mitigation should be a major factor (if not the major factor) in your decision making. The California DOJ is not messing around.

Arguably, the best risk mitigation strategy you can adopt is to hire a property management company that understands the legal landscape and how to balance operating in your best interest, under the law, while increasing your bottom line as much as possible with as minimal amount of risk as possible.

This isn’t even a plug for our services. If you’re in our service area and you need a property manager then we would love to talk with you and see if we’re a good fit. But even if we aren’t a good fit or you are out of our service area, hiring the right property management company is the number one risk mitigation strategy you can adopt today.

Just make sure whoever you hire understands the significant landlord/tenant legal changes California has gone through over the last decade or so. If there’s a property management company that is operating identically today to how they were ten years ago, they are a disaster just waiting to happen. In fact, if I were looking for a property management company in California, I would probably ask companies I was considering hiring how they have changed their operations over the last ten years to adapt to changes in the law. The answer to that question will be very telling about how much they understand how to legally operate in this State.

As we always say, California is still a great place to be a landlord. Rents are high, appreciation is higher than almost anywhere else, and owning real estate can have several tax advantages. If you treat your rental property like the small business that it is and operate it in compliance with all applicable laws, you can be very successful as a landlord in this State.