AB 1482: Cap on rent increases, just cause evictions

The signing of Assembly Bill 1482 is considered the most significant policy change for residential landlords and tenants in California in the last 25 years, but how much will really change? AB 1482 has two main components: (1) a cap on rent increases and (2) a requirement for just cause evictions. However, despite the new protections afforded to tenants under this bill, it is not expected to cause massive changes in the way landlords operate their properties or their ability to earn sizeable profits.

AB 1482, which took effect Jan. 1, only affects properties that (i) are more than 15 years old, (ii) contain two or more units, and (iii) are not already subject to local rent control ordinances (e.g., San Francisco, Beverly Hills, Santa Monica, West Hollywood, among many more). AB 1482 exempts non-corporate or REIT owned single-family homes, condominiums and townhomes and also exempts duplexes where one unit is occupied by the owner. A full list of the exemptions from AB 1482 can be found in California Civil Code Sections 1247.12(d) (as to the permissible rent cap) and 1946.2(e) (as to just cause eviction). Beginning July 1, 2020, landlords will also be required to notify certain tenants whether their units are or are not subject to the rent limits imposed by the bill.

For those properties covered by AB 1482, the bill will limit annual rent increases to 5% plus the rate of local inflation (as tied to the Consumer Price Index in each metropolitan area), or 10%, whichever is lower. For renters who have lived in a unit for more than 12 months, a landlord may raise the rent up to two times within a given year so long as the total increases do not exceed the state's annual cap on rent increases. AB 1482 does not apply to vacant units -- owners can continue to reset rents to market rates at vacancy and thereafter resume conforming to the annual cap for the occupied units.

In addition, under AB 1482, all applicable evictions must be based on "just cause," which is divided into two categories: at-fault just cause and no-fault just cause. Grounds to terminate a lease for at-fault just cause include (1) defaults in the payment of rent, (2) a material breach of the lease, (3) nuisance, waste, unlawful or criminal activity, (4) refusal by the tenant to sign a lease extension, (5) refusal to allow the landlord to enter the unit, (6) assignment or subletting in violation of the lease, (7) failure to vacate after signing a vacation agreement, or (8) failure to vacate upon termination of employment (i.e., in the case of a property manager). A landlord can also terminate a lease for no-fault just cause where (1) a landlord or landlord's family members intend to occupy the property (subject to certain conditions), (2) the property is removed from the rental market, (3) the landlord is required by law to vacate the property, or (4) the landlord intends to substantially remodel or demolish the property. For any no-fault just cause eviction, the landlord must either provide the tenant with relocation assistance or waive the tenant's final month's rent.

At first blush, AB 1482 appeared to be a game-changer. However, with annual rent increases in California hovering at around 8% and the numerous carve-outs to the definition of just cause evictions, it may turn out to be more sizzle than steak.

Cheryl Nieman Brechlin is an attorney with Crosbie Gliner Schiffman Southard & Swanson LLP (CGS3), a commercial real estate law firm with offices in Los Angeles and San Diego.