What You Need To Know About California Rent Increase Laws

At the start of 2020, new laws surrounding rent increases and rent control went into effect in California. While many of these rules were simply clarifications of things that were already in place, other rules completely changed the way that landlords must do business in California.

In particular, with regard to the passing and implementation of The Tenant Protection Act of 2019, new limitations were placed on rent increases and how landlords can end leases. Are you aware of how the changes in the laws may affect your business?

Landlords must be up-to-date on changes like these. If you break these rules, even accidentally, you could find your business in a difficult position. Take the time to get a complete understanding of the Tenant Protection Act and how it is going to affect your work moving forward.

A Table Of Contents On California Rent Increase Laws

What Are Rent Increase Laws?

What Are Rent Increase Laws?Before we cover the specific changes that have happened in California, let’s talk about rent increase laws and what they typically cover.

Rent increase laws are laws that help to ensure that rent increases do not affect residents and tenants in an unfair or unreasonable way. There are a few different areas that rent increase laws may cover. While these laws contribute to the overall rent control in an area, the two are not completely synonymous.

In particular, rent increase laws are meant to keep rent from skyrocketing out of control in a way that would be unfair or unreasonable to expect residents of the area to pay. The laws may create specific rules about the following:

  • How much notice a tenant must be given for a rent increase
  • What percentage of rent increase can occur yearly
  • When rent increases can be applied (and when they cannot)
  • Who, if anyone, is exempt from rent increases

Rent increase laws may also have specific clauses to address rent-stabilized housing, but the overall rules about that type of housing situation are likely to be made clear in separate legislation.

New California Rent Increase Laws Explained

The Tenant Protection Act of 2019 went into effect on January 1, 2020, and it caused some changes to the rental industry. Specifically, this act changed a few things about rent increase and how rent increase must be handled by landlords like you.

The New Law

As mentioned, The Tenant Protection Act of 2019 (AB-1482) was passed to address housing and homelessness issues in California. The act went into effect on January 1, 2020 and will remain in effect until 2030.

It’s a good idea to bookmark the complete law here, but we’re also going to break down the most important parts for landlords to know right now.

Updated Rent Increase Cap

The first thing you should know about this act is that it implemented an updated rent increase cap.

The tenants of this bill state that the rental rate for a 12-month period cannot be increased by more than the lower of the following two options:

  • 5% plus the Consumer Price Index (CPI, the yearly change in cost of living)
  • 10%

In most parts of California, the CPI averages around 2.5%, which means the yearly cap on rent increase would be 7.5%. You would not be able to raise the rent by more than 7.5% if you were working in an area with 2.5% CPI.

These changes do not affect the maximum late fee for rent in California; you can still charge what is a reasonable amount and listed in the lease agreement.

Limited Increases

The passed bill also makes it clear that the rental rate cannot be raised more than two times over a 12-month period. Additionally, the tenant must have been there for their complete lease term before rent can be raised at all.

“Just Cause” Lease Termination

New California Rent Increase Laws ExplainedWhen a one-year lease ends in California, it automatically converts to a month-to-month lease unless you sign a new agreement with your tenant. Even though the initial lease period is over, the agreement automatically renews until the tenant moves out or there is just cause for lease termination.

As a landlord, you must have a reason to terminate a lease agreement. Some landlords have been guilty of terminating a lease just so they can get around rent increase caps and charge higher prices. The bill requires just cause for lease termination to avoid this problem.

Some examples of just cause include:

  • Nonpayment of rent
  • Criminal activity at the property
  • Serious lease violation
  • Preventing the landlord from entering the property under allowed circumstances

If you have just cause to end a lease agreement, you just send a “notice of violation” and proceed with an eviction case.

No-Fault Terminations

This bill also introduces the idea of no-fault terminations to rental law in California. In a no-fault situation, this bill permits landlords to provide specific relocation assistance to tenants in order to regain full control of the property.

What is a no-fault situation? A no-fault situation is when you or a direct family member wants to live at the property, the property will be converted into a non-rental property, the property will be demolished or heavily remodeled, or the local government is requiring the tenant to move out.

These situations require a solid, justifiable reason for the tenant to need to move out at this time.

If you want a tenant to move out in a no-fault situation, you must do one of the following:

  • Provide them one month’s rent payment
  • Waive the final month’s rent

Giving tenants this exact money is meant to enable them to quickly find another option in these less-than-ideal circumstances.

Rent Increase Exceptions

As with most bills, this bill has worked in a few exceptions for when the increased laws and limits do not apply.

In this case, the following exceptions have been made:

  • Does not apply to properties built in the last 15 years
  • Does not apply to single-family homes unless they are owned by a corporation, real estate trust, or an LLC with a corporation member
  • Does not apply to duplexes where the owner lives in one of the units
  • Stricter laws in cities that have rent control laws will take precedence over the act

Rent Increase Notice

When you decide to increase rent, there are rules about how much notice you must give to your tenant before the rent increases.

Normal Leases

In the case of a month-to-month tenancy or a long-term tenant that has lived at the property for more than one year, you must give at least 60 days’ notice before rent increases.

Exemptions

If your property is exempt from the new rent increase rules and you are able to raise the rent by more than 10% at a time, you must give at least 90 days’ notice before a rent increase takes effect.

How Much Can A Landlord Raise Rent In California?

Now that you know what laws have changed, let’s take a look at those changes in action. How much can you raise rent in California?

Let’s say you have a tenant signed on for a one-year lease. They decide to stay on at the end of the lease, but you switch to a month-to-month arrangement and do not sign a new lease. Once they have passed the initial 12-month period, you have the opportunity to increase rent.

However, you would only be able to raise the rent two times during the next 12 months. Additionally, you would need to give tenants at least 60 days’ notice to do so. The local CPI at this imagined property is 3%, so you are able to do an 8% increase to the rent.

If you had signed a new lease agreement with an updated rent, that rent would be locked in for the lease period. The updated rent would still need to comply with the rent increase rules stated above.

Other Changes In Action

In addition to the changes surrounding rent increase and rent control, there are some additional changes that have gone into effect in California rental law in 2020.

  • Section 8 Discrimination
    A new law requires that landlords view Section 8 assistance as income. This means that landlords will not be able to use a lack of income as a reason to deny Section 8 applicants. You can still use credit score or other requirements when choosing tenants.
  • Military and Veteran Discrimination
    In a similar vein, the law requires that housing vouchers given to military personnel or veterans to be viewed as income. This will help them find housing more easily.
  • Security Deposits
    California law allows for the security deposit to be equal to two months’ rent for an unfurnished apartment and three months’ rent for a furnished apartment. This law limits those amounts to one and two months’ rent, respectively, for service personnel.
  • Homelessness
    Tenants may shelter someone at risk of homelessness as long as it doesn’t break the building code, even if their lease does not allow more roommates. The landlord may request additional compensation.

California Rent Increase Laws FAQs

Who Is Exempt From California Rent Control?

The answer to this question depends on the exact area and how strict the local regulation is. However, there is a state law that grants an exemption to rent control rules for:

  • Condominiums
  • Single-family homes
  • Units built within 15 years
  • Owner-occupied buildings
  • “Granny” suites that could not be sold independently of the primary house on a property

What Cities Have Rent Control In California?

Many cities in California have rent control laws. Those laws may be more restrictive to the state’s laws, so it is important to be aware of both sets of rules. The following cities currently have rent control ordinances:

  • Alameda
  • Berkeley
  • Beverly Hills
  • City of Commerce
  • Culver City
  • East Palo Alto
  • Gardena
  • Hayward
  • Inglewood
  • Los Angeles
  • Unincorporated Los Angeles County
  • Los Gatos
  • Mountain View
  • Oakland
  • Palm Springs
  • Richmond
  • Sacramento
  • San Francisco
  • San Jose
  • Santa Monica
  • Thousand Oaks
  • Vallejo
  • West Hollywood

How Many Days Notice Must Be Given For Rent Increase In California?

In California, the amount of time that must be given depends on the property type, lease type, and rent increase amount:

  • 90-day notice for all increases over 10%
  • 60-day notice for all month-to-month or yearly leases with tenants that have lived there for more than one year
  • 30-day notice for all month-to-month leases for tenants that have lived there for less than one year
  • 30-day notice for all week-to-week leases

Local ordinances may require you to give more notice in specific situations, so it is important that you become familiar with your county or city’s landlord-tenant regulations as well as the state’s rules.

Can A Landlord Raise Rent After The Lease Expires In California?

Yes; you can raise rent after the lease expires. Holdover tenants are considered to have a month-to-month contract with you. This means you can increase rent by either 5% plus the local CPI or by 10%. You must give the tenant 60 days notice and can only increase rent twice a year.

Can A Landlord Terminate A Month-To-Month Lease Without Cause In California?

Unless you have a no-fault reason for terminating the lease such as moving into the property yourself, you cannot terminate a lease without cause.

Stay Informed With Rent Increase Law Changes

Rental laws are reformed every few years, and it is important you are aware of those changes. Even if you don’t know the latest requirements, you are still responsible for following the rules, and any missteps will be your responsibility as well.

Remember:

  • There are new limits on how much you can increase rent.
  • You must give the appropriate amount of notice.
  • Some local cities have stricter increase rules, and those take precedence.

The best way to stay informed about local rental rules is to make connections with local landlords and government officials. From there, you will be more in the loop on all rental communication!