As you may know, the State of California legislature recently passed a law called the Tenant Protection Act of 2019 ("TPA") which imposes statewide restrictions on rent increases and termination of the tenancy with some properties being exempt. We have received many questions from clients as to how the new law applies to them. This post responds to some of the questions we have received from our clients.
Q: When terminating the tenancy based on no-fault, do I have to pay one-month relocation payment to every tenant or a fixed sum to be split by all the tenants?
A: The law only requires a relocation payment to be equal to one month's rent. You can either pay one month's rent to the tenant or you can waive the last month's rent. Assuming you are renting your property to two tenants for a total of $1,000 per month, when you decide to terminate their tenancy based on "no-fault just cause eviction" all you have to do is give the tenant sufficient notice and pay them $1,000 relocation fee or waive their last month rent. The tenants will split the $1,000. However, remember, if you live in a municipality with a rent control ordinance, the relocation requirement of the local ordinance may require more from the landlord, including possibly a larger payment than the state law would require.
Q: Do we know if the law applies to a single-family home with an illegal in-law unit as the second unit?
A: The TPA does not specifically address an illegal in-law suite. But if the owner does not live in one of the units, it looks like your property will not be exempt from the TPA unless other exemptions apply, such as the residential property that was built within the last 15 years. The key is whether or not there is more than one unit.
Q: Does the TPA or local ordinances, such as Ellis Act, apply when withdrawing the property from the rental market?
A: The TPA does not apply to residential real property subject to local ordinances requiring just cause for determination of a residential tenancy adopted prior to September 1, 2019. To directly answer your question, the Ellis Act will apply when withdrawing your residential real property from the rental market.
Q: Does the Property being held in an LLC qualify for an exemption if the LLC is a single member or family LLC?
A: A property will be exempt from the rent increase limitations and just cause eviction provisions under the TPA if the property owner is not a corporation or a limited liability company in which at least one member is a corporation. Therefore, if the LLC that holds title to your property has no corporation as member, then your property may be exempt from the TPA.
However, even if your property is exempt from the TPA, there are additional steps required to comply with this new law; such as to incorporate a clause into the lease in order to give a written notice to the tenants that the property they occupy is exempt from the TPA.
Q: Is it exempt from the TPA when a new owner purchased a single-family home or a duplex that was held in an LLC, but the new owner wants to live in?
A: This question requires a two step answer: 1) A single family home held by an LLC in which at least one member is not a corporation is exempt from the TPA; 2) A duplex in which the owner occupies one of the units as the owner's principal place of residence is exempt from the TPA so long as at the beginning of the tenancy the owner was already living in one of the units and continues to live in the property. For example, if the owner ceased to occupy one of the units, or the owner moves into one of the units after the tenants moved in, the property may not be exempt from the TPA.
The new law is complex and it's many nuances will likely be played out via litigation, to allow the Courts to determine the validity and scope of its provision. In fact, so many questions have been raised by readers of this Blog that we will address more in Part II of this series in a couple weeks.