Los Angeles Real Estate Report

Gov. Newsom this past weekend signed a bill that amends some of the tenancy termination rules under the California Tenant Protection Act of 2019.

The bill, SB 567 by Sen. Maria Elena Durazo, D-Los Angeles, will alter the requirements for performing two specific types of “no fault” tenancy terminations that are regulated under the existing state law. The SB 567 changes are set to take effect April 1, 2024.

To assist rental property owners in navigating these changes, CAA will offer supporting documents, such as Industry Insight updates and forms, as the effective date of the new requirements draws.

Background

The Tenant Protection Act of 2019, created by AB 1482, instituted a statewide “just cause” standard that requires landlords of covered properties to, in most cases, have a specific reason to terminate a tenancy. Typically, where a tenancy is being terminated for a reason that is not a fault of the tenant, the landlord is required to pay relocation expenses to the tenant.

The 2019 law also capped annual rent increases on some rental property at 5% plus the change in the consumer price index, not to exceed 10%.

Most single-family homes, condominiums, certain owner-occupied duplexes, and newer rental housing are exempt from the law’s requirements, though in the case of single-family homes, a mandatory notice must be given for the exemption to apply.

Senator Durazo argued that SB 567 would close “loopholes” that some landlords were exploiting by moving tenants out and raising rents on new tenants without fulfilling the stated reasons listed in the termination notice. When first introduced, SB 567 not only imposed stricter requirements on evictions, it attempted to lower the rent cap. CAA successfully forced that language out of the bill, keeping the existing AB 1482 rent caps in place and securing other amendments to keep the eviction rules from going too far.

SB 567 does not change the existing law that applies the just-cause provisions only to tenants who have occupied the property for at least 12 months. And just like the existing law, this occupancy period extends to 24 months if additional adult tenants are added to the lease before the existing tenant has occupied the residential real property for 24 months.

New regulations for substantial remodel of a rental unit

Since its inception, the Tenant Protection Act of 2019 has allowed for an owner to recover possession of a rental unit to substantially remodel it. SB 567 doesn’t change that; owners can still end a tenancy if they plan to substantially remodel the unit. What is new is that owners who exercise this right must now include specific language in the termination notice regarding the work to be performed and the tenant’s right to reoccupy the property if the work isn’t commenced or completed. The new changes also require copies of any required permits for the work to be provided with the notice to the tenant as well. Finally, the legislation requires the notice to tell the tenant that if they are interested in reoccupying the unit following the substantial remodel, the tenant must tell the owner and provide contact information to the owner.

Changes to owner move-in rules

SB 567 also amends the provision in the Tenant Protection Act that permits an owner or their family member, as defined, to move into a unit.

In short, the new requirements more specifically state who qualifies as an “owner” for the purposes of an owner move-in and sets new residency requirements. Owners who hold their properties as individuals (with family members), in family trusts, and in some cases, through a partnership or LLC, can all qualify under the legislation to exercise the “owner move-in” option.

The legislation also sets timeframes for how quickly the owner or their family member must move in and how long they must reside in the unit. The intended occupant must reside in the unit for at least 12 months and must move in within 90 days after the tenant leaves.

Finally, SB 567 adds penalties against rental property owners who violate the law. In the coming months, watch for background papers and forms to aid in compliance.

About the Author

Barrentine Group is a dedicated team of real estate professionals committed to guiding clients through every step of the buying and selling process with integrity and care. Known for their expertise, innovation, and focus on consumer education, they provide trusted insight in today’s ever-changing real estate market. With a client-first philosophy and a commitment to clear communication, the Barrentine Group measures success not by accolades but by the satisfaction and lasting relationships built with the clients they proudly serve.

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