We want to dive further into the Tenant Protection Act of 2019, also known as the Rent Control Law. At New Bridge Management, we are constantly asked how this rent control law is going to affect property owners. We’re telling you a bit more about it in today’s blog.
Exemptions and Exclusions
Let’s start by discussing who this law will not affect.
If you are a single property owner, meaning that you have one investment property, this law will not impact you. Certain parts of it do, but the rent control portion does not affect you.
This law will also not affect you if you own a condominium or if you own a multi-family property that is less than 15 years old.
One final type of property owner this law will not affect is the owner of a duplex who lives in one unit. If you have a duplex and you live on one side of it and rent out the other side, you don’t have to worry about rent control.
Those of you in these categories can enjoy a big sigh of relief.
15-Year Impact and Multi-family Properties
There are a few details to understand with the 15-year multi-family property situation.
This is a rolling 15-year impact. This means that if your property was built 15 years ago, you are not impacted by rent control up until the time that the property is 14 years old. So, if the property was built 10 years ago, you have five years where the rent control cap will not impact you.
As you know from our previous blog, this law is expected to be in effect until January 1, 2030. It is a 10-year law that will sunset, so in five years the property that will turn 15 years old will be impacted by rent control.
Impact of the Consumer Price Index
Throughout the state, the rent control cap is 5 percent plus the consumer price index. Many owners have asked us where they find the consumer price index. This is a regional index that you are going to be looking at; not the national index.
Make sure that you pay attention and you look for your regional index. I know that in many smaller counties, we do not have a regional index and we look to Sacramento. Our consumer price index is at 3.34 percent currently. So, adding that to the five percent cap, we could increase rent by 8.34 percent. But, who wants to do the math on .34 percent? Just round it to 8 percent, and you will be safe and your tenants won’t feel like they are being gauged.
Rolling Back Your Rents
There’s some bad news if you have made rent increases throughout 2019 in anticipation of this law going into effect. The bad news is that on January 1, 2020, you must roll back the rent amount to what it was on March 15, 2019.
Please take a look at that and roll back your rents if necessary. Otherwise, some significant impacts could affect you negatively in the long run.
You must notify the tenants whether the property is being impacted by the rent control law or not. That notification has to go into place right away, so you should either create an addendum to your current lease and provide that information to your tenants, or have them sign a new lease. If you are going to have a new lease signed, the notification must be part of the lease.
We know this is complicated. If you have any questions regarding the rent cap control laws, do not hesitate to contact us at New Bridge Management.