It is a big deal but it is like pissing in the wind - nothing anyone can do about this.
AB 1482 (what you are talking about) coupled with the 2020 ballot measure to roll back prop 13 for commercial properties is a no-win for property investors and landlords in California. I am in the process of liquidating all my California holdings.
https://ballotpedia.org/California_Tax_on_Commercial_and_Industrial_Properties_for_Education_and_Local_Government_Funding_Initiative_(2020)
Heck LA County just approved a rent control ordinance. https://abc7.com/politics/los-angeles-county-rent-control-ordinance-approved/5529287/
In reality, your property taxes and could annually go up over the 5% rent cap and expenses will go far beyond that. Your ROI will be negative - not a good business model.
But the good people of California elected these fools, now everyone will pay the price.
Rent control is quickly becoming a global phenomenon in major cities!
For those of you with time on your hands (inevitably landlords who have benefited from this same phenomenon ;), this is a very interesting, and telling article. (Or to put it to song- “You say you want a re-vo-lu-tion...”
Help interpreting the legalese:
(A) (i) Intent to occupy the residential real property by the owner or their spouse, domestic partner, children, grandchildren, parents, or grandparents.
(ii) For leases entered into on or after July 1, 2020, clause (i) shall apply only if the tenant agrees, in writing, to the termination, or if a provision of the lease allows the owner to terminate the lease if the owner, or their spouse, domestic partner, children, grandchildren, parents, or grandparents, unilaterally decides to occupy the residential real property. Addition of a provision allowing the owner to terminate the lease as described in this clause to a new or renewed rental agreement or fixed-term lease constitutes a similar provision for the purposes of subparagraph (E) of paragraph (1).
Does this mean I have to add this to our lease and get tenants to sign it if I want to preserve the right to terminate tenant occupancy to have my family occupy the unit? That is my interpretation. Our RE lawyer who wrote our lease died a while back. If my interpretation is correct, does anyone have appropriate wording they can provide?
Thanks
This is the exact language in the bill and is required to be included in leases executed after 7/1/2020 to preserve the exemption. For pre-existing leases, I think you can do it by written notice or by lease:
“This property is not subject to the rent limits imposed by Section 1947.12 of the Civil Code and is not subject to
the just cause requirements of Section 1946.2 of the Civil Code. This property meets the requirements of
Sections 1947.12 (c)(5) and 1946.2 (e)(7) of the Civil Code and the owner is not any of the following: (1) a real
estate investment trust, as defined by Section 856 of the Internal Revenue Code; (2) a corporation; or (3) a
limited liability company in which at least one member is a corporation.”
Help interpreting the legalese:
(A) (i) Intent to occupy the residential real property by the owner or their spouse, domestic partner, children, grandchildren, parents, or grandparents.
(ii) For leases entered into on or after July 1, 2020, clause (i) shall apply only if the tenant agrees, in writing, to the termination, or if a provision of the lease allows the owner to terminate the lease if the owner, or their spouse, domestic partner, children, grandchildren, parents, or grandparents, unilaterally decides to occupy the residential real property. Addition of a provision allowing the owner to terminate the lease as described in this clause to a new or renewed rental agreement or fixed-term lease constitutes a similar provision for the purposes of subparagraph (E) of paragraph (1).
Does this mean I have to add this to our lease and get tenants to sign it if I want to preserve the right to terminate tenant occupancy to have my family occupy the unit? That is my interpretation. Our RE lawyer who wrote our lease died a while back. If my interpretation is correct, does anyone have appropriate wording they can provide?
Thanks
This is the exact language in the bill and is required to be included in leases executed after 7/1/2020 to preserve the exemption. For pre-existing leases, I think you can do it by written notice or by lease:
“This property is not subject to the rent limits imposed by Section 1947.12 of the Civil Code and is not subject to
the just cause requirements of Section 1946.2 of the Civil Code. This property meets the requirements of
Sections 1947.12 (c)(5) and 1946.2 (e)(7) of the Civil Code and the owner is not any of the following: (1) a real
estate investment trust, as defined by Section 856 of the Internal Revenue Code; (2) a corporation; or (3) a
limited liability company in which at least one member is a corporation.”
@Dan H. did you look up the actual language of the bill, I thought i saw it there. I remember seeing that specific text Somewhere.
I cut the text of my question directly from regulation and did not see it there and I have gone over the regulation a couple of times trying to answering various questions. There are quite a few holes in various areas.
Has anyone heard about the US Treasury changing underwriting rules for multifamily? Weird to see "good policy" in the form of an attack.
Treasury Plans To Restrict Multifamily Lending In Areas With Rent Control
@Matt R. The activists aren’t done yet
This is true as this was defeated at the ballot box already and they just circumvented voters. CA Gov. workers at work.
Need help interpret this soon to be law. Does this new rent cap apply to section8 units? I have 3 of my unites under section 8 and I am about $500 below the market
Here is the text on the bill
Housing restricted by deed, regulatory restriction contained in an agreement with a government agency, or other recorded document as affordable housing for persons and families of very low, low, or moderate income, as defined in Section 50093 of the Health and Safety Code, or subject to an agreement that provides housing subsidies for affordable housing for persons and families of very low, low, or moderate income, as defined in Section 50093 of the Health and Safety Code or comparable federal statutes.
This section shall not apply to the following residential real properties:
(1) Housing restricted by deed, regulatory restriction contained in an agreement with a government agency, or other recorded document as affordable housing for persons and families of very low, low, or moderate income, as defined in Section 50093 of the Health and Safety Code, or subject to an agreement that provides housing subsidies for affordable housing for persons and families of very low, low, or moderate income, as defined in Section 50093 of the Health and Safety Code or comparable federal statutes.
If my understanding is correct this part of the bill refers to section8 units being exempt, am I right?please help I am new to this thing. Thanks.
@Bryan Souza holy smokes, that is totally f-ed up, and I smell major lawsuit, etc. coming up.
Given that condos are exempt from the state rent control bill, and the fact that FHA is relaxing its financing requirements for condos, I expect there will be more buyers for condos. Here in Sacramento condo prices have not recovered their previous peak in 2005. If interest rates continue to be low, I should think that the condo prices will continue to increase.
n reality, your property taxes and could annually go up over the 5% rent cap and expenses will go far beyond that. Your ROI will be negative - not a good business model.
I don't understand this. Elsewhere in the thread I was told an 800k house will be worth 650k to a bank, but you're saying it will be re-assessed much higher, arbitrarily. If the government is just making the assessment up, nothing would stop the property tax from doubling arbitrarily no matter what the market or capped rent is.
But the good people of California elected these fools, now everyone will pay the price.
XD so truuuu, everyone except those damned tenants!!!!
Given that condos are exempt from the state rent control bill, and the fact that FHA is relaxing its financing requirements for condos, I expect there will be more buyers for condos. Here in Sacramento condo prices have not recovered their previous peak in 2005. If interest rates continue to be low, I should think that the condo prices will continue to increase.
I have a condo built in the 1970s. Would that be exempt? That was not clear from the recent articles...
Given that condos are exempt from the state rent control bill, and the fact that FHA is relaxing its financing requirements for condos, I expect there will be more buyers for condos. Here in Sacramento condo prices have not recovered their previous peak in 2005. If interest rates continue to be low, I should think that the condo prices will continue to increase.
I have a condo built in the 1970s. Would that be exempt? That was not clear from the recent articles...
I think most all SFHs,Condos and Townies are exempt but double check that and or if held in LLCs?
Given that condos are exempt from the state rent control bill, and the fact that FHA is relaxing its financing requirements for condos, I expect there will be more buyers for condos. Here in Sacramento condo prices have not recovered their previous peak in 2005. If interest rates continue to be low, I should think that the condo prices will continue to increase.
I have a condo built in the 1970s. Would that be exempt? That was not clear from the recent articles...
I think most all SFHs,Condos and Townies are exempt but double check that and or if held in LLCs?
Here is the exact text from the regulation that would exclude a condo if owned by an individual (or an LLC IF the LLC does not have a corporation as a member) regardless or age of the condo. This is cut from the section on what is excluded.
(8) Residential real property that is alienable separate from the title to any other dwelling unit, provided that both of the following apply:
(A) The owner is not any of the following:
(i) A real estate investment trust, as defined in Section 856 of the Internal Revenue Code.
(ii) A corporation.
(iii) A limited liability company in which at least one member is a corporation.
The landlord, however, is required to notify the tenant that the unit is not bound by the rent control and the regulation provides the exact wording to be used:
“This property is not subject to the rent limits imposed by Section 1947.12 of the Civil Code and is not subject to the just cause requirements of Section 1946.2 of the Civil Code. This property meets the requirements of Sections 1947.12 (d)(5) and 1946.2 (e)(8) of the Civil Code and the owner is not any of the following: (1) a real estate investment trust, as defined by Section 856 of the Internal Revenue Code; (2) a corporation; or (3) a limited liability company in which at least one member is a corporation.”
@Edit B. The point of the law is to limit home sale prices. Couldn't that translate to lower property taxes and lower rent and still turn a profit? Not for you... but for the next buyer.
@Mike Franco "College students have financial aid and mommy and daddy..."
This. This is the problem. This is why we have calls for price controls. Keep thinking like that and you'll find yourself regulated out of business.
@Edit B. The point of the law is to limit home sale prices. Couldn't that translate to lower property taxes and lower rent and still turn a profit? Not for you... but for the next buyer.
It may lower multi family RE prices that have let their rents get behind market, but these are typically purchased by investors. SFR are exempted. SFR are what pulls up the investor property prices because people buying their own home typically do not run numbers to see if financially it is the smart option. The multi family that have rents set to market will be doing great raising rents 7.5% (assuming local inflation of 2.5%). Eventually those below market rent will be able to get their rents up to market rent because 7.5% increases will get them there (everyone below market rent should be expecting max rent increase because it is the only way the owner can maintain the value of their property).
In coastal So Cal, an RE purchased today (and prior to this regulation) at market price is cash flow negative. They rely on rent increase to make any money on the investment. So the rent increase will happen but the incentive to provide tenants nice rentals is now lower especially if the rent is below market rent. If I had any rentals a huge amount behind market rent, the only repairs I do are those that I am legally required to do and those that not doing would result in further costs (and I may be selective in those because a repair that requires a tenant to move out is a valid reason for terminating a tenant by the regulation so a unrepaired roof leak that results in further damage could provide the means to get rid of a below market tenant).
This law is all about political showmanship, than truly helping tenants...
5% annual increase is more than what most landlords are doing in reality... One month's rent to evict is not that bad either....
The reason SF rent control is so tough is becasue eviction in SF costs between 40~60 months of rent
Given that condos are exempt from the state rent control bill, and the fact that FHA is relaxing its financing requirements for condos, I expect there will be more buyers for condos. Here in Sacramento condo prices have not recovered their previous peak in 2005. If interest rates continue to be low, I should think that the condo prices will continue to increase.
I have a condo built in the 1970s. Would that be exempt? That was not clear from the recent articles...
According to the text of the law :
(8) Residential real property that is alienable separate from the title to any other dwelling unit, provided that both of the following apply: .....
SFRs and condos are exempted provided that they are owned by mom and pop investors.
Hope that helps