California is notorious for enacting more new laws every year than any other state. Every year, the California legislature introduces hundreds of bills that are discussed, voted on, and then signed into law. Many of these bills directly impact the rental housing industry. With all the changes in law from year to year, it is sometimes hard to keep up. That is why our lobbying team created this end-of-the-year guide, to keep our members apprised of the ever-changing laws and regulations impacting our industry.
This year, our lobbying team, the California Political Consulting Group (CalPCG), identified and tracked over 156-rental property related legislative bills out of 2772 total bills that were introduced in the California Legislature. Among the tracked bills, only about 43 were considered “top priority” bills—those that have the potential to immediately impact rental housing providers or the residential rental property industry in some significant way.
Of the top priority bills, only one with potentially negative consequences for the rental housing industry was signed into law: Assembly Member Chiu’s AB 2819, which hides unlawful detainer filings from public view. All other significantly harmful rental housing bills failed passage, including AB 2502, which would have adopted price controls on rental housing. Overall, despite another year of legislative attacks on the rights of rental property owners, our lobbying team successfully helped to defeat the worst bills, while obtaining substantial amendments on all other bills of importance.
The bills described in this Rental Property Owner and Mangers Guide are rental housing related bills that were signed into law in 2016. Some of the bills we supported, some we remained neutral, and some we opposed initially but moved to a neutral position after the author took significant amendments.
Note: Unless otherwise noted, all bills discussed herein become effective on January 1, 2017.
2016 LEGISLATIVE BILLS SIGNED INTO LAW
AB 551 (Nazarian) Bed Bugs: The bill establishes new rules for addressing rental housing bed bug problems. Originally, the bill contained a host of unreasonable regulations on property owners, including a requirement to inform tenants of bed bug problems, regardless of how long ago the problem occurred. It proscribed unreasonable timelines for eradicating bed bugs. It also made owners liable for bed bug infestations that were caused by tenants. After much negotiation and advocacy by our lobbying team, the author made significant amendments.
The law will require new leases and month-to-month rental agreements to include specific notice regarding bed bug identification, behavior, and biology and it will stress the importance of cooperation for prevention and treatment on and after July 1, 2017. All current tenants must receive the same disclosure notice by January 1, 2018. Our rental and lease agreements will be amended to include the disclosure requirement. A new bed bug addendum form will be added to the library of forms.
The new law also prohibits an owner from showing, renting or leasing any vacant dwelling unit that the owner knows has a current bed bug infestation, and prohibits owners from retaliating against a tenant for reporting a suspected bed bug infestation. The law does not impose a duty of an owner to inspect a dwelling unit or the common areas for bed bugs if the owner does not have notice of a suspected or actual infestation. After a unit has been inspected by a pest control operator (PCO), owners must notify the tenant of the unit of the PCO’s findings. The notification must be in writing and made within two business days of receipt of the PCO’s findings. All tenants must be notified when a bed bug infestation is found in a common area. Finally, tenants must cooperate with the inspection to detect and treat for bed bugs.
AB 1750 (Dodd) Environmental Hazard Disclosures: The new law encourages, but does not require rental property owners and managers to provide their tenants with a booklet about common property-related environmental hazards. The booklet, entitled “Residential Environmental Hazards: A Guide for Homeowners, Homebuyers, Landlords and Tenants,” was created by the state, and provides useful information on common environmental hazards like asbestos, radon gas, lead-based paint, formaldehyde, fuel and chemical storage tanks, and water and soil contamination. The booklet, which has been used in single-family home real estate sales transactions for more than two decades, contains important information about common environmental hazards. Should owners and managers decide to deliver the environmental hazards booklet, the potential to provide misleading, inaccurate or wrong descriptions, definitions, or guidance about those hazards will be minimized. Additionally, owners and managers should be aware that the content of issues addressed in the booklet is deemed sufficient and no additional information is required to be disclosed. It should be noted, however, that providing the booklet does not relieve an owner or manager of his or her duty to notify tenants of any known harmful hazard on the property and does not permit the owner and manager to rent an uninhabitable dwelling. The booklet will be available through the Association or at the following website: https://www.cdph.ca.gov/HealthInfo/environhealth/Documents/Radon/2011HazardGuide.pdf
AB 1928 (Campos) Landscape Irrigation Equipment: Under the bill, new landscape irrigation equipment standards will go into effect by January 1, 2019. The new standards involve new manufacturing labeling requirements, and ensuring that new irrigation equipment that is sold after the effective date established by the California Energy Commission (CEC) is water efficient. The bill ultimately establishes efficiency standards to help the consumers conserve water. To date, the CEC has not adopted regulations on landscape irrigation performance standards or labeling requirements because money has not been made available. The 2016-17 state budget contains $30 million for the CEC to implement the Water Energy Technology Program, which will provide funding for the development of innovative water saving technologies.
AB 1934 (Santiago) Development Bonus: The bill establishes a “bonus” for commercial developers that partner with an affordable housing developer to construct affordable housing projects. Bonuses include density bonuses and regulation waivers and variances. Should a commercial developer partner with a housing developer through a joint project or two separate projects that have affordable housing, the local governments must grant the developer a development bonus. A development bonus could include: a 20% increase in maximum allowable intensity; a 20% increase in maximum allowable floor area ratio; up to a 20% increase in maximum height requirements or parking requirements or an exception to a zoning ordinance or other land use regulation.
AB 2093 (Steinorth) Certified Access Specialist (CASp) Inspections: CASp inspectors are licensed professionals who inspect properties to ensure that properties are in compliance with disability access laws. A CASp inspection can help minimize a property owner’s exposure to disability access liability. The bill requires commercial property owners or lessors to state on every commercial lease form or rental agreement executed on or after January 1, 2017, whether or not a CASp specialist has inspected the premises. Commercial property includes mixed-used developments that contain residential rental units. While CASp inspections are not currently mandatory for residential or commercial property, they may be soon. This bill represents the State’s continued effort toward ensuring CASp inspections become the norm.
AB 2228 (Cooley) Code Enforcement Certifications: Requires the Board of Directors of the California Association of Code Enforcement Officers (CACEO) to develop and maintain standards to become a Certified Code Enforcement Officers (CACEO). Standards include minimum training, qualifications, and experience requirements to become certified. These CCEOs will have enforcement authority for health, safety, and welfare requirements, whose duties will include enforcement of a statute, rule, regulation, or standard, and who will be authorized to issue citations or file formal complaints. CCEOs are a new class of code enforcement officers, with heightened powers, but also with more training and oversight.
AB 2299 (Bloom) & SB 1069 (Wickowski) Accessory Dwelling Units (ADU): An ADU, previously known as “in-law” units or “granny flats,” are additional living spaces on single-family lots that have a separate kitchen, bathroom, and exterior access independent of the primary residence. These bills require local governments to permit property owners to build ADUs in single-family and multifamily residential zones, so long as the ADU meets specific standards defined in the bill. Those standards include, but are not limited to, parking, height, setback, lot coverage, landscape, architectural review, and maximum size of a unit. As long as the standards are met, local cities and counties are required to approve the ADU. Property owners, who are interested in adding an ADU to their property, consult an attorney.
AB 2362 (Chu) Notice of Pesticide Use in Common Interest Developments: Requires a homeowner association in a common interest development to provide owners or tenants with advance written notice whenever over the counter pesticides are applied to the affected separate interest(s) (dwelling(s)) or to the common area without a licensed pest control operator. That notice must specify: the pest or pest to be controlled, name and brand or the pesticide product proposed to be used, the approximate date, time and frequency with which the pesticide will be applied and a statement regarding the toxicity of pesticides. The association or agent is to provide the notice at least 48 hours prior to the application if the pesticide is to be applied to the separate interest however it the pest poses an immediate threat to health and safety, thereby making compliance with the notification unreasonable the association or agent shall post the notice as soon as practicable but not later than one hour after the pesticide is applied. If the case of the pesticide being applied to the common area, the bill requires an association or its agent to post the notice in a conspicuous place in or around the common area in which the pesticide is to be applied. The content of the notice is very specific and is stated in the new state law. The new law does authorize the association or agent to agree orally to an immediate pesticide application if the tenant requests and the association or agent agrees the pesticide be applied before the 48 hour notice. In situations where the rental is in a CID, lease agreements should specify how and who is to provide the tenant notice. Additionally, the owner should notify the homeowner association or association manager who should be notified if a pesticide is to be used.
AB 2406 (Thurmond) Junior Accessory Dwelling Units: The bill permits local governments to establish laws for the creation of “junior accessory dwelling units” (JADU) in single-family residential zones. A JADU is a unit that is no more than 500 square feet in size contained entirely within an existing single-family structure. A JADU may include separate sanitation facilities, or may share sanitation facilities with the existing structure. A JADU may include a separate entrance, and sound attenuation. Efficiency kitchens are required, where the kitchen must include a sink, cooking facility with appliances, food preparation counter, and prohibits a local government ordinance from requiring additional parking as a condition of granting a permit.
AB 2442 (Holden) Density Bonus for Constructing Housing For Certain Groups: Requires local governments to grant a density bonus when a housing developer agrees to construct housing for transitional foster youth, disabled veterans, or homeless persons.
AB 2476 (Daly) Notice of Parcel Tax to Non-Resident Property Owners. The new law requires local agencies, including cities, counties, special districts and school districts, to provide a specified notice of a new parcel tax to non-resident owners within 30 days following a legislative body’s vote to place the proposed tax on the ballot.
AB 2501 (Bloom) Density Bonus Application Time: Requires local government to adopt procedures and timelines to streamline the density bonus process. The new procedures include providing a list of all documents and information required to be submitted with the density bonus application, and notifying the applicant for a density bonus whether the application is complete. The bill also prohibits a local government from conditioning the submission, review, or approval of an application on the preparation of an additional report or study that is not otherwise described.
AB 2515 (Weber) Water Efficient Landscaping: The bill ensures that regulations regarding water efficient landscaping are current and updated every three years. Specifically, it requires the Department of Water Resources to update the model water-efficient landscaping ordinance every three years, or make a finding that an update to the model ordinance is not a useful or effective means to improve landscape water use efficiency. This could have a profound impact on property owners who repair, remodel or improve exterior landscaping.
AB 2819 (Chiu) Hiding Unlawful Detainer Records from Public View: Previously, unlawful detainers (UD) court filings were masked, or hidden from public view for 60 days following the initial court filing, and then were automatically unmasked and made public on credit reports unless the defendant prevails within the 60 day period. Under the new law, all UD filings will be permanently masked unless the rental property owner prevails at trial or a default judgment is obtained, because few UDs go to trial, and property owners rarely go back to court to obtain a default judgment, most UD filing records will remain hidden from public view. The permanent masking of this information will hinder rental property owners’ ability to assess a prospective tenants history of making or not making timely rent payments. Without an accurate record of UD filings, owners will have to consider new ways to assess the creditworthiness of an applicant’s rental payment history, including asking for bank statements and returned checks. Owners may also want to consider as an industry whether to adopt new reporting processes, in which owners report to the credit bureaus every time a tenant is late paying his or her rent. Individualized reporting would help fill a void created by this new masking law. A Q&A will be written on the new law and will be available within the next 30 days.
AB 2820 (Chiu) Price Gouging: The bill revises the definition of state of emergency and local emergencies for the purpose of criminal price gouging—increasing prices, including residential rental rates and towing services by more than 10 percent. The bill initially defined a “state of emergency” in such broad terms it could have included housing shortages and economic recessions resulting from policy decisions and regulation. Our amendments sharply limited the ability of a local government to declare a state of emergency and restrict rental increases. If that version of the bill passed, the State could have declared our recent recession as a state of emergency, and placed strict rent control on all residential rentals statewide. San Francisco would have been able to declare an emergency because of its housing shortage. State of emergency is not restricted and only applies to mean a natural or manmade emergency resulting from an earthquake, flood, fire, riot, storm, drought plant or animal infestation or disease, or other natural or manmade disaster.
Our lobbyists worked with the author to amend the bill to ensure that “emergencies” for the purpose of rent freezing, relates to natural and manmade disasters like earthquakes, floods, fires, riots, storms, droughts, and plant or animal infestation or disease.
AB 2873 (Thurmond) All Building Inspectors to Become CASp Inspectors by 2020: Under the bill, starting January 1, 2020, all city and county building inspectors employed or retained by a local agency who conduct permitting and plan check services to review for compliance with state construction-related accessibility standards by a place of public accommodation with respect to new construction or renovation, including, but not limited to, projects relating to tenant improvements that may impact access, must be by certified access specialists. Requiring all city building inspectors to become CASp inspectors will help make the inspection and permitting process more efficient. Because all buildings need to be disability access compliant, it makes sense that buildings inspectors be trained to ensure that the buildings they inspect are access compliant. To pay for the new mandate, the bill increases the fee from January 1, 2017 through December 31, 2019 for an application for a local business license from $1 to $4, however, in no case will the fee be less than $1 per business license on an indefinite basis.
SB 7 (Wolk) Submetering and Residential Utility Billing Service Requirements. On January 1, 2018, water submeters are to be installed in new multifamily construction or mixed used commercial properties. In addition, tenants that are to be billed for actual water use through submeters are to receive a specified notice at point of rent concerning the billing and are to receive notice about water usage on each water bill. Owners will be permitted to charge up to $4.75 per bill for administrative processing. Repair and replacement of water related drips and leaks are to be completed within 21 days. Remedies for non-payment are restricted. Billing for excessive water use is defined. Deductions from a tenant’s security deposit will be permitted if the tenant fails to pay his or her water bill. Grace periods to pay water bills are defined. Limitations on late payment fees are specified. The bill only applies to owners that have submeters.
SB 269 (Roth) Technical Violations of Disability Access Laws: The bill allows qualifying small businesses to avoid liability for minor “technical violations” of disability access laws if they correct the violations within 15 days. “Technical violations” include certain interior signs (other than directional signs or signs that identify the location of accessible “elements, facilities, or features”), lack of certain exterior signs (other than parking signs and directional signs that indicate accessible pathways or entrance and exit doors), and the order in which parking signs are placed, the color of parking signs, the color of parking lot striping, faded or damaged paint on otherwise compliant parking spaces, and others. The new law states that the above presumption of limited immunity affects the plaintiff’s burden or proof and is rebuttable by a preponderance of the evidence showing that the plaintiff did experience difficulty, discomfort, or embarrassment of the particular occasion as a result of one or more of the technical violations. The bill also protects certain businesses in certain conditions from paying minimum statutory damages for construction-related accessibility claims made during the 120-day period after a CASp has inspected the business.
SB 814 (Hill) Water Conservation: The bill prohibits excessive water use during periods of drought emergencies by metered residential customers in single family homes and multi-family properties where each unit is individually metered or submetered “by the urban retail water supplier.” Our amendments assure that penalties will not apply to multi-family properties where each unit is not separately metered or where each unit is submetered and the owner bills water to the tenant. It also requires water suppliers to implement ways to discourage excessive water use, including rate hikes, block tiers, water budgets, and rate surcharges.
SIGNIFICANT PROPOSED STATE REGULATIONS
Although no new housing regulations were adopted in 2016, there are some significant housing regulations that are being proposed.
Support Animals: The State’s housing agency, Department of Fair Employment and Housing (DFEH), is proposing broad new regulations requiring rental property owners to allow tenants to have “emotional support animals” (ESA) of all breeds and types to live with them in their units. An ESA is an animal that provides emotional support to persons with disabilities who have a disability-related need for such support. Although federal regulations already proscribe rules requiring owners to make reasonable accommodations to allow tenants to have ESAs living with them, DFEH’s proposal is concerning because of how broad the right to have an ESA is under the proposal, and the limited to nonexistent authority owners have to deny a support animal request when the animal poses a threat to health and safety of other tenants, and to the property. Our lobbying team has been involved with the ongoing discussions on the state level, and will keep the association updated on its progress.
Occupancy Limits: DFEH is also proposing new occupancy limits and standards. Occupancy limits the maximum number of tenants per unit an owner can establish. Currently, the occupancy limits are based on what is “reasonable.” Unofficially, reasonable occupancy limits in California is two persons per bedroom plus one additional tenant. The proposed new occupancy standards, however, would require owners to allow up to 15 people in a three-bedroom apartment. Apartments and neighborhoods are simply not built to withstand the impact of allowing 15 people per apartment unit. Our lobbyists have and will continue to be involved at the state level to find reasonable solution to address the State’s occupancy concerns.
Criminal Background Screening: New regulations are being adopted with respect to employment criminal background screening procedures and rules. The rules include delaying background checks at least until after the first level of screening has been completed. Although no current regulations are being proposed with respect to screening tenants for residential units, we are likely to see movement in that are in the next few years.
The information provided herein is intended to provide general guidance and awareness on recently passed state laws and regulations and shall not be construed in any way as a substitute for individual legal advice. Those that require specific advice should consult an attorney.
Information courtesy of the East Bay Rental Housing Association (ebrha.com), located in Oakland, California.