Stay informed of the latest legal updates impacting California landlords and multifamily property owners in 2024! Join me for a discussion with attorney Anthony Marinaccio as he delves into the intricacies of SB 567 and AB 12, shedding light on critical changes affecting statewide rent caps, eviction provisions, and security deposit regulations. Don't miss out on this insightful discussion, essential for navigating the evolving landscape of property ownership laws.

Specifically, you will learn about:

(1) SB 567 – Increased damages a landlord could be liable for if rent is raised above the permitted statewide rent cap

(2) SB 567 – New criteria that must be met to comply with the “owner move-in” no-fault eviction provision of the Tenant Protection Act (AB 1482)

(3) SB 567 – New criteria that must be met to comply with the “substantial remodel” no-fault eviction provision under the Tenant Protection Act (AB 1482)

(4) AB 12 – Changes to the security deposit amount that landlords can collect

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*Transcript edited for clarity

Kiran Dhillon, SIG Commercial:

Hi everyone, welcome to our series, Simply Multifamily. My name is Kiran Dhillon, I am a Broker-Associate with KW Commercial specializing in multifamily sales. The purpose of this series is to highlight issues that affect owners of multifamily properties via market updates, investment insights, and interviews with trusted professionals. Today, we have the privilege of sitting down with attorney Anthony Marinaccio of Marinaccio Law regarding some of the new 2024 laws relating to real estate that affect landlords and owners of multifamily properties. Welcome back, Anthony. Thanks for being here.

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Anthony Marinaccio, Marinaccio Law:

Hi, Kiran. Nice to be here and thank you for having me.

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Kiran Dhillon, SIG Commercial:

Of course. The first new law that I'd like to talk about is SB 567 and the changes to the Tenant Protection Act, aka AB 1482. It's my understanding that there have been updates to both the rent cap provision and the no-fault eviction provisions. Is that correct?

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Anthony Marinaccio, Marinaccio Law:

That is correct. So as many landlords know, under the statewide law, there's a cap every year on the amount that you can raise rents.Currently it's 8.8%, however, prior to this year there was no enforcement mechanism. And now the law has changed slightly, well dramatically, in the sense that if you as a landlord illegally raise the rent more than what you should have, a tenant can seek that money back and possibly even treble damages, which would be three times that amount. For landlords that may have buildings in the City of LA, they might be aware of this law already, but now it's just statewide. So particularly if you did an illegal rent increase that was large,that was illegal in the last few years, you may want to recalculate the numbers and give the money back now as opposed to later.

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Kiran Dhillon, SIG Commercial:

That makes sense. And is there any distinction between landlords who were unaware and accidentally raised it too much versus landlords who did it willfully?

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Anthony Marinaccio, Marinaccio Law:

No. So unfortunately, lack of knowledge of the law is not a defense. That means that even if you did not know about it and you later find out, you could be liable, which means that you should make sure that you're compliant now. And so for example, like I said, this year it would be 8.8% and it's recalculated every July 1st.

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Kiran Dhillon, SIG Commercial:

And when does this law take into effect?

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Anthony Marinaccio, Marinaccio Law:

April 1st, 2024.

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Kiran Dhillon, SIG Commercial:

Okay, so people have a little bit of time to figure out if their increases were too high and correct that. And then what about the changes to the "no-fault eviction" provisions?

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Anthony Marinaccio, Marinaccio Law:

So, the two areas under no-fault evictions that are pretty common are the owner move-in and also the substantial remodel. Under the owner move-in, SB 567 clarified that the law now requires or will as of April 1st,certain language be added to notices. Now, the owner or the occupant that's supposed to move in has to move in within 90 days of the move out and also has to live there for at least one year.

Also, unlike before, you can't switch units. So if the owner lives in one unit, the owner cannot now move to another unit in the building. And if there is a vacant unit that's similar to the one that you want, you would have to use the vacant unit. You can't evict that tenant then.

Now if for example, an owner moves in and they only live there for six months, the owner may have to give back the unit to the tenant that they evicted and they would have to give it to them for the same price that the tenant was paying.

They may also have to reimburse the expenses that the tenant had in order to move out, which can be substantial. It's also important that the notices for the owner occupancy do include certain language regarding the move out and regarding moving back in and the relocation. So it's always very important that if you're doing your own notices, that you make sure that you use the most relevant and timely notices. I know a lot of people use old ones that are from years ago and then we can't use them because they're invalid. That would be a very good defense if the parties go to court.

And now the second type of eviction that is common is known as the substantial remodel. And under the substantial remodel provision,now it requires that the remodel be substantial enough that it would require the tenant to be out of the unit for more than 30 days. I generally think that that means it has to be to the building itself, electrical, or plumbing. It cannot be, for example, repainting the building or changing carpets or changing the flooring. It has to be substantial and it also has to require a permit. So now when you do the notice, you would need to make sure you have a copy of the permit, so obtain those permits beforehand. And also, you need to have some sort of description in the notice of the type of remodeling you intend to do,including some sort of schedule or plan that's required.

There are also further notice provisions that are required if the tenant wants to move back into the unit and to provide new addresses so that it's important again to make sure you have the right notice. And it's also important to have that plan and actually execute that plan once the tenant moves out. So for example, I've seen a lot of larger remodels meaning kitchens,bathrooms, or moving walls that are substantial altogether. I've also seen some that involve the whole building where you're redoing the piping in the whole building or electrical work or something like that, combined with other remodeling would get to that substantial remodel level.

It's also important for both that the new laws now actually have an enforcement mechanism, meaning that for example, if a landlord says they're going to move into the unit, or if they say their grandmother is going to move into the unit, that they actually move into the unit.

And if they don't, or if you don't do the remodeling that you had said you were going to do, the tenant could file a lawsuit for fraud and also for damages under this particular law for their out-of-pocket damages and multiply that by three, which can be substantial. I know I've seen some claims of moving that could cost $10,000 to $15,000 at a minimum. So multiply that with other damages and it can get pretty high. It's also important to note that for landlords in LA County, this only applies to incorporated cities that do not have stricter rent control laws. For example, right now, city of Los Angeles, West Hollywood, Santa Monica, Pasadena and this area all have stricter rent control laws or eviction control laws – stronger than the statewide limit and also unincorporated LA County.

If you're in those areas, you actually have to follow what's in the city laws or the local rules as opposed to the state law. If you're outside of LA County, most cities have not enacted their own rent control laws. So Orange County, Riverside and San Bernardino, I think only a few cities have so far, but in LA County, there are quite a few cities that have already enacted some. I believe Burbank has done so. Pomona recently had one, I think they just passed. It's getting more common, so you should check that to make sure. Even if you've been doing business a long time in that city,they may have changed the laws.

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Kiran Dhillon, SIG Commercial:

The notices for the owner move-in and the substantial remodel, how much time ahead of time do you have to give those?

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Anthony Marinaccio, Marinaccio Law:

Those have to be done at least 60 days in advance. You can always give more time, but you can't give less. And it is really important that you use the proper notice. I'm seeing that a lot with 3-day notices, and 60-daynotices right now, that people are using the same one that they found online from 10 years ago and they're just not valid anymore. So just make sure you do the right notice.

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Kiran Dhillon, SIG Commercial:

And now we can talk about security deposits.

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Anthony Marinaccio, Marinaccio Law:

Perfect. And so the law is changing July 1st, 2024.Current law says that you can charge two months’ rent as the security deposit for an unfurnished unit and up to three months’ rent for a furnished unit. The new law as of July 1st of this year will say that you can only charge one month's rent as a security deposit. So if the ad is incorrect, you could get calls from Fair Housing or people looking to start lawsuits for something as silly as charging more security deposit.

There is an exception: if an individual owns less than four units combined, you could charge more, except if the tenant is a service member. If the tenant is a service member, if they're active-duty service, then it goes back to one month.

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Kiran Dhillon, SIG Commercial:

Got it. So if somebody owns a duplex and a triplex and it's five units together, then that exception doesn't apply to them.

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Anthony Marinaccio, Marinaccio Law:

Correct. So for example, if you are an individual landlord and you have a back house, you can charge the higher amount if that's all you own, but as soon as you own more than two buildings, or if you own two buildings and more than four units, automatically you're going to be under that one month restriction. Also important, a lot of local cities do have a security deposit interest rates that might be charged. So it's always important to know that if you're in a city that does have rent control laws, there might be a charge for the interest for the security deposit.

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Kiran Dhillon, SIG Commercial:

And when does this security deposit law go into effect?

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Anthony Marinaccio, Marinaccio Law:

It would be July 1st, 2024.

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Kiran Dhillon, SIG Commercial:

So, if you are a landlord and you already have a lease and you collected the two months or three months of rent under the prior law, do you have to give it back?

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Anthony Marinaccio, Marinaccio Law:

You don't have to return it, but now starting July 1st,any current lease can only collect that one month’s rent as the security deposit.

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Kiran Dhillon, SIG Commercial:

So, the landlords have until the end of June, essentially,if they're renting out a unit to collect under that old scale of two or three months?

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Anthony Marinaccio, Marinaccio Law:

Exactly. Correct.

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Kiran Dhillon, SIG Commercial:

Great, well that pretty much wraps up our discussion for today. Anthony, thank you so much. There are a lot of new laws in 2024 relating to real estate and multifamily owners and landlords, but we wanted to keep it brief and get this information out. And then if people have questions about other laws that they've heard about, feel free to reach out to me. You can reach me at my email kiran@sigcommercial.com. And Anthony, I'm sure you're open to people reaching out to you with questions as well.

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Anthony Marinaccio, Marinaccio Law:

Sure, you can always call my office or email me if there are specific questions you have or notices that you'd like to serve.

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Kiran Dhillon, SIG Commercial:

And what's your office number?

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Anthony Marinaccio, Marinaccio Law:

My office number is (818) 839-5220.

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Kiran Dhillon, SIG Commercial:

Great, and I would highly recommend if anybody is in the process or planning to serve these notices to reach out to Anthony because you do want to make sure you're doing it correctly. If it's done incorrectly, not only is it invalid, but you could be on the hook for quite a bit of damages.

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Anthony Marinaccio, Marinaccio Law:

And the most important thing about the notice is make sure they're done correctly when you serve them. Because if you wait 60 days and then you have me look at it, what you don't want to hear is me to tell you they're wrong, start all over again. And then you have to start those 60 days all over again. There's no way to correct a bad notice except to serve a new notice. So it's always important to do it correctly the first time or have an attorney look at it when you first serve the notices as opposed to waiting if the tenant doesn't move out, and then having to show the notice to somebody.

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Kiran Dhillon, SIG Commercial:

So do it correctly the first time.

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Anthony Marinaccio, Marinaccio Law:

Correct. The first time. Otherwise you're going to be stuck waiting longer.

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Kiran Dhillon, SIG Commercial:

Do it right or do it twice, right?

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Anthony Marinaccio, Marinaccio Law:

That's right.

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Kiran Dhillon, SIG Commercial:

Alright, thank you Anthony.

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Anthony Marinaccio, Marinaccio Law:

Thank you, Kiran.

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