Most of us don’t know much about the complexity and diversity of renter protection rules. But as Palo Alto gives them a closer look and voters statewide consider Proposition 10 that would eliminate major restrictions on local rent control rules, it’s time to get a better sense of the basics and where Palo Alto law stands.
Renter protections vary extensively by local jurisdiction, but they essentially fall into three main buckets reflecting increasingly more intensive regulation of the landlord-tenant relationship. The summary of key strategies below is drawn primarily from the Palo Alto Municipal Code and a September 23, 2015 County of San Mateo Interdepartmental Correspondence on the “Continuum of Residential Tenant Protection Measures.” The full county memo appears as Attachment A accompanying the Palo Alto Colleague’s Memo on renter protections. Click here for excerpts outlining commonly advanced pros and cons of policies regarding just cause eviction, relocation assistance, and rent stabilization.
Notice requirements, minimum lease terms, and mediation
Notice of Lease Termination
In California, state law sets a minimum standard of 30 days prior written notice of lease termination. Tenants who have resided in the rental unit for at least a year must be given 60 days prior written notice. Local governments are permitted to exceed that standard. Palo Alto has not done so.
Notice of Rent Increase
State law preempts local regulations regarding notice of rent increases, setting a statewide standard of at least 30 days advance notice if a proposed rent increase is less than or equal to ten percent of the rent charged at any time during the preceding year. If the proposed increase exceeds that ten percent, the landlord must give 60 days prior written notice.
Minimum Lease Terms
Palo Alto Municipal Code Section 9.68 requires that a tenant be offered a lease term of at least 12 months during which the rental rate cannot be increased. If the tenant rejects the offer of a one-year term, a shorter lease may be negotiated, but once that tenant has occupied the unit for 12 months, the landlord must again offer a 12 month lease. A 12 month lease must be offered annually, (or at the conclusion of a longer lease) but at the end of each lease term, the rental rate may be increased.
Mediation of Rent Increases
Some jurisdictions offer or require a mediation process to address certain rent increases or other landlord-tenant disputes. Palo Alto Municipal Code Section 9.72 defines a mandatory dispute resolution process (conciliation and mediation) that can be triggered by a written request from either tenant or landlord regarding rental rate increases, deposits, repairs and maintenance, utilities, occupants, parking and storage facilities, privacy, quiet enjoyment, or use of common areas.
Retaliatory acts or omissions against any party to the dispute resolution process are prohibited and, if identified within six months of the party’s participation, may be referred to the city attorney for remedial action. Every rental agreement must include notice of the right to mediation and protection from retaliation, including contact information for the city facilitator.
Palo Alto’s dispute resolution ordinance applies to any residential rental property that contains two or more units (except two-unit properties in which one of the units is owner-occupied) and any residential rental property when the owner owns two or more residential rental units anywhere in the city.
Just cause and relocation assistance
Just Cause Evictions
Palo Alto does not currently have a just cause eviction ordinance. Just cause eviction ordinances define a specifically enumerated list of reasons that permit a landlord to evict a residential tenant. They also often require a landlord to identify the grounds and supporting facts for the eviction. Typical examples include:
- failure to pay rent, damage to the property, creating a nuisance or interfering with other tenant’s safety or comfort, illegal activities, or unauthorized subtenants;
- new occupancy by owner, family member or resident manager;
- substantial renovations; or
- removal of the property from the rental market.
Many local governments require landlords to pay relocation assistance when an eviction is not the fault of the tenant (“no-fault evictions”). Such requirements typically include lump sum payments and/or relocation assistance services. Sometimes the payments are required for all no-fault evictions, other times they apply only based on certain types of eviction (such as to facilitate owner occupancy of the unit) or the status of the affected tenant (such as income or disability).
The emergency ordinance enacted in Palo Alto on August 27 requires a base relocation payment based on the size of the unit being vacated, ranging from $7,000 for a studio to $17,000 for 3 or more bedrooms. They will increase annually based on the Consumer Price Index (CPI). The base payments are set at approximately three times the current market rate for each type of unit, reflecting high start-up costs of a new tenancy, in addition to the cost of moving and potential lost wages. A single additional payment of $3,000 will be added where the unit is occupied by a low-income household or one or more tenants who is elderly, disabled, or a minor child.
To be eligible for relocation assistance under the emergency ordinance, a displaced residential household must have an annual household income that does not exceed one hundred (100) percent of the area median household income for Santa Clara County as adjusted for household size. Affordable housing developments are exempt and the emergency ordinance only applies to multi-family housing of 50 units or more. It is expected to impact approximately 25 parcels.
Rent stabilization ordinances take a wide variety of forms, but generally speaking they include some combination of limits on increased rents, limits on landlord conduct that has the effect of imposing a rent increase (such as reduction in services), or eviction controls. The implementation of a rent stabilization ordinance can be managed by a rent board or integrated into the jurisdiction’s staff responsibilities.
There are two forms of allowable local rent control in California. The least restrictive type (permanent decontrol) limits rent increases for units occupied at the time of adoption, but expires altogether as soon as those units become vacant. The other type (vacancy decontrol-recontrol) allows a landlord to set the initial rent, but limits increases as long as the same tenant occupies the unit. Once the unit is vacant, rents typically rise to the market rate which then becomes the new “base rent” on which the rent increase limits apply. All rent control ordinances “make some allowance for automatic periodic rent increase, and also for additional rent increases when required to ensure the landlord receives [a] fair rate of return.”
Because landlords can raise rents between tenancies, rent control alone can create an incentive for landlords to evict tenants for the very purpose of increasing rents. As a result, most rent stabilization ordinances include carefully crafted just cause eviction limits. For example, California’s Ellis Act gives landlords an almost absolute right to evict tenants for the purpose or exiting the rental business, but jurisdictions can still require relocation assistance in such cases and can potentially impose additional requirements should the landlord try to re-enter the rental market.
Evictions to allow owner occupancy are typically (though not always) considered just cause, but localities can impose requirements that the owner take occupancy within a certain period of time or that they maintain occupancy for minimum tenure. Finally, evictions for major renovations are often allowed, but some cities require the landlord to demonstrate that the evictions are actually necessary or require that the tenants be given a right to return following construction and even a comparable base rent, adjusting for amortized capital improvements.
Costa Hawkins Rental Housing Act
California’s 1995 Costa Hawkins Act imposed strict limits on the reach of local rent stabilization efforts. Under the Act, all housing built after February 1, 1995 and all single family homes and condominiums are exempt from local rent stabilization laws. Also, localities are prohibited from regulating the initial rent offered to a new tenant following a vacancy. Statewide Proposition 10, on the ballot this November, would repeal the Costa Hawkins Act, opening the door to much greater impacts from local rent stabilization rules.