This is the second post in a series of interviews with Paul Getty, founder and CEO of First Guardian Group in which we sat down to explore his insights on California’s new Tenant Protection Act of 2019, known as California AB1482, and how he believes the legislation will impact investment property owners.
Q. Paul, what are some of the key provisions in AB 1482?
A. First, it’s worth noting up front that the provisions in AB1482 are not all that bad upon first view. For example, the limitation on a rent cap is fairly generous. It basically says you can have an annual rent increase of 5% plus the CPI inflation rate – the Consumer Price Index – which is a published rate you can find online. The provision states the combination of those two cannot exceed 10% per year. So, on the face of it that sounds quite generous, but here’s the problem.
Many landlords whom we work with, particularly those we refer to as “mom & pop” landlords, are quite fair and reasonable with their tenants. They don’t want to raise rents on a frequent basis, because they’re fearful if they do, they may lose a good long-term tenant, and then have to deal with a potential bad tenant who moves in and presents a lot of headaches they don’t currently have. It’s not uncommon for landlords to lay low and not raise rents except for every few years. The problem with that now occurs when the landlord wants to sell the property. Since the value of the property is subject to the amount of rent that’s earned, and the landlord hasn’t raised rents in four or five years, then even a 10% allowable increase may not match current market rates and the value of the property upon sale will likely be far less than it could have been.
Another provision in AB1482 that is a significant concern of landlords has to do with what’s called, “just cause eviction.” This is a concept which limits the landlord’s ability to remove tenants. With this legislation, there are now a whole series of “do’s and don’ts” that landlords have to be very careful to follow, including providing written notification to all their tenants beginning in early 2020 that tenants have certain rights and that only under certain restricted conditions can they be evicted from property.
Altogether, it’s estimated the provisions in AB1482 will apply to approximately 8 million renters in California, which is sizable percentage.
Q. Are there any property types excluded from the act?
A. Yes, there are. A good number of the landlords we work with own single-family properties or single-family homes which they have bought and are now renting out. Fortunately for them, the single-family properties are excluded from AB1482 unless the ownership structure is a corporation or another type of entity that is different from an individual.
But, if landlords have a duplex, or quad-plex or any other type of property that has more than one unit, they will be subject to the requirements of AB1482.
In our next post, we’ll look closer at the AB1482 provision around eviction.
If you have any questions, please feel free to reach out to Paul directly at 866-398-1031 schedule some time on Paul’s calendar here.
Your Comments :