Everything You Must Know About Rent Control: Los Angeles
This article addresses the concerns of landlords regarding rent increases. The Los Angeles City Council passed a new ordinance on June 2, 2023.
Increase notices must be posted on or before January 1, 2024 in order to be considered valid. We discuss what you need need to know.
As the Los Angeles rental market continues to evolve, property owners face a myriad of challenges and responsibilities, especially when it comes to navigating the intricacies of rent control regulations.
With upcoming changes on the horizon, staying informed and up-to-date is more crucial than ever. This article aims to empower you, as property owners, with a comprehensive understanding of Los Angeles’ rent control laws, providing insights into the current regulations while shedding light on recent and impending updates.
By keeping up with these developments, property owners can make informed decisions, ensure compliance, and foster a harmonious relationship with their tenants. Let us delve into the essentials and equip you with options on how to navigate these regulations with confidence.
What is the current rent control policy in Los Angeles?
– Rent Stabilization Ordinance (RSO)
The Rent Stabilization Ordinance is a local law enacted by the Los Angeles City Council that regulates rental housing to protect tenants from excessive rent increases and unjust evictions.
The RSO applies to a wide range of rental units, including replacement units, apartments, single-family homes, townhomes, condominiums, and duplexes, among others, in unincorporated Los Angeles County. (1)
It covers all rental properties built before October 1, 1978, and requires landlords to follow specific guidelines for rent hikes, imposing annual rent increase caps. Property owners must register their covered rental units with the Rent Stabilization Division and adhere to reporting and record-keeping requirements.
Additionally, the RSO mandates “just cause” for eviction, outlining legitimate reasons for removing tenants. The RSO provides tenant protections, promotes housing stability, and presents compliance obligations and exemptions for property owners in the city of Los Angeles.
– Just Cause for Eviction Ordinance (JCO)
The Just Cause For Eviction Ordinance in Los Angeles is a crucial component of the city’s tenant protection measures. Enacted to prevent unjust and arbitrary evictions, the JCO outlines specific legitimate reasons, or “just causes,” for landlords to evict tenants from a rent-controlled apartment and other covered rental units under the RSO.
This includes common just causes include:
- non-payment of rent,
- violation of lease terms,
- engaging in illegal activities, or
- causing substantial property damage
To evict a tenant for a just cause, landlords must follow a legally prescribed process, provide proper notice and documentation, and pay relocation fees for no-fault evictions. (2)
The JCO aims to maintain housing stability, protect tenants from retaliatory eviction, and prevent homelessness. As an integral part of Los Angeles’ tenant rights framework, the JCO ensures a fair balance between the rights and responsibilities of both landlords and tenants.
Rent control laws during the pandemic
– Tenant Protection Act of 2019
Assembly Bill 1482 (AB 1482), also known as the California Tenant Protection Act of 2019, was enacted on January 1, 2020, which established statewide rent control and eviction protections for rent-controlled tenants not covered by local ordinances.
Under AB 1482, landlords are subject to rent increase caps, limiting annual rent hikes to no more than 5% + local CPI (Consumer Price Index), or 10%, whichever is lower. The act also imposed restrictions on evicting tenants after they have lived in a unit for at least 12 months. (3)
AB 1482 sought to strike a balance between protecting tenant rights and providing some flexibility to property owners. It aimed to stabilize housing costs, prevent arbitrary evictions, and promote housing security for California’s renters in a time of escalating housing costs and limited supply.
– Eviction moratoriums
During the COVID-19 period, various eviction moratoriums were implemented at the local, state, and federal levels to protect tenants facing financial hardships due to the pandemic’s economic fallout.
The eviction protections are also applied in Los Angeles county which temporarily prohibited evictions for non-payment of rent or provided specific conditions for just cause evictions, ensuring that tenants could remain in their homes despite their inability to pay rent.
The Los Angeles RSO, which governs rent control and eviction regulations, was not suspended during the COVID-19 pandemic. It was initially intended to last for the duration of the local emergency period declared by the Mayor of Los Angeles due to the Covid-19 pandemic.
This period was then extended by several City Council resolutions to ensure that tenants in rent-controlled units remained protected as the pandemic’s financial impacts continued to evolve.
When can property owners apply rent increases?
Prior to the pandemic, landlords were typically allowed to raise the rent once every 12 months on the anniversary of the tenant’s move-in date, following a 30-day written notice. The annual allowable rent increase is pegged to the Consumer Price Index (CPI), ranging from 3% to 8% as allowed under the RSO.
Addressing landlords’ concerns about resuming normal rent increases, the Los Angeles City Council enacted a new ordinance on June 2, 2023.
Currently, the allowed increase is 7% rent plus 1% each for gas and electric.
This is according to the Los Angeles Renter Protection Notice, issued in accordance with Ordinance No.187737.
It is vital to emphasize that any rent increase notice issued during the emergency period or within 12 months after its conclusion must explicitly state that the rent increase will not take effect until after the moratorium period ends.
Landlords are also prohibited from implementing retroactive rent increases to compensate for the rent freeze period. As a result, the postponed rent increases must comply with the RSO’s annual limits applicable for the year in which the increase becomes effective, rather than being based on the years during which the increase was frozen.
A difficult chapter for property owners
Observing the set provisions in these ordinances adds to the weight of their concerns when it comes to rent control. Here are some of the obstacles investors may face after the eviction moratorium has been lifted:
- Bouncing back from financial losses
Owners are already taking the toll with past due rent collection excluding late fees, installment payment of rent, and extension of transition periods. Additionally, failing to comply with rent control ordinances can lead to costly penalties, fines, and legal disputes.
Combined with tenants’ inability to pay despite garnishment of wages and falling in line along with other debt collectors, property owners are faced with the challenge to keep up with their financial losses posed by these ordinances.
- Absence of rental income planning
With the permissible rent increase limits and just cause eviction reasons, rent adjustments become a burden for owners during decision-making once the moratorium has been lifted.
Understanding rent control laws allows property owners to plan their rental income efficiently. However, these create negative impacts and long-term implications that disables owners to plan for maintenance, property improvements, and budgeting more effectively.
- Dealing with unnecessary vacancies
Misinterpreting or unknowingly violating rent control laws can lead to tenant disputes or evictions being deemed unlawful. Tenant extension after the eviction jurisdiction has been ruled also limits the property’s availability in the market which can lead to negative consequences for property owners.
- Tedious process to safeguard investor interests
Legal notices are required to be served to tenants while recovering unpaid rent also need to follow proceedings from the small or civil court. If proper documentation and timing are not observed, an eviction case can be dismissed and forfeited the chance for rent repayment.
- Readiness in facing future changes
Rent control regulations may evolve over time making owners anticipate potential changes, but may only waste time and energy to try to adapt. Staying updated may not be enough because, without proper skills and expertise, it is still a challenge to get high tenant satisfaction and improved tenant retention rates.
Vital role of a property management company in rent control
Staying updated with rental control laws is essential for rental property owners, and partnering with a property management company can offer several advantages in this regard.
1. Provide legal expertise
Property management companies typically have a team of professionals well-versed in local, state, and federal rental control laws. Their expertise ensures that property owners are always informed about the latest regulations for their rental unit and comply with them effectively.
2. Risk mitigation and eviction compliance
Property management companies can help owners navigate the complexities of the city’s rent stabilization ordinance, reducing the risk of violations and potential legal disputes. By adhering to these laws, owners can avoid costly fines and penalties.
When necessary, property management companies can handle eviction proceedings in strict adherence to just cause eviction requirements, safeguarding owners from potential legal issues.
3. Tenant screening and communication
A property management company can assist with thorough tenant screening, ensuring that potential tenants meet all the required criteria and are suitable candidates under Los Angeles regulations.
In line with this, property managers also need to ensure that their lease agreement complies with current rental control laws and contains all necessary provisions to protect the owner’s interests.
By acting as a liaison between owners and tenants, a property manager also helps in maintaining clear communication, monthly collection and reporting of tenants’ rent, as well as promptly addressing tenant inquiries or concerns related to rental control.
4. Rent regulation and operational strategies
Property managers can provide valuable insights into rent control limits and allowable rent increases, helping owners optimize rental income while staying within legal boundaries.
By handling legal compliance and navigating rental control regulations, property managers allow owners to focus on other aspects of their investment, streamlining overall property operations.
5. Educated market insights
Reputable property management companies stay up-to-date with ongoing training and education to remain informed about any changes in rental management ordinances, enabling them to advise owners accordingly.
A property manager must be able to provide market insights, such as rental trends and tenant demands, to help owners make appropriate decisions within the framework of rental control laws.
Property management best practices
Rental property owners, especially with multiple investments, can benefit significantly when collaborating with property managers. Owners or landlords and property management companies can implement best practices to easily overcome rent control challenges:
- Centralized Compliance Management: Establish a system to monitor and manage rent control compliance across properties. Regularly update property managers on policy changes and conduct training sessions to ensure understanding.
- Transparent Communication: Maintain open channels between owners and managers to discuss rent control challenges and developments. Regular meetings help align strategies and address concerns promptly.
- Thorough Documentation: Maintain comprehensive documentation for all rent increases, lease agreements, and eviction actions to demonstrate compliance if needed.
- Educate Tenants: Property managers should inform tenants about rent control policies, their rights, and responsibilities to foster positive landlord-tenant relationships.
- Rent Adjustment Strategies: Develop rent adjustment plans that consider market conditions, local regulations, and tenant retention goals.
- Review Contracts: Ensure property management contracts include language regarding rent control compliance and outline penalties for non-compliance.
The enforcement of rental control regulations and the ability of landlords and tenants to navigate these changes will not only pose as challenges but also significantly influence the future of the Los Angeles rental market.
These policies will remain a central concern for city regulators, tenants, and landlords alike, making it essential to exercise best practices by closely monitoring their impact on Los Angeles’ housing market in the coming years.
Manage the ordinances with Lotus West Properties
If you are self-managing multiple properties that will be affected by the change in rent control ordinances, the challenges you face in the months could be numerous.
Sending out increase notices that meet the standards of the new ordinances, and managing the process with tenants who receive the notices, will be one of the biggest challenges, until this critical time passes in January 2024.
For over 20 years, Lotus West Properties has demonstrated expertise and experience, in dealing with rental control in areas around the greater Los Angeles. This time will be no different.
Entrust your properties in Marina Del Rey, Pacific Palisades, Venice, and other areas in Greater Los Angeles, to us. This will secure your peace of mind that you will be able to get back on track with rent increases and deal with any tenants that have been abusing the ordinances to not pay rent or neglect properties.
Our property managers can help manage these increases so that you and your investment are not negatively affected by enforcing the new regulations incorrectly, preserving the rental income, and also helping the LA housing market by keeping good tenants in their homes.
Contact us TODAY! So we start helping you before the deadline expires.
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