What Is Rent Cap and How Does It Effect My Property?

by | May 18, 2021 | Latest News, Market Information

As the summer approaches, now is a great time to review rental contracts, market rents and set up annual inspections. Our property managers are hard at work implementing rent increases as they see fit for properties currently below market rent. We are well versed on the local and state requirements and are implementing all CPI increases in compliance with Civil Code 1947.12. *

But, what is Civil Code 1947.12 and how does it effect my property? And are these laws the same for single family homes versus apartment? To begin, Civil Code 1947.12 specially address tenant and landlord rights in regards to the Rent Cap Laws using the current CPI. These laws are constantly changing in this political climate, especially considering California is still in a State of Emergency, so it is easy to get confused when addressing rent cap. Below are a few common questions and answers owners may have regarding the current Civil Code 1947.12 & Rent Cap and if/how it is applied to their rental property.

Common Questions and Answers Regarding Rent Increases:

Q1: What is Civil Code 1947.12 and CPI? Civil Code 1947.12 limits rent increases for some residential California properties in any 12 month period. CPI is the percentage change in the cost of living in a 12 month period determined by the Consumer Price Index for the region where a residential property is located.

Q2: How much can the rent be raised under this Civil Code? An allowable rent increase is currently 5% plus the “percentage change in cost of living” (CPI). However the combine 5% plus CPI must not exceed 10%.

Q3: How do I know what the maximum rent increase would be? A maximum rent increase worksheet is used to determine the CPI plus 5% to determine the new maximum gross rent. Your property manager has access to this worksheet and can calculate what the maximum increase would be in the current period.

Q4: Are there any exemptions to this new law? Yes, according to the Tenant Protection Act of 2019 (Statewide Rent Cap Law) there are several exemptions.

  1. Housing that has been issued a certificate of occupancy within the previous 15 years (new housing)
  2. A duplex in which the owner occupies one of the units at the being of tenancy and throughout the tenancy.
  3. Single-family residential property (including condominiums) so long as:
    1. The owner is not a corporation, not an LLC with at least one owner who is a corporation, and not a real estate investment trust (REIT) AND
    2. The owner gives the tenant a legally required notice of this exemption. Ownership by individuals, partnerships, individual co-owners, trusts, and LLC’s with no corporate owners, all qualify for the exemption.

Q5: Where can I find more information on current and past CPI figures? Current CPI figures can be found at https://dir.ca.gov/OPRL/CPI/PresentCCPI.PDF. More information on San Diego specific CPI can also be found at https://data.bls.gov/timeseries/CUURS49ESA0/

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 *Please Note: The information in this article is for general informational purposes only and should not be relied upon as a complete report of all new changes in local, state or federal laws. This article does not intend to take the place of legislative services or membership in trade associations. If you desire legal advise please consult a legal professional. Laws may have changed since the publishing of this article.

 

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