Sacramento Report

Rental Housing — A Changing Industry Don't Be Left Behind

by Debra Carlton

A common business practice—at least for those businesses that want to survive—is to talk about change, to watch for it, to make it happen, and to embrace it. Specifically, keeping abreast of the new laws is important for rental property owners and managers.

So what does this mean for the rental housing industry? As a result of legislation this year, a 120-year old law will change in January 2003. Owners who wish to terminate the tenancy of a resident who has been in the unit for one year or longer will be required to give that resident a 60-day notice. Please note that this new law does not change the three-day notice laws. Owners can still serve a resident with a three-day notice if the resident fails to pay the rent or violates provisions of the lease or the law. Owners can also serve a 30-Day Notice to Terminate a Tenancy if the resident has been in the unit for less than one year.

The more challenging legislation in procedural terms is AB 2330, which was signed by the Governor in late September. This bill requires owners or their agents to perform a walk-through of the dwelling unit no earlier than two weeks prior to the tenant moving out of the unit. While the California Apartment Association has always encouraged a walk-through of the unit by the owner and the tenant at the beginning and the end of the tenancy, this new law requires a challenging procedure that will require your careful consideration when developing your internal processes. The penalty for keeping the security deposit in bad faith will increase in 2003 from $600 to two times the amount of the security deposit.

AB 2330 also clarifies the definition of “security,” prohibiting an owner from charging a new resident any fees to begin their tenancy. You can, however, continue to charge a screening fee, not to exceed $30, as allowed under the current law. CAA’s Forms Task Force will amend existing forms and create new forms and instruction sheets to help you comply with this new law.

To help you understand what has precipitated these changes and why the rental housing industry will continue to face more challenges, here’s a brief overview of our state legislature and the political environment in California today.

California is more Democratic in its voting behavior than any other state in the nation, with the exception of Hawaii. The Democrats have also drawn congressional and legislative districts that will enable them to keep control of the legislature for at least another decade. California’s diverse population is nearing 35 million, and 43 percent of its citizens are renters. At the same time that California holds the spot as the sixth largest economy in the world, it also maintains one of the widest gaps between the rich and the poor. Reports show that one in every five working families is living at or below the poverty level. You therefore may not be surprised that our legislature is a reflection of a market driven by consumers. In the Senate there are now 26 Democrats to 14 Republicans, and in the Assembly there are 50 Democrats to 30 Republicans. Presently, Democrats are just a few votes away from a two-thirds majority, which means an easier time is ahead for passing a state budget and overriding the Governor’s veto.

In order to be heard in this current environment, the rental housing industry must first make some tough decisions about what is important to the operation of rental housing. As part of an organized ethical group of property owners and managers, you must consider yourselves the only force that can make a rational change. This change will effect the industry and the way it is viewed, and it will also impact those specific owners who refuse to operate ethically.

Rental property ownership is unique from other related industries. It supplies not only a service but also a product every day of the year. The industry also provides an important and necessary foundation for 43 percent of California’s population. At the same time, owners have a duty to ensure that it is delivered fairly and ethically. If not, the rental operations of today may be changed tomorrow not by the industry but for it.

For more information regarding CAA please go to website. The opinions expressed in this article are those of the author and do not necessarily reflect the viewpoint of the SFAA or the SF Apartment Magazine.Debra L. Carlton is the Vice President of Policy and Research for the California Apartment Association and is CAA’s chief lobbyist. Copyright © 2002.