By Aser G. Tolentino, Esq.
Introduction
California remains one of the major drivers of economic growth within the United States. Whether talking about breakthroughs in artificial intelligence or the latest streaming sensation, innovators from Silicon Valley to Hollywood continue to create and sell new ideas to the world. However, the benefits of those profits do not flow equally across the states’ hundreds of thousands of square miles or tens of millions of residents. This has meant that while many people in urban centers like Los Angeles or San Francisco earn wages that would make them well off in many other parts of the country, they might still struggle to afford even basic housing that meets the minimum of what is legally considered necessary to survive, and even working families in more modest communities can find housing prices well above what their means can afford. This is not a new problem but has continued to challenge Californians to find new solutions.
The latest efforts include Senate Bill 567, signed into law last year by Governor Gavin Newsom. This article covers the reasons behind the need for the new law, the provisions it adds to the Civil Code, and some thoughts on how it will affect housing and tenants moving forward.
Background of Tenant Rights in California
California’s renters have benefited from and suffered due to the state’s role in driving much of the nation’s economic growth through the end of the twentieth century and the start of the twenty-first century. As Cities like San Francisco, Los Angeles, and San Jose blossomed into innovation hubs, people worldwide flocked to birthplaces of entirely new industries in entertainment, technology, and related fields. With an increased demand for housing, prices inevitably skyrocketed, making it increasingly difficult for those same people and those who had already lived there and still needed to live there to maintain the services and communities that made everyday life possible. The result was increasing social dysfunction, punctuated by growing homelessness and growing economic inequality. With no end in sight, cities around the state exercised police powers to limit how much landlords could increase rent on existing tenants. While the restrictions they imposed were limited to housing at the time, this wave of so-called “rent control” preserved a supply of housing that, once occupied by a tenant, was guaranteed to remain affordable no matter how dramatically the market rate increased for other units.
Rent control was not a perfect solution, though, and definitely not universal. Statewide legislation such as the Ellis Act and Costa Hawkins Act limited the reach of rent control ordinances and local government’s ability to regulate landlords’ behavior. All the while, changes in the housing market meant that more and more tenants were living in homes not protected by rent control and related protections, even where it was available.
California’s 2019 Tenant Protection Act extended rent control and just cause for eviction requirements to any apartment in the state over fifteen years old. This meant units too new to receive protection under existing rent control ordinances also benefited. In contrast, cities and counties that had never had rent control would help for the first time. Anywhere in the state, Landlords who owned a covered rental unit could only increase rent by 5% plus the annual interest rate as measured by a standard known as the Consumer Price Index, once a tenant had resided in their covered rental unit for more than one year. They could also only end a tenant’s tenancy for one of a specified list of just causes. For tenants, there was just one problem: some of the just causes for eviction that allowed landlords to force people out were called “no-fault just cause” and could allow a landlord to force someone out in sixty days if they claimed they were going to move into the unit, or were going to remove the unit from the rental market. As written, simply stating this was enough to force a tenant out, something that became very common during the most challenging parts of the COVID-19 pandemic. Lawmaking is always a work in progress, and the COVID-19 Pandemic demonstrated numerous ways tenants could still fall through the cracks. In 2023, the California Legislature addressed some of these shortcomings by passing SB567.
Overview of SB-567
SB567 makes significant additions to the parts of the California Civil Code created by the Tenant Protection Act: Sections 1946.2 requiring just cause to evict tenants who had lived for more than one year in a covered rental unit, and 1947.12, which limited the amount a landlord could increase rent once a tenant had lived in a protected rental unit for more than one year. The first change was to those no-fault just cause for eviction. To take advantage of no-fault just-cause evictions, landlords must demonstrate follow-through on their obligations under the law.
While under the Tenant Protection Act, landlords could no longer evict tenants without cause, two of these causes provided a significant amount of wiggle room. “Intent to occupy the residential real property by the owner or their spouse, domestic partner, children, grandchildren, parents, or grandparents under Civil Code § 1946.2(b)(2)(A)(i) and “Intent to demolish or to substantially remodel the residential real property,” where, “remodel” means the replacement or substantial modification of any structural, electrical, plumbing, or mechanical system that requires a permit from a governmental agency, or the abatement of hazardous materials, including lead-based paint, mold, or asbestos, by applicable federal, state, and local laws, that cannot be reasonably accomplished safely with the tenant in place and that requires the tenant to vacate the residential real property for at least 30 days.” (See Civil Code § 1946.2(b)(2)(D).) The statute noted, “Cosmetic improvements alone, including painting, decorating, and minor repairs, or other work that can be performed safely without having the residential real property vacated, do not qualify as substantial rehabilitation,” but did not provide any further guidance.
Based on the language of Section 1946.2 as written, a landlord would only need to notify a tenant that they intended to perform substantial renovation or that the landlord or a member of their family would be moving in to create a just cause for eviction. If the landlord just turned around and rented out their home at market rate, the tenant would not have any means of punishing the landlord for the fraudulent eviction. While some readers would be quick to point out that the rent differential discussed in previous newsletters would be available as damages, all that an award of those damages would do would be to restore the tenant to where they would be economically, giving them the value of what they had lost, while leaving them without the home and the landlord free to continue charging market rate on their new tenants.
As of April 1, 2024, SB567 requires that the landlord comply with far more specific requirements before they or a family member can move into an occupied, covered unit to justify a just cause for eviction. In short, the landlord or family member cannot already live on the same property or have access to a vacant unit, must move in within ninety days of the tenancy ending, and live in the unit for at least a year. Meanwhile, the tenant has a right to know the relationship of any relative moving in, may demand proof of relationship, and must be provided an opportunity to move back in with an offer of rent at the same rate before the eviction accompanied by moving expenses if the landlord or their family member does not move in within ninety days or stay for the entire year. (See Civil Code 1946.2(b)(2)(A).) These new limitations on the landlord’s power and rights for the tenant to work in tandem with damages provisions are described later.
As for substantial remodeling, the new version of the statute makes multiple significant changes. The landlord must provide a notice describing the work to be performed, copies of permits or work contracts where permits are not required, and notice that the tenant may reoccupy their home if the work is not undertaken or upon its completion. (See Civil Code § 1946.2(d)(2iv).). The new version of the law also notes that a tenant need not vacate on days when their presence would not violate health and safety laws. (See Civil Code § 1946.2(b(2)(D)(iii).) Both sets of clarifications regarding no-fault evictions were vital, but as described earlier, the real change comes with how SB567 enforces the new restrictions because it provides the following language.
(h) (1) An owner who attempts to recover possession of a rental unit in material violation of this section shall be liable to the tenant in a civil action for all of the following:
(A) Actual damages.
(B) In the court’s discretion, reasonable attorney’s fees and costs.
(C) Upon a showing that the owner has acted willfully or with oppression, fraud, or malice, up to three times the actual damages. An award may also be entered for punitive damages for the tenant’s benefit against the owner.
As for § 1947.12’s rent control provisions, SB567 adds the following penalties.
“(k) (1) An owner who demands, accepts, receives, or retains any payment of rent over the maximum rent allowed by this section shall be liable in a civil action to the tenant from whom those payments are demanded, accepted, received, or retained for all of the following:
(A) Injunctive relief.
(B) Damages in the amount by which any payment demanded, accepted, received, or retained exceeds the maximum allowable rent.
(C) In the court’s discretion, reasonable attorney’s fees and costs.
(D) Upon a showing that the owner has acted willfully or with oppression, fraud, or malice, damages up to three times the amount by which any payment demanded, accepted, received, or retained exceeds the maximum allowable rent.”
How SB-567 Strengthens Tenant Rights
Unfortunately, in their original form, the additions to the Civil Code created by the Tenant Protection Act needed to be completed. By not specifying any requirements for owner move-in or renovation-based evictions, the TPA left holes in the bulwark someone could drive a truck through, and they did gleefully and often. The fact that a landlord could terminate a decades-long tenancy by claiming they were performing renovations or moving in and then leaving a unit vacant could have also added insult to injury. Tenants can now expect and demand more information before vacating and have remedies that allow for reoccupation, an option that was simply unavailable.
The new version of § 1946.2 provides more meaningful compensation and substantive justice for wrongfully evicted tenants by going beyond just an award of actual damages. First of all, it allows for an award of attorney fees and costs of litigation. When a tenant goes to a lawyer to represent them in a case of wrongful eviction, they often proceed on a contingency fee basis, which means that they do not have to pay the attorney up front but that the lawyer gets a set percentage of what the tenant receives in damages: and then after that, the tenant also has to pay back any costs the attorney advanced. When the landlord loses and has to pay those fees and expenses instead, the tenant does not have to pay for the justice they deserve as a matter of right. Beyond that, if the tenant can prove the landlord acted willfully, they can earn up to triple their actual damages to properly punish the landlord and deter them or others from breaking the law again.
The same is true for violations of rent control. Beyond monetary damages, though, the law makes clear that courts may grant what is referred to as injunctive relief. This empowers a court to order a landlord to comply with the law moving forward and punish breaches of its instructions.
Placed in more practical terms, the damages provisions of both sections raise the level of damages of tenant rights cases to a threshold high enough to make it worthwhile for a tenant whose rights have been violated to pursue a case. Recognizing the impact such violations have on people’s lives and livelihoods and clarifying eviction protections profoundly improves the relief that the Tenant Protection Act brought to the state in 2019. It is suitable for the promise the legislature and governor made to Californians half a decade ago that help was coming.
Potential Challenges and Criticisms
Landlords and property managers have naturally opposed any new rental market regulation. They have argued that harsh penalties will discourage investment in new rental units, particularly apartments already in short supply, and drive smaller landlords out of the market.
The natural counter to these claims is that the cities in which rent control and cause for eviction protections have been long established and continually refined still see new housing stock added regardless. Moreover, the fifteen-year minimum age for buildings covered by the TPA allows for several years of market-based rent for developers to recoup their investment before mature investments become regulated for the public good. Ultimately, time will tell as California’s trial of statewide rent control is currently set to expire at the end of the decade.
Conclusion
Just as rights are only as accurate as the tools to enforce them, those tools are only helpful if people use them. When you experience landlord harassment, fear unlawful eviction, live with uninhabitable conditions, or see someone else who is, you can speak up or reach out. There are organizations to help, and attorneys like those at Tenant Law Group are ready to fight for you.
