Richmond Enacts Rent Control

RICHMOND ENACTS RENT CONTROL

The city of Richmond, California has enacted a rent control ordinance.  This is the first new rent control ordinance enacted in California in approximately 30 years.

Under the Ordinance, annual rent increases cannot exceed the amount of the annual percent increase in the San Francisco, Oakland, San Jose region consumer price index.  Richmond will form a board that, on June 30th of each year, will announce the next year’s maximum rent increase.

In addition, evictions will require “just cause.”  “Just cause” means: nonpayment of rent; breach of lease covenant; nuisance; illegal purpose; tenant refusal to sign a written lease at the conclusion of a lease term; denial of access by landlord; occupancy at the end of the lease term or at the time of a foreclosure by a subtenant not approved by the landlord; the unit is needed for the occupancy by the landlord, certain family members of the landlord, or a resident manager; permanent removal of the unit from rental housing use (generally under the Ellis Act); and if required to comply with government orders or law.

Excluded from these limitations on rent are single family homes, condominiums, apartment units constructed after February 1, 1995, and units occupied by Section 8 tenants.  However, the just cause eviction requirement applies even to those properties.  For example, while there will be no limitations on rent increases that may be imposed with respect to single family homes and condominiums, just cause is required to evict tenants occupying those properties.

In addition to the limitations on rent increases and the just cause eviction requirements, landlords will be required to pay to tenants interest on their security deposits and also will be required to pay an annual fee to fund the rent control program.

Further, the rent board may order a rent reduction if there is a decrease in housing services.  For example, if the tenant was given parking as part of the rental agreement, but the landlord desires to terminate a tenant’s parking rights, the rent board may order a rent reduction to compensate the tenant for the loss of parking.

The Ordinance goes into effect on September 4, 2015.  However, base rents have been capped to July 21, 2015 rates.  Therefore, if a landlord increases the rent after July 21, 2015, the first allowable increase will be based on the amount of rent payable on July 21, 2015 plus the annual increase allowed under the Ordinance.

This is not a comprehensive analysis of the Ordinance and certain less common applications and exceptions to the Ordinance have been excluded for brevity.

Rent control is extremely technical and there are numerous built-in traps for landlords that, if not foreseen and handled correctly, may be astonishingly costly.  If you own, are considering purchasing, or may foreclose on a property located in Richmond, it is imperative that you consult with an attorney with significant experience representing landlords in matters involving rent control. Jonathan Seigel of Scheer Law Group has been handling rent control matters for over 20 years. He can be reached at (415) 491-8900, extension 107.