SLG Client Alert: Critical Deadlines For Owners Of Tenant-Occupied Single Family Homes Or Condominiums—Ignore These Deadlines And You Will Lose Your Exemption From State-Wide Rent Control

Note: The following is a general discussion on the specified topic or issue and may not be relied on as legal advice in any specific case or matter you encounter. You should review any applicable case, or matter with counsel experienced in this area of law and should not generally rely on the discussion in this Alert.

Date: June 5, 2020
To: All Scheer Law Group Clients and Affiliates
From: Jon Seigel
Subject: SLG Client Alert: CRITICAL DEADLINES FOR OWNERS OF TENANT-OCCUPIED SINGLE FAMILY HOMES OR CONDOMINIUMS—IGNORE THESE DEADLINES AND YOU WILL LOSE YOUR EXEMPTION FROM STATE-WIDE RENT CONTROL

One way that advocates of state-wide rent control made this legislation politically palatable was by exempting “residential real property that is alienable separate from the title to any other dwelling unit,” most commonly single family homes and condominiums, from rent and eviction control. However, that exemption may be lost unless the tenants are given written notice that the single family home or condominium is exempt and the deadline to do so is July 1, 2020. See, generally, Civil Code § 1946.2(e).

This alert discusses in general what must be done to preserve the exemption. This alert does not address other exemptions where no notice is required to preserve the exemption, notice requirements where state-wide rent control does apply, or requirements, if any, where there is a local rent control or eviction control ordinance that may supersede state-wide rent control.

As a threshold matter, the single family home or condominium exemption applies only where the owner is not any of the following:

(i) A real estate investment trust, as defined in Section 856 of the Internal Revenue Code.
(ii) A corporation.
(iii) A limited liability company in which at least one member is a corporation.
Civil Code § 1946.2(e)(8)(A).

LANGUAGE THAT MUST BE INCLUDED IN THE LEASE, RENEWAL, OR SEPARATE NOTICE

The language required to preserve the aforementioned exemption (referred to in this Alert as the “Exemption Language”) is as follows:

“This property is not subject to the rent limits imposed by Section 1947.12 of the Civil Code and is not subject to the just cause requirements of Section 1946.2 of the Civil Code. This property meets the requirements of Sections 1947.12 (d)(5) and 1946.2 (e)(8) of the Civil Code and the owner is not any of the following: (1) a real estate investment trust, as defined by Section 856 of the Internal Revenue Code; (2) a corporation; or (3) a limited liability company in which at least one member is a corporation.”

Civil Code § 1946.2(e)(B)(i).

The statute does not require that this language be in any specific point size. However, to be safe, we recommend using at least 12-point type size because, under the same statute, language that must be included where the premises is not exempt must be in at least 12-point type size.

Assuming the exemption applies, there are two applicable deadlines for providing the Exemption Language to the tenants, one for tenancies in existence before July 1, 2020 and another for tenancies entered into or renewed on or after July 1, 2020.

TENANCIES EXISTING BEFORE JULY 1, 2020

If a new lease or a lease renewal is entered into before July 1, 2020, the Exemption Language may be included in the lease or renewal or given by separate notice. If no new lease or renewal is entered into by then, or if a lease or lease renewal has been entered into in 2020 that did not contain the Exemption Language, the property owner should provide the tenants with a separate notice containing the Exemption Language before July 1, 2020.

If the property owner includes the Exemption Language in a separate notice, the statute does not provide any requirements as to how to serve the notice. We suggest service by regular mail along with another method where it can be proven the notice was sent such as certified mail, overnight mail or even e-mail. If there are multiple tenants, each tenant should be separately served with a copy of the notice along with a copy sent to “all occupants.” As always, save a copy of the notice and proof that it was served.

We suggest that the notice be served well before the end of the month to avoid a claim by the tenant that he or she did not receive the notice until July 1, 2020 or later.

TENANCIES COMMENCING OR RENEWED ON OR AFTER JULY 1, 2020

Under these circumstances, the Exemption Language must be included in the lease and renewals. If you are using a form lease that does not include the Exemption Language, you may attach the Exemption Language in an addendum to the lease or renewal which, we suggest, the tenants initial or sign and date.

Please call or email Jon Seigel if you want to discuss.

Spencer Scheer