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Rent Control In Sacramento By D Keith Dunnagan Esq
It is no secret that rent control has not been effective, yet, as rental rates continue to the rise in the local market the City chose to respond by placing restrictions on landlords rather than addressing local and state impediments to sustainable housing growth. Consequently, on August 14, 2019, the City of Sacramento joined many Bay area and LA area communities and counties by enacting a local rent control ordinance. This ordinance will take effect 60 days after its enactment pursuant to City Code 5.156.140. The question beginning to circulate is what does this new ordinance mean for landlords?
First, what must be understood is that the City of Sacramento passed this ordinance, so only those landlords with covered properties within the limits of the City of Sacramento are subject to the ordinance. Those that are in the County are outside the jurisdiction of this ordinance.
Second, what units are subject to this ordinance. Under City Code 5.136.030 there are a number of properties exempt from this ordinance, including but not limited to, short term rental properties, medical facilities, government owned or operated facilities, single family dwellings (one residence on one lot), rental units occupied by the landlord or landlord's family and rental units constructed after Feb. 1, 1995. Basically, those that are subject to the ordinance are those multi-family rental units (2 or more units) constructed prior to Feb. 1, 1995. That means those investors that own duplex and triplexes are subject to this ordinance. It is not just the larger commercial apartment units that are subject to the ordinance.
But if the property is subject to the ordinance what does that mean. There is a veritable laundry list of restrictions contained in what the City has titled the "Tenant Protection and Relief Act". Among these restrictions are as follows:
Landlords may not raise rent in excess of the allowed annual rent adjustment (5.156.040(A));
The annual rent adjustment is set at 6% plus a COLA not to exceed 10% (5.156.050(A))
Any rent adjustment sought that is great than the allowed adjustment must be approved by a hearing examiner (5.156.060);
Landlords will be required to contribute to a tenant protection program fee on an annual basis to cover the costs of implementing and enforcing this ordinance (5.156.080);
Once a tenant has resided in a unit for more than 12 months they will be subject only to just cause eviction and the ordinance defines a limited number of reasons that will justify terminating a tenancy after a tenant has resided for more than 12 months in a covered rental unit (5.156.090);
The provisions of this ordinance are non-waivable which means landlords cannot use their lease agreements to contract around the requirements of the ordinance (5.156.100);
If a landlord fails to comply with the ordinance the tenant may assert the non-compliance with the ordinance as an affirmative defense to any action brought by the landlord including an eviction action (5.156.110); and
Violations of the ordinance in addition to carrying civil liability may also subject the offending landlord to criminal sanctions (5.156.120).
The City did place an expiration date on the ordinance, so unless the ordinance is extended, the ordinance will expire on December 31, 2024.
What this means for the landlords in the City of Sacramento, is that you will have to be even more vigilant and diligent in managing your covered properties. Make sure your lease agreements spell out in specificity the rights and obligations of the parties. Make sure you stay aware of the timing constraints of the ordinance that has been newly enacted and ensure compliance.
The real estate attorneys at BPE Law Group have been the leading attorneys providing counsel to many of Sacramento's real estate investors and landlords. As always, in this ever-changing legal landscape, it is important that you consult with competent legal counsel on your real estate needs and goals.
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