Landlord-Tenant Issues, Granny Flats, HOAs and More: 2020 Real Estate and Land Use Updates
By Procopio Partner Justine K. Nielsen and Associates Sara G. Neva, Erica K. Lee and Justin M. Fontaine
The close of 2019 marks a particularly active and significant regulatory year for real estate in California. These statutes and regulations warrant a careful review as they provide both additional compliance obligations and also significant protections for owners of real estate.
Procopio’s Real Estate and Environmental Team reviewed these new regulations and have provided you with an overview of the significant changes impacting real estate, leasing, common interest development, and land use. Of particular note are statutes and regulations providing additional tenant protection measures including the expansion of protected classes and rent caps, the introduction of additional compliance requirements for common interest developments, as well as multiple significant incentives and protections for certain development projects.
Real Estate and Leasing
Tenant Protection Act of 2019 (AB 1482) Civil Code Sections 1946.2, 1947.12, and 1947.13
Subject to certain exceptions, AB 1482: (i) requires landlords to have “just cause” when evicting a residential tenant who has continuously and lawfully occupied a property for 12 months, and (ii) caps gross rent increases within a 12-month period at 5% plus the change in the cost of living. We have more details in a recently published alert.
Foreclosure of Project Subject to a Month-to-Month Lease (SB 18) Civil Code Section 1161b
This bill deletes the sunset clause on a law providing protections to tenants of foreclosed upon property. Currently, (i) a month-to-month residential tenant of foreclosed upon property is entitled to 90 days’ written notice to quit before the tenant may be removed from the property and (ii) a fixed-term residential tenant under a lease agreement entered into before transfer of title at the foreclosure sale is entitled to remain in possession until the end of the lease term, with certain exceptions.
Allowing Occupancy of Property to Persons at Risk of Homelessness (SB 1188) Civil Code Section 1942.8
This bill aims to encourage landlords and tenants to permit those at risk of homelessness to temporarily reside on their property. SB 1188 authorizes a tenant, regardless of the lease agreement, to temporarily permit the occupancy of the tenant’s dwelling unit by a person who is at risk of homelessness, with the written approval of the owner or landlord. Absent a separate agreement among the parties, SB 1188 provides additional rights and obligations for the owner/landlord, tenant, and person at risk of homelessness.
Reduced Security Deposits for Service Members (SB 644) Civil Code Section 1950.5
Existing law already caps residential security deposits at an amount equal to 2 months’ rent (unfurnished) or an amount equal to 3 months’ rent (furnished). With certain exceptions, this bill further caps residential security deposits from service members at an amount equal to one months’ rent (unfurnished) or 2 months’ rent (furnished). This bill also prohibits a landlord from refusing to enter into a residential lease with a prospective tenant who is a service member due to the prohibition on the landlord demanding a greater amount of security.
Discrimination on the Basis of Source of Income or Military/Veteran Status (SB 222 and SB 329) Government Code Sections 12920, 12921, 12927, 12930, 12931, 12955 and 12956
Existing law prohibits housing discrimination, including discrimination based on “source of income”. Together, these bills expand the definition of “source of income” to include (i) federal Department of Housing and Urban Development Veterans Affairs Supportive Housing vouchers, and (ii) federal, state, or local public assistance, and federal, state, or local housing subsidies, including, but not limited to, federal housing assistance vouchers issued under Section 8 of the United States Housing Act of 1937 (42 U.S.C. Sec. 1437f). This bill also prohibits housing discrimination based on veteran or military status.
Recycling Bin Requirement (AB 827) Public Resources Code Sections 42649.1, 42649.2, 42649.8, and 42649.81
In general, a business that generates 4 cubic yards or more of commercial solid waste or 8 cubic yards or more of organic waste per week must arrange for recycling services. With the exception of full-service restaurants, this bill requires a business already subject to either of those requirements, and that provides customers access to the business, to provide a recycling bin or container. The recycling bin or container must be visible, easily accessible, and adjacent to each trash bin or container (except in restrooms), and clearly marked with educational signage.
Notice for Month-to-Month Rent Increases (AB 1110) Civil Code Section 827
AB 1110, with certain exceptions, provides that, if a landlord of a residential dwelling subject to a month-to-month lease increases rent (i) by 10% or less of the annual rent, the landlord must provide at least 30 days’ notice before the effective date of the change, or (ii) by more than 10% of the annual rent, the landlord must provide at least 90 days’ notice before the effective date of the increase.
Religious Items on Doors (SB 652) Civil Code Sections 1940.45 and 4706
Subject to certain exceptions, this bill prohibits a property owner from prohibiting the display of religious items on an entry door or entry door frame of a dwelling. This bill also prohibits the governing documents of a common interest development from prohibiting the display of religious items on the entry door or entry door frame of a common interest development member’s separate interest.
Lead-Based Paint Abatement Immunity (AB 206) Civil Code Section 3494.5
This bill makes a property owner who participates in a program to abate lead-based paint created as a result of a judgment or settlement in any public nuisance or similar litigation, and all public entities, immune from liability in any lawsuit seeking to recover any cost associated with that abatement program. In general, this bill also prohibits participation in a lead paint abatement program from being considered as evidence that a property constitutes a nuisance, or is substandard or untenantable.
Common Interest Development
Wildfire Mitigation Compliance and Seller Disclosure (AB 38) Civil Code Sections 1102.19 and 1102.6f
Beginning July 1, 2021, sellers of real property, located in high or very high fire hazard severity zones, as designated by the Director of Forestry and Fire Protection, will be required to either provide to buyer or enter into an agreement with buyer to obtain documentation indicating that the real property is in compliance with wildfire protection measures. Such sellers will also need to provide a disclosure notice to buyers of homes constructed prior to January 1, 2020 with (i) a prescribed statement about fire hardening improvements on the property; (ii) a list of features that make the home vulnerable to wildfire and flying embers and identification of which features are present on the home; and (iii) beginning July 1, 2025, the State Fire Marshal’s list of low-cost retrofits and identification of which were completed while seller owned the property.
Accessory Dwelling Units (AB 670) Civil Code Section 4751
In general, this bill makes void and unenforceable any covenant, restriction, or condition that prohibits or unreasonably restricts the construction or use of an accessory dwelling unit or junior accessory dwelling unit on a lot zoned for single-family residential (meeting certain minimum standards) in instruments affecting the transfer or sale of separate interests or the governing documents for planned developments.
Election Rules (SB 323) Civil Code Sections 5100, 5105, 5110, 5115, 5125, 5145, and 5910.1
SB 323 contains numerous changes to the existing homeowner association election laws. Associations must amend their election rules to comply with the new laws, which became effective January 1, 2020.
The bill provides (not an exhaustive list):
- Elections for the board of directors must be held at the end of each director’s expiring term and a minimum of every four (4) years (Civ. Code §5100).
- Extends the election timeframe by changing the procedural requirements for the period leading to the election (Civ. Code §5115).
- Requires candidates to be a member of the association at the time they are nominated (Civ. Code §5105(b)).
- Authorizes associations to disqualify a person from serving or being nominated for a position on the board for specified reasons (e.g. failure to pay assessments) (Civ. Code §5105(c)).
- Election rules may not deny a ballot to a member or a person with general power of attorney for an owner (Civ. Code §5105(g)).
- Requires additional election materials to be held in the inspector of election’s custody until after vote tabulation (Civ. Code §5125).
- Association rules may no longer allow a person, business entity, or subdivision of a business entity that is employed or under contract with the association for any compensable services to serve as inspector of elections (Civ. Code §5110).
- Association records are to include members’ e-mail addresses (Civ. Code §5200).
- Associations are to allow members to verify their individual information at least thirty (30) days before ballots are distributed (Civ. Code §5105(a)).
- Associations are prohibited from filing a civil action unless the association has already complied with dispute resolution procedures (if requested by the member) (Civ. Code §5910.1).
- Election rules may not be amended less than ninety (90) days before an election (Civ. Code §5105(h)).
Balcony Inspection & Restrictions on Construction Defect Claims (SB 326) Civil Code Sections 6150, 5551 and 5986
AB 326 includes the following:
- Starting in 2025, associations for condominium projects (consisting of three or more multifamily dwelling units) must have visual inspections of certain load bearing components and associated waterproofing systems every nine years. The inspector must submit a report providing the current physical condition and remaining useful life of the structure. The association will be required to make repairs and to take preventative measures if the inspector determines the load bearing component to be unsafe.
- Subject to certain exceptions, this bill prohibits an association’s governing documents from limiting a board’s authority to commence legal proceedings against a declarant, developer, or builder of a common interest development. The board is required to provide written notice to the members of the association, specifying, among other things, that a meeting will take place to discuss the potential filing of a civil action.
Housing Crisis Act of 2019 (Senate Bill 330), Government Code Sections 65589.5, 65940, 65943, 65950, 65905.5, 65913.10, 65941.1, and 66300 et seq.
The Housing Crisis Act of 2019 declared a statewide housing crisis until January 1, 2026 and provides for significant protections for certain housing projects, including the following:
- Number of Hearings: SB 330 prohibits a city of county from holding more than five public hearings for any project that complies with the applicable, objective general plan and zoning standards in effect at the time the project is deemed complete.
- Vesting for Preliminary Applications: SB 330 limits a city or county’s ability to impose new or zoning, development regulations, or fee increases (with some exceptions) after a “preliminary application” has been submitted. It also specifies what constitutes a “preliminary application” and limits jurisdictions from adding additional submittal requirements after the review completeness review.
- Affordable Housing Project Streamlining: SB 330 prohibits certain development standards for very low, low, or moderate-income developments for up to a five year period. Under the Housing Crisis Act, local agencies are prohibited from disapproving or placing infeasible conditions on housing development projects for very low, low, or moderate income households unless the agency makes certain written findings.
Accessory Dwelling Units and Junior Accessory Dwelling Units (AB 68 and AB 881), Government Code Sections 65852.2 and 65852.22
This legislation package is intended to incentivize the development of Accessory Dwelling Units (ADUs), also known as granny flats or companion units, and Junior Accessory Dwelling Units (JADUs), as a tool to combat the housing crisis. Most significantly, it mandates jurisdictions to allow both a detached ADU and an attached JADU on properties with a single-family home. In addition, these laws severely limit the type of regulations cities or counties may adopt, including the following:
- Owner-Occupancy: Jurisdictions may not require ADUs to be owner-occupied (but cities may still require JADUs to be owner-occupied).
- Multi-family Buildings: ADUs must be allowed in multi-family buildings including in storage rooms, carports, boiler rooms, garages, etc., so long as minimum building standards are met.
- Development Regulations: Jurisdictions may not impose minimum lot sizes, maximum ADU dimensions, require parking in transit areas, or require parking to be replaced when a garage is converted to an ADU or JADU.
The laws also prevent homeowners’ associations from banning ADUs in their governing documents. Any HOA restriction that “prohibits or unreasonably restricts” ADUs on single-family residential lots is invalid and unenforceable.
Density Bonus for 100 Percent Affordable Projects (AB 1763), Government Code Section 65915
AB 1763 allows for an enhanced density bonus to developers who agree to construct 100% of units for lower income units, which can include up to 20% of total units for moderate-income households. Developments which meet the new criteria are eligible for up to 4 incentives under the Density Bonus Law, and additional benefits if the development is within ½ mile of a major transit stop.
Housing Development: Streamlining (AB 1485), Government Code Section 65913.4
AB 1485 makes several important amendments to SB 35 (2017), which provides for a streamlined, ministerial approval process of multifamily housing developments meeting certain conditions until January 1, 2026. Qualified multifamily housing developments meeting certain objective planning standards will also not be subject to discretionary permits and clarifies that the standard of review for whether a project qualifies for SB 35 is highly deferential to the project applicant, rather than to the city or county.
California Environmental Quality Act: “Major Transit Stop” (AB 1560), Public Resources Code Sections 21064.3 and 21060.2
AB 1560 broadens the definition of a “major transit stop,” which exempts from CEQA residential infill projects located within ½ mile from a major transit stop. The broadened definition of a major transit stop includes bus rapid transit stations. Bus rapid transit is defined as public mass transit service which includes (1) full-time dedicated bus lanes or operation in separate right-of-way dedicated for public transportation with frequency of service interval of 15 minutes or less during morning and afternoon peak commute periods, (2) transit signal priority, (3) all-door boarding, (4) fare collection system that promotes efficiency and (5) defined stations.
Given these significant legislative changes, Procopio’s Real Estate and Environmental Team continues to monitor legislative and regulatory action, as well as significant court cases, year-round to ensure clients are in compliance with and taking advantage of the new statutes and regulations critical to owners of real estate.
Justine K. Nielsen is a Partner at Procopio, the leader of its Land Use practice and a member of its Real Estate practice. She represents private entities and public interest groups on a variety of land use, planning and entitlement matters throughout various stages of the real estate development process and municipal law. She also focuses on due diligence prior to acquisition, assisting with adopting and amending general plans, community plans, entitlements, drafting development agreements, easements, memorandums, and issues pertaining to the Coastal Act, the Subdivision Map Act and other related statutes.
Sara G. Neva is an Associate at Procopio and a member of its Real Estate practice. She counsels clients on real estate, finance and general business transactions. Her practice involves real estate property purchase and sale, commercial leases and easements, joint venture formation and other equity investments, financing, land use and entitlements. Sara is experienced with developers, builders, lenders, borrowers, commercial real estate investors, entrepreneurs, non-profit organizations and commercial landlords and tenants.
Erica Kristen Lee is an Associate at Procopio and a member of its Real Estate practice. Her practice serves clients involved in developing residential and commercial real estate, including obtaining public reports from the California Department of Real Estate and approvals from local city and county planning departments. The focus of her practice is on varied types of subdivided land projects—including condominiums, planned developments, and mixed-use projects.
Justin M. Fontaine is an Associate at Procopio and a member of its Commercial Litigation and Land Use practices. He represents clients in complex business litigation, real estate, and land use disputes in both federal and state courts. He has represented clients in disputes arising out of the California Environmental Quality Act (CEQA), California Coastal Act, easements, quiet title and adverse possession, contracts, fraud, breach of fiduciary duty and deceit torts.