July 1, 2024 Law for California Security Deposits

Yellow bungalow

Beginning July 1, 2024, under the passage of AB12, there will be significant changes to the security deposit law for residential property as follows:

• Rental property owners will only be able to demand or receive one month’s rent in addition to the first month’s rent, for security deposit, whether the unit is furnished or unfurnished.
• However, small property owners will be able to demand or receive two month’s rent in addition to the first month’s rent before initial occupancy. 
• A small rental property owner is defined as one who:
• Owns no more than two residential rental properties that collectively include no more than four dwelling units offered for rent.
• Is a natural person or LLC in which all members are natural persons. A family trust may also qualify as a small landlord.
• Exception: If the prospective tenant is a service member, then the exception for small landlords does not apply, and the small property owner is limited to one month’s rent in addition to the first month’s rent.
• 
  
• Owners who currently hold a security deposit or those who demand or collect a security deposit in excess of one month’s rent prior to July 1, 2024, may retain the security deposit even though it is more than one month’s rent.

Unfortunately, one month's rent really provides very little protection to the property owner who may have to engage in eviction costs, and/or damage costs.  An uncontested eviction cost alone may be over $1200, see this site for an idea of costs, and that does not cover the cost of repair and cleanup. One attorney recommends that the property owner review an applicant's credit and look for a score of at least 700 FICO which ideally would indicate a more responsible tenant. Applicants' professions and history, though, are not always proof of good behavior.  (I once lived near a married couple in a high rise condo building who kept cats--more than allowed on the lease agreement--and allowed them to completely ruin a bedroom which was used as the litter box, as well do nothing about controlling fleas. The owner had to leave the unit vacant for months in order to restore hygiene and flooring.) So back to  the amount of deposit -- another good option is to own property in an LLC.

Please contact me if you would like additional information on tenant/property owner issues.

Julia Huntsman, REALTOR, Broker | http://www.abodes.realestate | 562-896-2609 | California Lic. #01188996

Are You a California Rental Property Owner? The Upcoming Proposition for the Statewide November Ballot

Update:  7-18-2024 - taken off 2024 ballot, will be addressed lin 2025.

Update 7-15-2024, see below.

In 1995, in response to a growing number of rent control issues, the Costa-Hawkins Rental Housing Act  was enacted by the California state legislature. Today, there is a third push to repeal it in November. Known as the Justice for Renters Act, it states: "“The state may not limit the right of any city, county, or city and county to maintain, enact or expand residential rent control.” As a rental property owner, you probably know there is an increasing overlay of multiple county and municipal laws governing rents and rights of tenants, and if as a property owner you are in such a jurisdiction, then you are bound by those laws. Long Beach is one such city, so is City of Los Angeles, in total about 25 local governments which have enacted rent controls.  If not in one of those jurisdictions, your property is under statewide rent control. This is important for knowing your current ability to raise rents.

House with For Rent Sign

The Costa-Hawkins Act made exempt single family homes, condos, townhomes and newly constructed  apartment buildings from the rent control ordinances, "and allows landlords to reset the rental rate on rent-controlled rental units where they become vacant or where the last rent-controlled tenant no longer permanently resides at the unit." The ability to reset the rents after, for instance, a long-term tenant who has been paying less than market value rents, is a property owner right under the Costa-Hawkins Act.  The above proposed Justice for Renters Act would eliminate the owner's ability to charge the market rate when a tenant vacates, or "vacancy decontrol".

But if this proposition should pass, property owners would no longer have the protections of the Costa-Hawkins Act but would instantly activate whatever local jurisdiction controls are already in place, many of which are more restrictive.  Should an owner not be able to bring rents to market value, but rather be subject to some much lower rent increase requirement, their entire property value would be devalued, along with less funds to maintain a property, rising property taxes, increasing property insurance, and increasing utilities, and which will also be charged fees at current market rates by contractors to do their work. While a simplified picture for tenants is that they may pay less money if they have rent control, they may also be living in a less enhanced, less attractive, non-turnkey property over time, with repair issues.  Such strict rent control could affect the smaller properties in the rental market as those owners exit due to financial constraints, thus causing lower availability of housing for renters and lower quality.   UPDATE 7-15-2024:  Now known as Proposition 33 on 2024 ballot:

"Proposition 33, rent control: A vote in favor of this measure would expand rent control in California. If the proposition passes, it would get rid of a nearly three decade-old law, known as the Costa-Hawkins Rental Housing Act, that bans rent control on single-family homes finished after February 1, 1995.

"Cities and counties would have more power to limit rent increases for incoming and existing tenants, making it harder for landlords to hike up prices. The measure would also insert new language into California law that prohibits the state from limiting how cities and counties expand or maintain rent control. It’s backed by the Aids Healthcare Foundation and is the third time since 2018 that voters will decide on the issue: Similar ballot initiatives, in 2018 and 2020, failed by 19 and 20 points, respectively." https://www.sacbee.com/news/politics-government/capitol-alert/article289594036.html

If passed, this proposed Act could only be repealed by another ballot initiative, it does not address the statewide housing shortage, or address homelessness.  It's important to not lose the Costa-Hawkins Act, it still maintains property rights for owners, which are being eroded with each passing year.

Go to Californians for Responsible Housing for more information on the effect of repealing the Costa-Hawkins Act. 

Julia Huntsman, REALTOR, Broker | http://www.abodes.realestate | 562-896-2609 | California Lic. #01188996

Long Beach Residential Unit Market

Did you know ...?

There continues to be a demand for Long Beach residential rental housing, and rents are at a premium.

The average sold price for a 4 unit property in 2021 was $1,321,209, which is up from an average price of $1,165,367 in 2020.*

Belmont Shore units

The average sold price for a 2-3 unit property in 2021 was $987,857, up from an average price of $883,062 in 2020.*

Currently, the average list price in Long Beach for 2-3 unit properties is $1,094,045, and for 4 unit properties the average list price is  $1,336,468.  Actual rents for  a 2 bedroom/1
bath may average about $2150/month, with proforma rents being a little higher depending on the size and area location, i.e., downtown, North Long Beach, Belmont Shore.* 

The last 90 days of average sale price of a 2-3 unit property, citywide, is $1,153,356 -- 24 of 59 properties sold over list price.  The average sale price for a 4-unit property is $1,375,283 -- 4 of 18 properties in the same time period sold over list price. 

 

Unit sold prices in Long Beach

To see active listings for duplexes, triplexes and 4-unit properties in Long Beach, please go to this search  which may be revised to include other types of properties, and other cities.

For an online (or in person) valuation of your income property, just contact me.

 *Information from CRMLS.                    

Julia Huntsman, REALTOR, Broker | http://www.juliahuntsman.com | 562-896-2609 | California Lic. #01188996

What About Holding an Open House in a Tenant-Occupied Property?

When a landlord decides he/she is selling a tenant-occupied property, there are certain requirements on both parties. The landlord has the right to sell the property and find a prospective purchaser

under normal and customary market conditions of the area, and that usually includes open houses and prospective buyer visits to the property with proper notice. Tenants are understandably not anxious to participate in the selling process, but landlords and their REALTORS have certain tools for handling the situation.

The law permits a landlord to hold open house, since a 2013 decision in Dromy v. Lukovsky which allows open houses on weekends with "reasonable" notice.  This case said that there should be no more than two a month, and 10 days advance notice should be given to the tenant.  The tenant may propose alternate days within 48 hours of receipt, which the landlord should consider.  The judge in the above case approved an open house on either a Saturday or a Sunday from 1:00 pm to 4:30 pm.  The agent must be present, and the tenant may be present.

If a tenant is not cooperative with these terms, a landlord should try writing a letter (REALTORS have sample forms also) explaining possible eviction, costs and attorneys fees and a possibly a negative credit report entry from the entire process.

Another method is to provide a 3-day notice to quit (check with your REALTOR).  The landlord may have to consider eviction if neither of these work.

However, many tenants do see it in their own best interest to cooperate because an income property may be sold to another investor who would like to retain good tenants.

For more specific information on this issue, please contact me via email on best procedures to follow when listing your income property with tenants.
Lic #01188996

Easing The California Housing Demand: A New California Law for Adding Second Units

Signed into California law last year, effective January 1, 2017 is a statewide law allowing the creation of 2nd units, not exceeding 1200 square feet, in otherwise single family and multifamily zones.  This bill, AB2299 (Bloom) imposes a state-mandated local program, and which deletes previously existing additional space parking requirements.  Existing driveway parking may now meet the parking requirements under this law.  This is significant for some property owners who had the space to build a unit, but did not have a large enough lot to meet new parking requirements as well.
Now referred to as Accessory Dwelling Units (ADUs), there are certain guidelines that a local agency may create but which may not be more restrictive than the new law, including the following:

• The unit is not intended for sale separate from the primary residence and may be rented.
• The lot is zoned for single-family or multifamily use.
• The accessory dwelling unit is either attached to the existing dwelling or located within the living area of the existing dwelling or detached from the existing dwelling and located on the same lot as the existing dwelling.
• The increased floor area of an attached accessory dwelling unit shall not exceed 50 percent of the existing living area.
• The total area of floorspace for a detached accessory dwelling unit shall not exceed 1,200 square feet.
• No passageway shall be required in conjunction with the construction of an accessory dwelling unit.
• No setback shall be required for an existing garage that is converted to a accessory dwelling unit, and a setback of no more than five feet from the side and rear lot lines shall be required for an accessory dwelling unit that is constructed above a garage.
• Local building code requirements that apply to detached dwellings, as appropriate.
• Approval by the local health officer where a private sewage disposal system is being used, if required.
• Parking requirements for accessory dwelling units shall not exceed one parking space per unit or per bedroom. These spaces may be provided as tandem parking on an existing driveway.
•  Off­street parking shall be permitted in setback areas in locations determined by the local agency or through tandem parking, unless specific findings are made that parking in setback areas or tandem parking is not feasible based upon specific site or regional topographical or fire and life safety conditions, or that it is not permitted anywhere else in the jurisdiction.
• When a garage, carport, or covered parking structure is demolished in conjunction with the construction of an accessory dwelling unit, and the local agency requires that those off­street parking spaces be replaced, the replacement spaces may be located in any configuration on the same lot as the accessory dwelling unit, including, but not limited to, as covered spaces, uncovered spaces, or tandem spaces, or by the use of mechanical automobile parking lifts.
• The ordinance shall not be considered in the application of any local ordinance, policy, or program to limit residential growth.

 This is a chance to ease the housing situation for family members, or for someone to add on a second unit for income without having to purchase a new property.  It's especially helpful for those who want to live individually in a residential area, i.e., Belmont Heights in Long Beach which already hosts some older residential properties with units, without the ambiance of a large apartment building.

Update July 22, 2017:  The City of Long Beach is still in the process of developing the code requirements that must match these units (i.e., fire and safety, certain construction requirements, etc.), but has also made ineligible building ADUs in the City's parking impacted zones.  The map for these zones is available on the City's website.

 

Landlords and Property Owners, Don't Risk Your Property With Illegal Activity

In spite of the laws being passed in many states allowing legal consumption of marijuana, federal law says it's illegal. So in spite of the growing public "approval" towards this drug, if you are a landlord with tenants, you may be at risk if you are allowing tenants to smoke marijuana on your property.

A landlord may be at risk, according to National Association of Realtors Senior Policy Representative Megan Booth, of having his/her property taken because the federal government, which takes precedence over state laws, may seize finances and property connected to illegal activity.  So while public opinion shifts more towards acceptance and pro-legalization, the federal government is also being pressured to act in accordance with the current federal laws. “The U.S. has signed on to global treaties classifying marijuana as one of the heaviest controlled substances,” Booth said. “So there’s some outrage that the U.S. isn’t prosecuting marijuana users here as fiercely.”

At the very least, new disclosures may be required (as if there aren't enough already) in leases and real estate sales transactions, covering marijuana policies on rented premises, and selling houses and condos where nearby marijuana use is allowed.   All is not rosy in this new "industry": there has been an increase in reports of explosions on properties where tenants have been growing pot using special equipment, mold could  be an issue because the plants require high humidity, to say nothing of smoke and odors from nearby users. Such issues could exponentially deadly if this involves apartments or attached multi-unit condominium buildings where an explosion could immediately cause damage across several units, or moisture and water leakage issues spread to a lower unit causing expensive mold removal and interior replacements, and subsequent legal issues for the owners, possibly the Board of Directors, and substantial insurance and replacement costs.  (Such a story was once told to me about non-English speaking tenants who rented a unit advertised as "garden apartment" in Orange County.  Being new to the U.S., and possessing very little English, this was interpreted to mean that a tenant could start their own garden inside the unit.  So a crop of marijuana plants was ultimately found growing over the carpeting and causing extensive water damage to the unit below.)

California Smoke Detectors Requirements on July 1, 2014

Are you concerned about your smoke alarms? You should be.  The law is changing as of July 1, 2014 in California.   According to CA's Health and Safety Code, all smoke alarms installed after July 1 must have none-replaceable battery with a 10-year battery life.  If you have currently have smoke alarms installed, you are not required to replace it until you replace it with a new smoke alarm.


Also,beginning January 1, 2015, the State Fire Marshal will require all smoke alarms to:

• display the date of manufacture;
• provide a place where the date of installation can be written; and
• incorporate a hush feature.

Landlords should be careful to note rules regarding their rental units/properties, and though there is no time schedule for inspections of smoke alarms," if a smoke alarm defect can be reasonably ascertained visually during a landlord’s visit to the unit, the landlord needs to repair or replace the device."  This also includes notifications by tenants of any problems.

Property owners applying for building permits will also have to review their smoke alarms when there is more than $1,000 of work to be done.

Sellers of property will be required to make all disclosures on their Transfer Disclosure Statement concerning the status of smoke alarms.  See the full article.

According to the National Fire Protection Association, between 2007-2011, the leading cause of  non-fatal home fires was cooking equipment.  The leading cause of home deaths by fire were smoking materials.  One-quarter of all fire deaths were caused by fires started in the bedroom. See full article.

Investor Buyers are Making a Difference in This Market

Investor buyers, do you know you make up about 27-30% of the current buying market?  Most investor buyers are looking to hold onto their properties for a while--only 5% of properties purchased last year have been re-sold.

The second home market surged in 2011, according to data from the 2012 NAR Investment and Vacation Home Buyers Survey. The combined market share of investment and vacation homes rose to the highest level since 2005.

Investment home sales in 2011 jumped 64.5 percent over 2010. Vacation home sales climbed seven percent, year-over-year, and accounted for 11 percent of all transactions last year.

Just Listed: Three-unit Property in a Long Beach Historic District

This 1920's vintage triplex is located just inside the Hellman Street Craftsman Historic District at 761 Walnut Ave. The front building has two side-by-side townhome-style units with hardwood floors and Arts and Crafts era tiled faux fireplaces with original built-in bookcases, natural wood. One unit has an updated kitchen. Rear unit is a one-bedroom over garage, laundry room (currently not used) at rear of garage. Very charming private rear yard with patio and gazebo, partially fenced.

Current asking price is $405,000.
Please contact me for more information on this property.