Since last spring's newsletter there have been many changes in California Law. One stealth issue has arisen that all owners need to carefully consider. This was a subtle change in the discrimination laws that should affect how and who you rent to. It is the first issue I tackle below.
The other two issues have been well publicized, but I want to discuss some nuances and ramifications for the local market. Those issues are the new 60-day notice for rent increases and what is happening in the area of toxic mold.
Discrimination Law Change
Watch out for this little known change in the law: The California Civil Code section 12955 has been amended as follows with the change underlined:
It shall be unlawful:
(a)For the owner of any housing accommodation to discriminate against or harass any person because of the race, color, religion, sex, sexual orientation, marital status, national origin, ancestry, familial status, source of income, or disability of that person.
(n)To use a financial or income standard in the rental of housing that fails to account for the aggregate income of persons residing together or proposing to reside together on the same basis as the aggregate income of married persons residing together or proposing to reside together.
There is additional text and changes, which I would send to anyone on request. So what is the impact? Watch out for "harassment" of any of these protected classes. Harassment can be very broadly defined. When in doubt keep communication in writing. It is almost impossible to "harass" someone in writing unless of course you make an overt remark. Do not discriminate based on sexual orientation. This has probably been unlawful in California for some time and it is now explicit in the statute. It has never been good business practice to harass or discriminate based on sexual orientation so examine your practices and make any change needed. Finally source of income and aggregate income can also be problematic. For example can you as a policy not rent to students? If the student has verifiable income from his parents it would appear not. Many owners out there exclude students. My interpretation is that you are putting yourself at risk for a lawsuit. Cal-Prop uses a rent guarantee form that has eliminated problems with students. I suggest you consider some way of accepting students. Cal-Prop has always rejected applicants where one applicant makes the lion share of the money. This aggregate income clause now invalidates that reason. We now look for other legal ways to eliminate prospects that have uneven income amounts.
You are probably aware of the new state law that requires owners of rental property to give tenants a 60-day notice when the increase in rent exceeds 10 percent of the rental value. Read on about why this notice is really 65 days and 35 days for notices under the 10 percent increase.
What you must do:
- For an increase in rent that is greater than 10 percent you must provide the tenants with at least 60-days advance notice. This is if you personally serve the tenant. How many owners hand deliver their tenants rent increases? I hope not many. Cal-Prop never personally serves a rent increase. If you post and mail it must be 65 days advance notice for over 10 percent or 35 days if under 10 percent.
- If more than one increase is given in a calendar year and the total amount of the increases exceed 10 percent then for the second increase the 60-day period is in effect.
Although this new section does not state you must also post when you mail a notice it is advisable to continue to post and mail any notice that is mailed as opposed to personally served.
Just when you thought it was safe to go back in the water . . . The hysteria machine that brought you asbestos and many other scares has found a something new. There are multiple bills pending on the issue of toxic mold in Sacramento and one will surely pass. This puts us past the point of debating whether this is a real problem and into the realm of how to handle mold to avoid negative repercussions.
What you should do:
- Do not panic: Most buildings have some mold. It is a natural substance that flourishes on cellulose-type materials: drywall, carpet, drapes, framing. In other words your entire building.
- Know the conditions: Floods, leaks and areas of poor ventilation all lead to conditions that can be conducive to the growth of mold. When these conditions exist you must first correct the condition i.e. the leak or moisture penetration first and then go after the mold.
- Have a policy: If you have a written policy, communicate that policy to the tenants, follow your policy for any impacted tenants and this will eliminate 90% of the problem. If you get a tenant that seems to be using the problem as a general grievance complete your mold policy and go the extra mile and then when appropriate and legal give them notice to vacate.
- Be proactive: Cal-Prop now includes mold inspection in our annual inspections with SDG&E where we inspect the wall heaters, check for water leaks and check the condition and operability of the smoke detectors.
- Eliminate problems: In Southern California with its long summers it should not be difficult to eliminate mold. Painting over the mold is rarely a permanent solution although the additives available now are quite effective. Open up the area where the mold is present and eliminate any water source. Instead of painting it over take down the drywall and dry out the area completely and then re-drywall. It is just as cheap in the long run and eliminates the problem.
Caveat: This article only advises on buildings fewer than 15 units where three or less units have a problem. If you have a building-wide problem completely different tactics are usually necessary.
Good luck and as always be sure to consult with an attorney for any and all specific legal situations. I recommend Jean Heinz of Heinz and Feinberg for all issues pertaining to real estate. She can be reached at 619-238-5454.