As published in the Salinas Valley Business Journal, November 2024
by Geraldine Villa, Attorney
Noland, Hamerly, Etienne & Hoss
On September 24, 2024, the Salinas City Council unanimously adopted rent stabilization and tenant protection policies. These policies are organized in three ordinances identified as a Rent Stabilization Ordinance, Just Cause Eviction/Tenant Protection Ordinance, and Tenant Anti-Harassment Ordinance. These ordinances are effective January 1, 2025.
This article is the first article of a three-part article series about these new ordinances. The article addresses only the Rent Stabilization Ordinance (“Rent Ordinance”). The other parts of the ordinance will be discussed in later articles.
Some Properties are Exempt
Single-family homes, condos, properties built after 1995, rental units which are deed restricted as affordable housing by a regulatory agreement or similar document, rental units in hospitals, convents, monasteries, extended medical care facilities, rental units in a hotel, motel, or room in boarding house, rental unit in an institutional facility including a hospital, medical care facility, residential care facility, are all among the residential properties exempt from this Rent Ordinance.
This Rent Ordinance targets multifamily buildings built before 1995.
This, however, could change if Proposition 33 is adopted by California voters in November. If Proposition 33 is adopted repealing the Costa-Hawkins Act, then single family homes, condos, and properties built after 1995 will not be exempt.
Limits on Rent Increases
The Ordinance limits annual rent increases to 2.75% or 75% of the most-recent 12-month increase in the Consumer Price Index for All Urban Consumers (CPI-U) Series, whichever is less. Only one rent increase in a 12-month period is permitted and that 12-month period begins on the date of the last rent increase regardless of whether that rent increase occurred prior to the effective date of the Rent Ordinance.
Landlord’s Ability to Petition City to Charge More Than Rent Caps
Landlords can petition the City to charge more than the rent caps contained in the ordinance by filing a Fair Return Petition. To file a Fair Return Petition, the landlord obtains the Petition Form from the City and must serve the completed form on all tenants. The Petition should be supported by whatever documentation the landlord has that justifies a rental increase above that allowed by the ordinance’s rent caps.
In reviewing the Petition, the City will examine changes in the Consumer Price Index for All Urban Consumers (CPI-U), the pattern in recent rent increases or decreases; changes in property tax or other taxes related to the property; deterioration of the property other than normal wear and tear; any failure of the Landlord to provide adequate Housing Services or to comply with applicable state rental housing laws; and other relevant evidence demonstrating the landlord is not receiving a just and reasonable return.
In no event may the landlord seek a rent increase exceeding the amount authorized by state law which is no more than 5 percent plus the percentage change in the cost of living, or 10 percent, whichever is less. See Cal. Civ. Code 1947.12.The landlord must pay to the City, in advance all costs associated with the City’s review of the Fair Return Petition, including the costs of any experts that the City determines are necessary to rule on the Petition. The landlord must pay all of the City’s estimated costs before City will process the petition.
The tenants have thirty (30) days from the date of receipt of the Fair Return Petition to respond and provide the City Attorney any materials the tenants want the City to consider in deciding the Fair Return Petition.
The City must make a decision on the Fair Return Petition within ninety (90) days after the City deems the Petition complete. Any person aggrieved by the decision may appeal to the City Council.
Landlord Petition to Pass Through Certain Capital Improvement Costs
With permission of the City, a landlord may file an application for a capital improvement plan with a request to pass-through certain capital improvement costs to tenants once work on the rental has been completed. This petition should include the actual cost of completed capital improvements to the rental unit based on actual expenses amortized over the life of improvement and does not include the ordinary repair, replacement and maintenance or costs attributable to bringing a rental unit into compliance with health and safety laws.
A tenant may file a financial hardship application that will exempt them with respect to any rent increase based on a pass through of capital improvement costs.
Tenants Can Petition for Rent Reduction
A tenant may request a rent reduction if he or she believes that the landlord has demanded rent in excess of the maximum rent permitted by the Rent Ordinance, if the landlord has reduced housing services (defined as all amenities related to the unit) or if the landlord fails to maintain the unit in a habitable condition as required by state or local law. The “Rent Reduction Petition” may request a refund of, or decrease in, rent proportional to the amount landlord accepted in excess of the maximum rental limitations, or the landlord’s reduction in housing services or the failure to maintain the rental unit in a habitable condition.
The tenant must provide the landlord a copy of the Rent Reduction and the landlord has thirty (30) days from the date of receipt to respond to it.
The tenant bears the burden of establishing a reduction is necessary. A Hearing Officer may consider factors such as the landlord’s failure to comply with the Rent Ordinance, reductions in housing services, and habitability violations. The Hearing Office must make a decision within sixty (60) days. Any person aggrieved by the decision may appeal to the City Council.
Notice Requirements
Salinas landlords are required to notify tenants (both current and future) of this Rent Ordinance. On or before commencement of a tenancy or a rental increase, the landlord must provide tenants written notice that the tenancy is regulated by this Rent Ordinance. The notice must detail the tenant’s rights under this Ordinance such as the right to submit a complaint, Rent Reduction Petition, the tenant’s right to respond to any Fair Return Petition and of the ineffectiveness of any rent increase if the requirements of the Ordinance are not met.
The notices will be in a form prescribed by the City Attorney and must be delivered in the language primarily used by the tenant, English, and Spanish.
Compliance is Mandatory
Failure to comply with the Rent Ordinance can result in civil and criminal penalties including but not limited to statutory damages three times the amount by which the payment exceeds the allowable rent, or for statutory damages of $1,000, whichever is greater, damages for emotional distress and punitive damages. Additionally, any person convicted of violating the Rent Ordinance is guilty of a misdemeanor and upon conviction can be fined up to $1,000 and jailed for not more than six (6) months.
Recommendation
Landlords should determine whether their rental unit is subject to this ordinance, familiarize themselves with the details of the laws, consult with legal counsel and give the necessary notices to all tenants.
This article is intended to address topics of general interest and should not be construed as legal advice.
©2024 Noland, Hamerly, Etienne & Hoss
Geraldine Villa is in Noland Hamerly’s Civil Litigation practice group and frequently works on landlord/tenant matters. A Salinas native, she serves on the Board of Directors of the Monterey County Women Lawyers Association.