BILL ANALYSIS Ó
SB 775
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Date of Hearing: July 15, 2015
ASSEMBLY COMMITTEE ON HOUSING AND COMMUNITY DEVELOPMENT
Ed Chau, Chair
SB
775 (Allen) - As Amended July 8, 2015
SENATE VOTE: 38-0
SUBJECT: Tenancy: rent control: certification.
SUMMARY: Provides that the requirement to certify rents in
jurisdictions with rent control under the Petris Act does not
apply to tenancies beginning January 1, 1999 that are subject to
the Costa-Hawkins Rental Housing Act (Costa-Hawkins).
Specifically, this bill:
1)Provides that the requirement to certify rents in
jurisdictions with rent control under the Petris Act does not
apply to tenancies beginning January 1, 1999 that are subject
to the Costa-Hawkins Rental Housing Act (Costa-Hawkins).
2)Provides that for a tenancy that began after January 1, 1999,
if the property owner provides the local agency with the
tenancy's initial rent in compliance with the agency's
registration requirements, in writing signed under penalty of
perjury, there will be a rebuttable presumption that the
statement of the initial rent is correct.
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EXISTING LAW:
1)States, under the Petris Act, that if an ordinance or charter
controls or establishes a system of controls on the price at
which residential rental units may be offered for rent or
lease and requires the registration of rents, the ordinance or
charter, or any regulation adopted pursuant thereto, shall
provide for the establishment and certification of permissible
rent levels for the registered rental units, and any changes
thereafter to those rent levels, by the local agency, as
specified. Provides that the ordinance, charter, or
regulation shall provide a process for the establishment and
certification of permissible rent levels within one year after
it is adopted, as specified. (Civil Code Sections 1947.7 and
1947.8)
2)Requires a local agency, upon the request of the landlord or
the tenant, to provide the landlord and the tenant with a
certificate or other documentation reflecting the permissible
rent levels of a rental unit. Provides that the landlord or
tenant may appeal the determination of the permissible rent
levels reflected in the certificate, and that the permissible
rent levels reflected in the certificate or other
documentation shall, in the absence of intentional
misrepresentation or fraud, be binding and conclusive upon the
local agency unless the determination of the permissible rent
levels is being appealed. (Civil Code Sections 1947.7 and
1947.8)
3)Requires the local agency, after the establishment and
certification of permissible rent levels and upon the request
of the landlord or the tenant, to provide the landlord and
tenant with a certificate of the permissible rent levels of
the rental unit. Requires that the certificate shall be issued
within five business days from the date of request by the
landlord or the tenant. (Civil Code Section 1947.8)
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4)Allows the landlord or the tenant to appeal the determination
of the permissible rent levels reflected in the certificate,
and requires the appeal to be filed with the local agency
within 15 days from issuance of the certificate, except as
specified. Requires the local agency to notify the landlord
and the tenant in writing of its decision within 60 days
following the filing of the appeal. (Civil Code Section
1947.8)
5)Provides that an owner of a residential rental unit who is in
substantial compliance with an ordinance or charter that
controls or establishes a system of controls on the price at
which residential rental units may be offered for rent or
lease and which requires the registration of rents, or any
regulation adopted pursuant thereto, will not be assessed a
penalty or any other sanction for noncompliance with the
ordinance, charter, or regulation. (Civil Code Section
1947.7)
6)Allows, under Costa-Hawkins, an owner of residential real
property to establish the initial and all subsequent rental
rates for a dwelling or a unit if it has a certificate of
occupancy issued after February 1, 1995, or it has already
been exempt from the residential rent control ordinance of a
public entity on or before February 1, 1995, pursuant to a
local exemption for newly constructed units, as specified.
(Civil Code Section 1954.52)
7)Provides that, for a dwelling or unit in which the initial or
subsequent rental rates are controlled by an ordinance or
charter provision in effect on January 1, 1995, the owner of
such real property may establish the initial and all
subsequent rental rates for all existing and new tenancies in
effect on or after January 1, 1999, if the tenancy in effect
on or after January 1, 1999, was created between January 1,
1996, and December 31, 1998. Existing law specifies that
commencing on January 1, 1999, an owner of real property as
described in this paragraph may establish the initial and all
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subsequent rental rates for all new tenancies if the previous
tenancy was in effect on December 31, 1995, except as
specified. (Civil Code Section 1954.52)
FISCAL EFFECT: None.
COMMENTS:
Background : In 1986, the Legislature adopted the Petris Act
which directs cities with rent control ordinances requiring rent
level registration to certify the maximum allowable rent for
every rent controlled unit under its jurisdiction. Upon the
request of a landlord or tenant, a city must certify the
permissible rent for a rent controlled unit or if no
certification is on file, provide a certification process to
determine the maximum allowable rent. A city must provide the
certification within 5 business days of the date of the request.
Nine years after the Petris Act was enacted, the Legislature
enacted Costa-Hawkins which preempts local adoption of strict
vacancy-control, rent control laws that do not allow a property
owner or landlord to increase the rent when a unit is vacated
and a new tenancy is created. Instead, Costa-Hawkins permits a
vacancy decontrol-recontrol form of local rent control where an
owner is authorized to increase the rent without restriction to
a new tenant when the tenancy is voluntarily vacated, abandoned,
or terminated by lawful eviction. The new rent for the new
tenant would then be subject to local rent controls for the
duration of the tenancy. Costa-Hawkins applied to tenancies
entered into after January 1, 1999 and protected the tenancy
rights of all occupants in place prior to January 1, 1999.
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SB 775 would amend the Petris Act to state that its provisions
do not apply to tenancies commencing on or after January 1,
1999. For those long-term tenancies still in existence today
that were established prior to January 1, 1996, the Petris Act's
maximum rent certification process may still apply.
Purpose of the bill : According to the author, "the problem with
the current law is that it is has created opportunities for
landlords and tenants to manipulate the certification process to
their advantage, rather than for its intended purpose of
creating certainty for the parties and the local agency. For
example, a landlord or a tenant, knowing that a local agency
does not have accurate information regarding a current tenancy,
will seek a certificate that will be premised upon a higher or
lower rent than what was initially agreed to by the parties.
Because current law permits the initial rent to be established
by the agreement of the parties, they are in the better position
to ascertain the rent than the local agency. Not surprisingly,
sophisticated landlords and tenants, knowing that the mandate to
issue a certificate within 5 business days is still required of
local agencies, will seek the certificate solely to obtain an
advantage or create confusion in a dispute over rent levels,
overcharges and/or an unlawful detainer proceeding. Local
agency staff is then put in the difficult position of scrambling
to ascertain a correct rent level with inadequate information,
and to then issue a certificate that may impact the outcome of
ongoing litigation.
"By amending existing law to remove the certification
requirement for post-January 1, 1999 rents established by the
landlord, local agencies would no longer be placed in the
impossible position of issuing binding certifications based on
incomplete or absent information. The amendment would also
protect the integrity of any contemporaneous administrative or
judicial processes for establishing rent levels or overcharges
by removing the ability to use the certification process to
obfuscate the issues in those proceedings.
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"Notably, some rent control jurisdictions provide an
administrative hearing for ascertaining base rents, current
rents and overcharges. But, unlike the certification process,
the administrative hearing process provides the parties with
adequate notice, and opportunity to present all their evidence
and to have the matter decided by a neutral hearing examiner,
along with a right of appeal. This approach has been the
preferred choice for the vast majority of parties who seek an
accurate determination of permissible rent levels and will
continue to be available to any landlord or tenant in those
jurisdictions that offer such proceedings."
REGISTERED SUPPORT / OPPOSITION:
Support
City of West Hollywood
Rent Stabilization Board of the City of Berkeley
Santa Monica Rent Control Board
Opposition
None on file
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Analysis Prepared by:Lisa Engel / H. & C.D. / (916)
319-2085