BILL ANALYSIS Ó
SB 775
Page 1
SENATE THIRD READING
SB
775 (Allen)
As Amended July 8, 2015
Majority vote
SENATE VOTE: 38-0
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|Committee |Votes|Ayes |Noes |
| | | | |
| | | | |
| | | | |
|----------------+-----+----------------------+--------------------|
|Housing |7-0 |Chau, Steinorth, | |
| | |Burke, Chiu, Beth | |
| | |Gaines, Lopez, Mullin | |
| | | | |
|----------------+-----+----------------------+--------------------|
|Appropriations |17-0 |Gomez, Bigelow, | |
| | |Bloom, Bonta, | |
| | |Calderon, Chang, | |
| | |Daly, Eggman, | |
| | |Gallagher, | |
| | | | |
| | | | |
| | |Eduardo Garcia, | |
| | |Holden, Jones, Quirk, | |
| | |Rendon, Wagner, | |
| | |Weber, Wood | |
| | | | |
SB 775
Page 2
| | | | |
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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 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.
FISCAL EFFECT: According to Assembly Appropriations Committee,
this bill will have negligible state fiscal impact.
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
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determine the maximum allowable rent. A city must provide the
certification within five 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.
This bill 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 this 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
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to ascertain the rent than the local agency. Not surprisingly,
sophisticated landlords and tenants, knowing that the mandate to
issue a certificate within five 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.
"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."
Analysis Prepared by:
SB 775
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Rebecca Rabovsky / H. & C.D. / (916) 319-2085
FN:
0001527