BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                     SB 775


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          SENATE THIRD READING


          SB  
          775 (Allen)


          As Amended  June 16, 2016


          Majority vote


          SENATE VOTE:  38-0


           -------------------------------------------------------------------- 
          |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            |                     |
          |                |     |                       |                     |
          |                |     |                       |                     |
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                                                                     SB 775


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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 a property owner has provided the local agency with the  
            tenancy's initial rent in compliance with the agency's  
            registration requirements in a 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  
          determine the maximum allowable rent.  A city must provide the  
          certification within five business days of the date of the  
          request. 









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          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  
          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  








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          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:                                             
                          Rebecca Rabovsky / H. & C.D. / (961) 319-2085     
                                                                  FN:  
          0003459









                                                                     SB 775


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