Five Things Every Real Estate Agent Should Know About Property Management in California
The property management landscape in California has experienced constant changes. As a real estate agent, it’s crucial to stay informed on these changes to provide accurate advice to clients, especially those interested in acquiring rental properties. In addition, if you are interested in leasing a property for a client or taking on full property manager duties, you will want to know the differences and responsibilities.
Below are five important things every agent should know:
1. Limits on Rent Increases
Under the Tenant Protection Act, landlords cannot increase rent by more than 10% or 5% plus the Consumer Price Index (CPI), whichever is lower, over a 12-month period. This rent cap applies to most residential properties, making it essential for agents working with investors to communicate the limitations on rental income growth. Keeping clients informed about these restrictions will help them plan long-term investment strategies with realistic expectations.
2. No-Fault Evictions Are Prohibited
Under the new regulations, no-fault evictions—where a landlord ends a tenancy without any fault on the part of the tenant—are significantly restricted. Common reasons for no-fault evictions include the landlord moving back into the property, taking it off the rental market, or performing major renovations. These changes mean that landlords must now have just cause to evict tenants, such as non-payment of rent or violating the lease agreement.
For example, if a landlord intends to move into the property themselves, they must provide proper notice to the tenant and, importantly, cannot re-list the property for rent within 12 months. This rule aims to protect tenants from unjust displacement.
Additionally, for properties subject to rent control, if the property is sold, landlords may face challenges when it comes to eviction notices. During escrow, it may not be possible for the current owner to issue an eviction notice prior to the new buyer taking ownership. This can complicate the timeline for a buyer looking to move into a rent-controlled property, as the new buyer will likely need to work within existing tenant protections.
3. Tenant Screening and Application Fees
Starting in 2024, tenant application fees in California are capped at $62.02, and landlords are required to consider alternative forms of income, such as government assistance, when assessing a tenant’s ability to pay rent. This is a crucial update for agents advising clients on rental property management, as it changes the way landlords screen potential tenants.
For more indepth look at the Tenants applying with Government Subsidies.
4. Repair and Maintenance Obligations
Landlords must ensure that all necessary repairs and maintenance that affect a tenant’s health or safety are addressed promptly. If landlords fail to make such repairs, tenants have the right to use a “repair and deduct” remedy, allowing them to fix the problem themselves and deduct the cost from their rent. Regular maintenance not only helps maintain good tenant relationships but also protects landlords from potential legal disputes.
5. Security Deposits and Refund Timelines
As of 2024, landlords are limited to collecting security deposits that do not exceed one month’s rent. Upon a tenant vacating the property, the security deposit must be returned within 21 days, with detailed receipts provided for any deductions. Agents should inform their clients about these deposit rules to ensure they comply with state laws and avoid conflicts with tenants.
Exeception:
The exceptions for small landlords under California's new security deposit law (effective July 1, 2024) are as follows:
Definition of a Small Landlord: A small landlord is defined as a natural person or an LLC in which all members are natural persons, who owns no more than two residential rental properties with a total of no more than four rental units.
Exception for Small Landlords: Small landlords are allowed to collect a security deposit of up to two months’ rent, regardless of whether the property is furnished or unfurnished. This is in contrast to the general rule, which caps the security deposit at one month's rent starting in July 2024.
Service Members Exception: The small landlord exception does not apply if the tenant is a service member. In such cases, even small landlords must adhere to the general one-month cap on security deposits.
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