Renting Homes and Condos

I own a vacant single-family home. I’d like to rent it for one year and then have it vacated so that family members can move in. What is the best way to do this? 

There is a myth permeating the landlord community that single-family homes and condominiums are exempt from rent control laws. However, if the home or condominium was constructed before June 13, 1979, some, or even all, of the rent control rules may apply. Therefore, for pre-1979 homes and condos, the owner should understand how the law works before asking the occupants to vacate.

Under the Costa-Hawkins Rental Housing Act, a state law enacted in the mid-1990s, single-family homes and condominiums in most circumstances enjoy an exemption from the rent restriction provisions of any local rent control regulation if the tenancy began on or after January 1, 1996. Remember that most California rent control ordinances, including San Francisco’s, consist of two prongs: One part is known as “rent restriction,” which means that the government can limit rental increases to the annual allowable amounts and the limited other grounds such as capital improvement pass-throughs, operating and maintenance increases, certain bond measures, and qualified utility allowances. The second arm is commonly known as “eviction control,” which means that the municipality mandates the allowable reasons to terminate a tenancy. In San Francisco, there are 15 “just cause” reasons to terminate a tenancy in a pre-1979 rental unit.

Tenants in single-family homes and condominiums contained within buildings built before 1979 who resided there since before January 1, 1996 are entitled to both rent restriction and eviction control protections. Most importantly, for all tenancies in pre-1979 homes and condos, the eviction control limitations always apply, meaning the owner must invoke a valid just cause reason to eject the tenant. Yet because the rent restrictions do not apply to the post-January 1, 1996 leases, owners who rent out their single-family homes to a single tenancy (that is, there is only one lease, and the house is not subdivided) oftentimes draft the rental agreement to include substantial rent increases after the initial term (e.g., one year). In the absence of rent restriction, rent after the first year can be raised to whatever amount the owner deems appropriate. If drafted and agreed upon at the inception of the tenancy, a tenant may be hard-pressed to challenge the increase as discriminatory after the term expires and the new higher rent becomes effective. Other owners who desire to move back into their homes may invoke the owner move-in just cause provision under the rent law, although this ground contains many requirements and additionally mandates the payment of substantial relocation sums to displaced tenants.

Lastly, this member’s question highlights one of the many pitfalls of the local rent law. In order to evict a tenant to move in a direct relative, the owner must also live in, or simultaneously be seeking to occupy, the unit as his/her principal place of residence. In multi-family buildings, this is achieved by devoting one of the units to the owner’s use. In single-family homes, however, a relative move-in generally cannot be done, as the owner will not be living, or seeking to live, in the same building.

In sum, drafting a lease agreement to make the home unattractive to the tenants after the initial term may provide the best opportunity to move family members in, although such an outcome cannot be guaranteed. Therefore, when faced with this issue, retain an attorney, as the law surrounding Costa-Hawkins and the application of the local rent ordinance is quite complex!

DW

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