Governor Newsom Calls for State of Emergency Due to Spread of Coronavirus

Industry News,

Landlords Beware: A 10% Rent Cap. May Apply – Even for New Tenants

California has now declared a State of Emergency statewide due to the continued spread of the Coronavirus.  Just last December, Governor Newsom had extended the State of Emergency and, as a result, restrictions on rent increases for various counties through December 31, 2020, including  Los Angeles, Santa Barbara, Ventura and a handful of other counties.  NOW, this latest declaration applies  Statewide to all counties.

Accordingly, the State of Emergency anti-price gouging restrictions impact all vendor prices, including rent increases.  As a result, like pricing for other goods and services, rent increases may not exceed 10% in certain instances unless the housing provider can prove that the increased price is directly attributable to increases in the cost of labor or materials needed to provide the good or service.  That may mean owners cannot increase rent for vacant units by more than 10%.  We urge owners that find themselves in a situation of increasing rent by more than 10% while an Emergency Declaration is in place to consult with an attorney before doing so.

In general, if the rents in the area where the owner operates were impacted by the disaster than the rent cap may apply for either new or existing tenancies.  If rents are not a result of shortages due to the disaster or cause of the emergency declaration, then the owner may be free to set the rent subject to local or state rent control laws.  In other words, if the rents in the area where the owner operates have been impacted by a natural disaster or other matter giving rise to the Emergency Declaration, then the “cap” should apply, but if rents are not a result of shortages due to the emergency event, then the owner might be free to set the rental rate.  Again, check with an attorney first.

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