California is one of the best states to invest in real estate. With its thriving economy, stunning natural surroundings, and sunny weather, there is a great demand for investment property in the California housing market. Statistics show that there are about 6.2 million renters in California, with a large number being located in the metropolitan cities of San Francisco, San Diego, and Los Angeles. The state is also known for its strict California landlord tenant laws. So if you are thinking of investing in the California real estate market, there are some laws California real estate investors need to get familiar with.
Related: Landlord Rights: Know Your Rights and Use Them
Disclaimer: The following is only a brief overview of California laws. This article was written for educational purposes only and is not meant to take the place of formal legal advice. Be sure to consult with a local attorney to ensure compliance with the law when drafting and enforcing a California lease agreement.
7 California Landlord Tenant Laws That Every Real Estate Investor Should Know
1. Anti-discrimination laws
When looking for tenants for a rental property, California landlord tenant law requires you to adhere to the fair housing laws. This will determine how you advertise a California rental property, questions you ask when screening a tenant, and how you handle people who rent from you.
California investors and landlords are allowed to reject potential tenants based on criminal behavior, bad credit history, negative references, and history of eviction. However, it is illegal to discriminate against potential renters based on their familial status, religion, race, sex, national origin or physical disability. It’s also illegal to discriminate against someone on the basis of their gender identity, sexual orientation or personal traits.
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2. Security deposit limits and return rules
Security deposits are one of the major causes of problems between tenants and landlords. While the payment of security deposit is not a must in California, landlord rights allow you to charge a maximum of 2 months’ rent. If the rental investment property is furnished, landlords can ask for 3 months’ rent as a security deposit. Asking for a security deposit is a good way to gauge a renter’s financial stability.
When it comes to returning the security deposit, California landlord tenant law allows landlords to withhold all or part of the security deposit when:
- The tenant owes unpaid rent
- The tenant causes damage to rental property
- The rental is dirty
If the landlord decides to withhold part of the security deposit, he/she must provide the tenant with a list showing what costs were covered (repairs, unpaid rent, etc.). Receipts of repairs done must also be provided within 21 days. However, if there is no reason to withhold the security deposit, the landlord must return it within 21 days of the renter moving out.
3. Rental agreement laws
According to California landlord tenant laws, tenancies of 12 months or more must have rental agreements. While oral agreements are legal, it is difficult to prove the terms of a verbal agreement. Rental agreements on paper make it easier to confirm what was agreed and allow faster settling of disputes. Since the rental agreement is a legal document, it should be drafted by an attorney to include all the necessary disclosures and notices.
Required California rental agreement notices cover things such as lead paint, civil code, pest control, carcinogenic material, utilities, demolition permit, military ordinance, death in unit, mold, and utility.
4. Laws on repairs
Every real estate investor is required to repair major defects in their rental properties to comply with the local building and health codes. They are also responsible for maintenance work so as to make the real estate investment property livable. Similarly, tenants are required by the law to take good care of their rental units. Tenants are responsible for the repair of any damages resulting from their abuse or negligence. They are also held liable for damages caused by their family, friends or pets.
California landlord tenant law provides tenants several options to pursue in case the landlord fails to conduct repairs. However, the tenant must first inform the landlord of the repairs required and then give them enough time to complete the repairs. Usually, 30 days is considered sufficient time for most repairs. If the landlord fails to complete the repairs within the designated time, tenants could:
- Abandon the apartment
- Assume the right to ‘repair and deduct’
- Sue the landlord
- Withhold rent
- Call local or state health inspectors
Related: How to Budget for Big Repairs to Your Rental Property
5. Rental payment laws
California landlord tenant law does not allow landlords to demand payment of rent in cash. The exception is when the landlord has received a check that has bounced for three consecutive months.
As a tenant friendly state, a new California rent control law was instated earlier this year. According to the law, annual rent increase should not exceed 5% plus inflation each year until 2030. However, this law only applies to apartments built prior to 2004. Duplexes and single-family homes that are owner-occupied are exempt.
In the California real estate market, landlords are not required by law to have a rent payment grace period. If the landlord wishes to include a grace period, they should include it in the rental agreement. Once the grace period elapses, a late fee will be charged.
6. Eviction laws
Before proceeding with the eviction process, the landlord is required to give the renter a written notice. Renters that have lived in the investment property for 12 months or more should be given a 60-day notice, while those that have lived in the property for less than 12 months should be given a 30-day notice. However, there is the option of a three-day notice if the tenant:
- Has rent arrears
- Damaged the rental property
- Violated any terms of the rental agreement
- Uses the rental property for an unlawful purpose
- Is a nuisance to other tenants
- Committed sexual assault or violence
Related: Make the Eviction Process as Painless as Possible
7. Notice of entry
Landlords must provide renters with formal notice 24 hours before entering their rental units. A landlord has a right to enter rental units for the following reasons: abandoned property, an emergency, showing the unit to potential tenants, agreed-upon repairs, and court orders. Apart from the cases of an abandoned property or emergency, landlords are only allowed to access the unit during normal business hours.
Owning a rental property in California can be a very lucrative venture. However, before investing in California real estate, you need to be conversant with California rental laws. To learn more about California landlord tenant laws, be sure to check out the California Department of Fair Employment and Housing, as well as the U.S. Department of Housing and Urban Development (HUD). If you have any further queries about California renter rights and laws, consult a seasoned landlord tenant attorney in the state.
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