Photo by Avi Waxman on Unsplash

Landlords with properties affected by the Costa-Hawkins Housing Act should be aware of a recent ruling which reached the California Appellate Court in May of 2020. In the case of Owens vs City of Oakland Housing, Residential Rent and Relocation Boards, Jonathan Owens, the landlord, owned a four-bedroom single-family home. He lived in one of the rooms and leased out the remaining three rooms to three separate tenants. A tenant filed a complaint asserting there was no rent concession while the property was under construction. Instead of giving an adjustment during the construction period, Owens informed the tenant the property was not subject to rent control because it was a single-family home: he terminated the lease.

Below is an excerpt from the article available on natlawreview.com:

“In its decision, the court focused on the definition of a “dwelling unit” as used in the exception found in Civil Code section 1954.52(a)(3)(A), which provides that “an owner of residential real property may establish the initial and all subsequent rental rates for a dwelling or a unit about which the following is true…It is alienable separate from the title to any other dwelling unit….” . While the landlord defined the dwelling unit as his single-family home; the court, after analyzing the statutory definitions of the term, the determined that the dwelling unit at issue was the separate room being rented to the tenant.[2] As a result, the landlord had converted his single unit dwelling into a multi-unit dwelling that was subject to Oakland’s Rent Adjustment Program since the individual rooms were not alienable separate from the title to any other dwelling unit.”

Ultimately, tenants renting a room in a single-family home or condominium are entitled to protection established by Oaklands’s Rent Adjustment Program. Landlords who seek protection from rent control through similar leasing practices or exemptions may soon find those considerations disappearing. If you are an investor or landlord of real estate property in California, specifically Los Angeles, you should consider reviewing lease agreements to ensure the entire home or condominium is defined as the “dwelling unit”. As always, please seek legal counsel before entering any lease agreement as there could be long-lasting impacts on the property.

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