Housing providers play a critical role in their local communities, provide an essential service to residents, and are an important part of the tax base. In the December issue of AOA Magazine, I wrote about Santa Ana’s new Rent Stabilization Ordinance that limits rent increases to a maximum of 3% per year or 80% of the percent change in the CPI, whichever of the two is lower. In addition to enacting a lower local rent cap, the city has also adopted a more restrictive Just Cause Eviction Ordinance.
One of the city’s stated reasons for adopting this ordinance is that “The City Council finds and determines that regulating the relations between residential landlords and tenants will increase certainty and fairness within the residential market within the city and thereby serve the public peace, health and safety.”
While the purpose of this ordinance sounds noble, the manner of fulfilling the purpose is flawed. The job of city government is to fulfill the city charter and protect its citizens – renters and property owners alike. Despite this, the new ordinance is clearly biased towards tenants by giving them even greater rights and against another member of the community, housing providers, by taking away their rights. Thus, the city is actually creating inequity, and in doing so discouraging investment in the city and disenfranchising a vital member of the local business community.
The ordinance is very lengthy, at times confusing, and has many new restrictions and rules that limit a property owner’s ability to evict a tenant or terminate a tenancy, and otherwise run their local business. Here’s my list of TOP 5 UNFAIR new restrictions.
#5 Month-to-Month Leases
The ordinance states that, “After a tenant has continuously and lawfully occupied a residential real property for thirty (30) days, the Owner of the residential real property shall not terminate the tenancy without just cause.” For a variety of reasons there are times when tenants and property owners mutually prefer a month-to-month lease. This provides maximum flexibility to both parties. This is where the city has decided to step into this otherwise fair and straight-forward business relationship and take away the rights of the housing provider to terminate the lease. Only the tenant has the option to end their tenancy. The tenant has the flexibility to unilaterally decide to move by giving 30 days’ notice at any time, yet the housing provider doesn’t have the same ability to give 30 days’ notice to the tenant. This makes a month-to-month lease contract completely one-sided.
#4 No Fault Just Cause Termination of Tenancy
“If an owner or their spouse, domestic partner, children, grandchildren, parents, or grandparents would like to live in the unit, the Owner shall, regardless of the tenant’ s income, either assist the tenant to relocate by providing a direct payment to the tenant that is the equivalent of three months’ rent, or waive in writing the payment of rent for the final three months of the tenancy, prior to the rent becoming due.”
Are you kidding me?! When a lease agreement has expired, both the tenant and the property owner should have equal choice in whether or not they want to renew the lease. It’s understandable that tenants want the option for security and stability, and at the same time, so do property owners. Housing providers do not like to have tenants move out. It’s costly in terms of restoring the unit to move-in-ready condition, lost rent revenue while the property is vacant, and the time and expense associated with finding a new qualified tenant.
If a tenant only needs to give 30 days’ notice to move, and they do not need to state the reason for moving, why should an owner be severely restricted in their reason for not renewing AND need to pay a tenant to move? When the lease agreement is over, a housing provider should not be “fined’ for not renewing the lease and for moving into the property that they own. It’s bad enough that under SB1482 a property owner has to pay a tenant one month of rent for a no-fault termination of tenancy, and now Santa Ana is mandating that an owner needs to pay a tenant three months’ worth of rent! This is completely unfair, one-sided, and gives more rights to the person who is renting then the person who actually owns the property.
#3 At Fault Cure or Quit Violations
Under the new ordinance, if an owner issues a notice to terminate a tenancy for just cause that is a curable lease violation (damaging property, creating a nuisance…), the owner must also inform the tenant of the contact number for the Eviction Defense Fund that the city has set up to help tenants to defend themselves against property owners. This feels like a slap in the face to housing providers. Basically, if a tenant has done something egregious and is in violation of their lease, when you give them notice of their violation, you also need to give them the phone number to the city and let them know that they have the right to access free funds that have been set aside to help them defend themselves against an eviction.
#2 Tenant Eviction Defense Fund
While the Tenant Eviction Defense Fund isn’t technically part of the ordinance, it was adopted at the same time. The city voted to set aside $300,000 to help tenants defend themselves against an eviction. So how is the city fulfilling its purpose of creating a fair relationship between tenants and property owners? If the city wants to create fairness and safety, shouldn’t they also set aside money to help housing providers pay for costly at-fault evictions for tenants who create a nuisance, damage property or commit a crime? Wouldn’t it be a win-win for the city and for property owners if the city not only helped to pay for the eviction process, but also helped to pay for fixing any damage done to the property, thus investing in providing quality housing to its residents.
#1 Criminal Activity
On the topic of crime, the new ordinance states, “Criminal activity by the tenant on the residential real property, including any common areas, or any criminal activity or criminal threat … on or off the residential real property, that is directed at any Owner or agent of the Owner or other tenants of the residential real property (is cause for eviction). This at-fault, just cause provision shall apply if the Owner has, within a reasonable time, reported the criminal activity to law enforcement. Further, at-fault, just cause eviction of a tenant under this provision shall only apply to that tenant who committed the criminal activity described herein.”
In other words, if a tenant has committed a crime, you can only evict that tenant, not their family or roommates. Under these conditions, it would take a tremendous amount of time and resources for a property owner to enforce that the criminal does not return to the property to “visit” their spouse, family or roommates. This person is after all a criminal and does not abide by the rules, so this puts the owner and other residents at risk and makes the residential housing in Santa Ana less safe and peaceful.
The Ordinance Does Not Achieve Its Stated Goal
If the city’s true objective is to create fairness between property owners and tenants and enhance peace and safety within the city, then they missed the mark. The ordinance clearly gives tenants preferences while saying it wants to remove biases, takes away the ability of housing providers to run their own business, encourages unsafe communities, and is likely to drive away investment in Santa Ana.
This article only addresses a small portion of the more restrictive just cause eviction ordinance stipulations. If you would like a copy of the 21-page ordinance or if you have any questions, I would be happy to help.
If you have questions or comments I can be reached by phone or text at 714.330.9999, by email at [email protected] or visit my website at www.InvestingInTheOC.com. Mercedes Shaffer is a real estate agent with Pacific Sotheby’s International Realty and specializes in helping clients to create an optimal investment strategy through buying and selling investment real estate and 1031 Exchanges. DRE 02114448.