On August 13, 2019, the Sacramento City Council voted to adopt by a 7-1 margin a rent control and tenant protection measure known as the Sacramento Tenant Protection Act (the “Act”). Citing increasing rent statistics, an influx of in-migration and a shortage of rental units, the Act sets out to provide tenants with protections against rent gouging and unwarranted evictions by landlords, while providing landlords an opportunity to receive a fair and reasonable rate of return on their investment.
The Act, which goes into effect on September 12, 2019, affects all buildings or structures built on or before February 1, 1995 and offered for use or occupancy for residential purposes under a rental agreement of at least thirty (30) days, unless specifically exempted under the Act. Notable exemptions under the Act include single family dwellings, condominiums and stock cooperatives. Key provisions of the Act include the following:
- In any given twelve (12)-month period, a landlord cannot increase the rent by more than six percent (6%) plus the percentage of the annual increase in the cost of living adjustment as promulgated by the U.S. Department of Labor, Bureau of Labor Statistics, which collectively cannot exceed ten percent (10%). For example, considering that the cost of living adjustment percentage increase from 2019 over 2018 is two and seven-tenths percent (2.7%), a landlord cannot increase the rent by more than eight and seven-tenths percent (8.7%) for this upcoming year. This limitation on rent cannot be waived by a tenant. However, a landlord can establish a new base rent when a new lease is executed, which new base rent will then be subject to the limitations on increases under the Act.
- A landlord may petition to raise the rent in excess of the limitation described above if the landlord can demonstrate by a “preponderance of the evidence” (more likely than not) that the increase in the rent is necessary to provide the landlord with a fair rate of return. Such showing must be made by the landlord to a hearing examiner at a hearing. The hearing examiner is an official appointed by the city council, and all decisions made by the hearing examiner are final unless the landlord timely seeks judicial review. For a list of factors that the hearing examiner can or cannot consider in his/her determination, the list can be found here.
- All landlords subject to the Act will be required to pay a new program fee, which amount is to be determined by the city council on an annual basis. Such collected fees will be used to implement and enforce the Act.
- Once a tenant has resided in a rental unit for more than twelve (12) months, a landlord cannot terminate the rental agreement, evict a tenant or threaten to terminate the rental agreement, unless: (a) the tenant fails to pay rent (after receipt of a notice to quit or pay rent); (b) there is a breach of the rental agreement beyond a reasonable notice/cure period; (c) the tenant engages in criminal activity in violation of law; or (d) the tenant fails to give landlord access to the unit as required under applicable law.
- However, upon one hundred twenty (120) days’ advance notice, a landlord may recover possession of a rental unit if: (a) necessary and substantial repairs are necessary to bring the rental unit into compliance with applicable law, and the tenant is given an opportunity to reoccupy the unit or occupy a comparable unit owned by the landlord; (b) the landlord or an immediate family member of the landlord moves into the unit as its primary residence for a period of at least twelve (12) months; or (c) the landlord withdraws the unit and all rental units in the building from the rental market for at least twelve (12) months. The landlord must also satisfy certain notice requirements.
- A tenant may file a petition with the hearing examiner for a landlord’s violation of any provision of the Act. The landlord’s failure to comply with any provision of this Act is an affirmative defense in an unlawful detainer action or any other action brought by the landlord to recover possession of the rental unit. Any person who violates the Act may also be subject to criminal sanctions, civil actions and administrative penalties.
The Act has a sunset date of December 31, 2024. For the entire language of the Act, please click here.