Rental Market Update, 3rd Quarter 2024

Brief Description with links to the Bills, and Tiner full-length video and written blogs AB 2493 Changes How Landlords Must Process and Decline Applications Tiner Written Blog — Tiner Video Blog Effectively makes “first come, first served” applicant processing policy a requirement rather than just a Fair Housing recommendation. Changes the way Landlords respond to declined applicants in 3 ways: Landlords must provide a copy (no longer by request) Landlords must provide a receipt for their application fee that includes processing costs. Landlords must provide a refund for any unused portion of the application fee. AB 2801 Requires 3 Times Landlords Must Take Photos For Deposit Deductions (And Forbids Mandated Cleaning Charges) Tiner Written Blo g — Tin er Video Blog Modifies California Civil Code section 1950.5 (about security deposits). Security deposit deductions must include before-occupancy photos for tenants who move in beginning July 1, 2025. Beginning April 1, 2025, Landlords who want to utilize the security deposit for cleaning or damage must take photos before and after work photos. Prohibits automatic charges for cleaning/carpet cleaning unless they are reasonably necessary to restore the property to its condition at the inception of the tenancy. SB 611 Creates 3 Changes Landlords Must Follow for 2025 Tiner Written Blog — Tiner Video Blog Landlords cannot charge tenants for preparing and serving termination notices (3-Day, 30/60/90-Day Notice of Termination). It requires Landlords to allow tenants to pay rent and security deposits in at least one form other than cash or electronic funds transfer. Any security over 1x the rent to a military service member must explain why the Landlord required the additional protection. In addition, any security over 1 Month's rent must be refunded within 6 months if the tenant has paid on time. AB 2347 Extends Response Time For Tenants Responding To An Eviction Notice From 5 Days To 10 Days. AB 2622 Raises The Daily Limit For Handymen From $500 To $1000 AB 2747 Requires Landlords to offer tenants credit reporting. Properties with 15 or fewer doors are exempt. SB 1051 Requires landlords to rekey locks when the tenant adequately documents an incident of domestic violence.

One of the new laws for California in 2025 is Senate Bill 611. SB611 changes 3 things that Landlords need to be aware of: Bans Landlords from charging tenants for termination notices such as 3-Day Pay or Quit Notices. Requires Landlords to accept rent paid in more forms than was previously required. Addresses Landlords who require more than 1x rent for security in any form for military service members. Here is a link to the civil code for SB 611 . Until now, most landlords have had provisions in their leases allowing them to charge tenants when they have to prepare and/or serve a 3-Day Pay or Quit notice. That was perfectly logical, as it is the tenant’s failure to pay as agreed that causes the need for the property manager or property owner to complete and serve a 3-Day Pay or Quit Notice. It costs time and money to create the notice, drive to the property, serve it in person, and (if the tenant isn't home) to mail a certified copy… It’s certainly not the PM or property owners inaction that results in the extra effort needed to prepare and serve notice for the tenant’s lease violation. While the language of SB 611 prohibits charging the tenants for any notice of termination, the most common notice of termination where landlords have charged is a 3-Day Pay or Quit. That’s the required first step for an eviction. It also applies to standard 30/60/90-Day Notice of Termination but we did not typically see lease provisions that would charge a tenant a fee to prepare and serve them. It would also apply to serving a 3-Day Notice to Quit - but those notices are rare because they are reserved for the most egregious actions by the tenant. An example would be when there was a police bust and the tenant had been using the home as a meth lab. Best practices to consider for Notices of Termination: If your lease has provisions for charging the tenant to prepare, deliver, or serve a notice of termination, remove it from your lease for 2025 (or just use a form service that keeps up with this requirement). Consider using a late letter reminder rather than serving a 3-Day Pay or Quit Notice. If your tenant just needs a reminder, send them an email rather than driving out to the property. Serve 3-Day Pay or Quit Notices only when you expect you may be moving forward with an eviction. Consider having your eviction attorney prepare and serve any 3-Day Pay or Quit Notices. Failure to do this step correctly is the number 1 reason evictions are tossed out in court. I highly recommend having a pro do it right. That is our common practice at Tiner Property Management. Don’t allow tenants to pay chronically late. If you allow it, your actions set up a detrimental reliance whereby a tenant can claim it’s ok to pay late because you have allowed it for so long. A late payment should be an exception. Consider reviewing my video blog: What Landlords need to Know About Late Fees. It is a related topic. What Landlords Need to Know Abut Late Fees SB 611 Requires that Landlords allow tenants to pay rent and security deposits by at least one form other than cash or electronic funds transfer. Landlords cannot require tenants to make wire funds and/or cash only. The best practice for all money due before possession (Example: First month's rent and Security Deposit) is to require guaranteed funds - such as a cashier's check or electronic funds. After that, Landlords might consider personal checks, money orders, and cashier's checks as alternatives to cash or wire (electronic funds) options. Accepting cash can be dangerous. You make yourself a target when anyone can recognize a pattern of you accepting cash. SB 611 Contains a provision for Military Service members: SB 611 requires that any security charged to a military service member in excess of 1x the rent after 4/1/25 requires a written statement of explanation as to why the extra security was charged. Furthermore, any security in excess of 1 month’s rent must be refunded within 6 months if the tenancy is not in arrears during that 6-month period. Note: The security deposit for military service members has been capped at 1x rent for some time now. This provision was written to clarify some conflicts in prior laws. Credit where credit is due: SB 611 was authored by Democrat Bill Dodd, passed with 29 Democrat votes (+2 Republicans), and signed into law by Governor Newsom (Democrat). Disclosure: John Tiner is not an attorney and Tiner Property management is not a law firm. Do not consider this video/blog legal advice - seek legal advice from an attorney for your particular situation. How to contact us: If you need help with your rental and would like to hire Tiner Property Management, please reach out to us by calling 916-974-6003 or by email: i nfo@tiner.com or check us out on our website: www.tiner.com

Another new law for Landlords in 2025 - AB 2801 - requires Landlords to take pictures before a tenant moves in, after they move out (and before any work is done), and again after the work is completed to charge them for cleaning and damage from their Security Deposit. To be most effective, the required photos should be date stamped. Additionally, landlords may not require any fixed cleaning costs in their Rental Agreements. AB 2801 Modifies (or codifies into) California Civil Code section 1950.5 which pertains to Security Deposits. Until now, before and after photos were not required, but having them was the best practice. Tiner Property Management has been taking before and after photos for a long time. In order to best serve our clients, we prepare to defend our deposit deductions in court every time. We have been to small claims court with tenants 50-100 times over the past 40 years - and we win a very high percentage of those cases. Every time we go to court to defend our charges, our before and after pictures have played an important role in winning. But now, before and after photos are becoming law. I say “becoming law” because there is a phase-in period. Before and after work is completed photo requirements: Beginning April 1, 2025, Security Deposit deductions must be accompanied with before and after work pictures showing each item you charged for. The before-work pictures must be taken as soon as the tenant vacates - but before any work is done. Then photos must be taken of the same items to show the work after it is completed. Example: Dirty oven, cleaned oven. Gross drawers and cleaned out drawers, broken window and new glass, broken window blinds and new blinds. Before occupancy photos are also required: Beginning July 1, 2025 , Security deposit deductions must include before occupancy photos as well as the before and after photos when the tenant moves out and work is done. I think marketing photos work well for this as long as you take those extra pictures of the oven, sinks, tubs, toilets, yard… Until now, many landlords used the same marketing photos for multiple vacancies. AB 2801 will necessitate taking new photos each time you have a vacancy - and they should be date-stamped pics or have another way of proving when they were taken. Automatic Cleaning charges are prohibited: AB 2801 also prohibits automatic charges for cleaning and/or carpet cleaning unless those charges are reasonably necessary to restore the property to its condition at the beginning of the tenancy. Some landlords have been charging for cleaning as if it were required every time. I have seen leases with long lists of pre-agreed cleaning charges with tenants. That policy functions as a non-refundable security deposit which is illegal. Landlords should remove that language from their lease. This does not limit a landlord’s ability to charge for cleaning when it is needed to restore the home to its pre-rental condition (minus normal wear and tear). Summary: Start taking date-stamped photos of your properties (along with your marketing photos) right away. Include pictures of items that are commonly left dirty and/or damaged. Take pictures of everything you plan to charge the tenant for as soon as they move out. Take after photo once the work is complete. Provide copies of the photos along with your security deposit transmittal (accounting). Take any automatic cleaning requirements out of your leases. Giving credit where credit is due: AB 2801 was Authored and passed exclusively by Democrats. Here is a link to AB 2801 Disclosure: I am not an attorney and Tiner Property Management is not a law firm. Do not consider this blog legal advice - seek legal advice from an attorney for your particular situation. How to contact us: If you need help with your rental and would like to hire Tiner Property Management, please reach out to us by calling 916-974-6003 or by email: info@tiner.com . To learn more about our services, check out our website: www.tiner.com .

California has changed the rules for Application fees, how applications must be processed, and what landlords must do when they decline an applicant in 2025. AB 2493 effectively makes “first come first served” a requirement rather than just Fair Housing’s recommendation. AB 2493 Also changes the way Landlords respond to declined applicants in 3 ways: Landlords must provide a copy of their credit report whether they ask or not. Landlords must provide a receipt for their application fee that includes costs for processing the application. Landlords must provide a refund for any unused portion of the application fee. Tiner Property Management has enjoyed an incredibly low eviction rate for decades We are evicting less than 1 tenant a year with 1200 doors under management so literally 99.9% of our tenants do not get evicted each year. We attribute that to our excellent applicant screening process which, until now, utilized a “strongest applicant” process rather than “first come first served”. AB 2493 will force us to modify our process. Giving credit where credit is due: AB 2493 was authored and passed by Democrats. It passed with 57 Democrat votes and 3 Republicans (while 10 Republicans voted against it), and of course, signed into law by our Democrat Governor. The drive for this legislation came from stories of applicants who paid application fees 20 times before finding a home ($1000). They were often those who could least afford it. Until now, Fair Housing has recommended “first come first served”, but it was not the law. “Strongest applicant” policy is allowed as long as the screening criteria is applied equally and in accordance with Fair Housing law. To be clear, AB 2493 does not say you cannot have a “strongest applicant” screening policy - but it does say you must refund every application fee to declined applicants for any reason if you do not have a “first come first served policy”. Landlords can only keep an Application fee IF they meet ALL 4 of these conditions: Completed applications must be considered in the order they are received (“first come first served”). Landlords must provide screening criteria in writing WITH the application (not after). The first approved applicant who meets the screening criteria is approved for tenancy. Applicants are not charged an application fee until/unless they are actually considered (Don’t charge in advance anymore). #3 is not considered a violation if the landlord/PM inadvertently collects an application fee from an applicant as the result of multiple concurrent application submissions - so long as the landlord/PM provides a Application Fee refund within 7 days. An exception is made when a tenant and landlord agree to use the Application for another property for consideration - then if they do not qualify, the landlord can keep the Application fee. When a Landlord meets all 4 of those considerations, they can then keep the Application fee - even if the tenant is declined. If a landlord wants to retain a “strongest applicant” screening policy, they can (just apply your criteria equally and legally), BUT THEN YOU MUST REFUND EVERY APPLICATION FEE FOR EVERY DECLINED APPLICANT REGARDLESS OF THE REASON. Time limits for Application Fee refunds: The refund must go back within 7 days of you selecting a different applicant - or 30 days from when the application was submitted - whichever is first. I considered not charging for application fees so that I could keep my better “strongest applicant” policy. Then I did the numbers. Tiner Properties would lose over $140K per year if we did not charge for application fees. Applicants think we make a killing on application fees - but we actually lose money on them. Just the cost for running the credit report and averaging the cost of my applicant screening staff, I lose money on application fees - and there are many more costs than that. From a business perspective - it is not feasible to maintain a strongest applicant policy any longer. Is AB 2493 best for landlords? I don’t think so - but maybe. On the “no” side: Landlords are statistically better off with an overqualified applicant that has an 820 credit score, no debt, and a $15K monthly income - than a barely qualified applicant who arrived first with a 700 credit score, considerable consumer debt, and a $9K monthly income. The odds of late rents, eviction, rehab… all go up with the first applicant compared to the “strongest applicant”. On the “yes” side: A “strongest applicant” policy has become increasingly more risky. Almost every declined applicant could file a Fair Housing complaint saying you declined them for some protected status in the law (Race, color, religion, sex, family status and disability, gender expression, sexual orientation etc) Fair Housing even has a testing program to seek out non-compliance. Tenant advocacy groups are assisting declined applicants, helping them file civil rights complaints… It is time consuming and expensive to respond to a complaint - even when you have done everything right. The risk of such a complaint is lower for landlords who have a “first come first served policy”. From a cost perspective, compliance in this regard may save landlords money and grief. 3 Additional requirements of AB 2493 for declined applicants: Landlords must provide a copy of the credit report to anyone who paid an application fee and was declined within 7 days (this was formerly only required upon request of the applicant). Landlords must provide an itemized receipt to any declined applicants. The receipt must list out-of-pocket expenses and time spent to obtain and process the information about the applicant. PM/Landlords must refund any unused portion of the Application Fee. For example: If/When a landlord did not pull a credit report. Conclusion: Put your screening criteria in writing and give it out with your applications. Pay attention to the “completed applications” portion of this law. Example: Your written criteria may consider a completed application when the applicant has provided proof of income, proof of ID… Often the applicants who are most resistant to providing those items (everybody has “a story”) are the ones it would be better to decline anyway. Be sure to create and use a receipt describing all associated costs for processing your applications. Provide credit reports to every applicant you decline. Provide a refund for any unused portion of your application fee. Here is a link to AB 2493 . Disclosure: I am not an attorney and Tiner Property management is not a law firm. Do not consider this video/blog legal advice - seek legal advice from an attorney for your particular situation. How to contact us: If you need help with your rental and would like to hire Tiner Property Management, please reach out to us by calling 916-974-6003 or by email: Info@tiner.com or check us out on our website: tiner.com

Step-by-step instructions on navigating the tricky process.

Voting time is upon us. This ballot has a couple issues directly related to owning rental homes that I wanted to remind you of:

Effective July 1, 2024, AB 12 introduces significant changes to security deposit caps for rental properties. Under the new law, the maximum security deposit allowed will be reduced to one month's rent for both furnished and unfurnished units. However, small landlords owning two residential rental properties with four doors or less are exempt from this change. Property owners already holding deposits exceeding one month's rent are grandfathered in. Professional property managers are adjusting their policies to comply with the new law, with many opting for a flat security deposit rate of one month's rent. Learn how Tiner Property Management is navigating these changes to ensure compliance and competitiveness in the Sacramento market.

A review of vacancy trends, and advice on how to best market in the current economy.

 A rent market update by John Tiner October 2022