Buying A Tenant-Occupied Home in Los Angeles- How To Navigate Rent Control:
If you are looking to buy a property that is tenant-occupied, or can potentially be rented in the City of Los Angeles, it may be subject to the city’s Rent Stabilization Ordinance (RSO), also known as “Rent Control”. The city of Los Angeles has different rent increase laws than those imposed by the state of California.
When looking to buy a multi-family property in Los Angeles that is currently occupied, many homeowners have questions regarding the Los Angeles Rent Control policies.
Generally, the Rent Control Laws in Los Angeles apply to rental properties that were first built on or before October 1, 1978, and include:
- Apartments
- Condominiums
- Townhomes
- Duplexes
- Two or more single-family dwelling units on the same parcel
- Rooms in a hotel, motel, rooming house, or boarding house occupied by the same tenant for 30 or more consecutive days
- Residential unit(s) attached to a commercial building
- Accessory Dwelling Unit (ADU) (read more about building an ADU by clicking here!)
- Junior Accessory Dwelling Unit (JADU)
The Rent Control laws of Los Angeles County give clear guidelines regarding:
- permitted rent increases
- legal reasons for eviction
- tenant relocation assistance
When Can Rent Be Increased in Los Angeles?
1) Tenant Vacates The Property
According to the rent control regulations in Los Angeles, the rent for a given property can be increased at the market rate if the tenant leaves the property.
Can I legally make a tenant vacate a property?
There are a few ways in which a property owner can legally remove a tenant from a property:
- Payment: The owner of the property can legally pay the tenant to leave, as long as the tenant leaves willingly and signs a Tenant Buyout Agreement.
- Eviction: A tenant can only be evicted when they are at fault—for instance- if they have missed payments or violated the terms of their lease agreement.
- Family Taking Residency: If the landlord or an immediate family member is planning to move into an apartment, they can ask the tenant to leave.
- Ellis Act: Utilizing California’s Ellis Act, which allows landlords to mass-evict tenants when taking a property off the rental market. That could mean tearing the building down or redeveloping it as for-sale condos. But, this requires the property owner to pay relocation fees to help tenants find and move into a new place. Fees in the city of Los Angeles range from $8,500 to $21,200, depending on how long tenants have lived in the building, how old they are, and how much money they earn.
2) Additional Tenant Moves In:
In compliance with Los Angeles Rent Control Laws, if an additional tenant moves into a rental unit then the landlords can increase the rent within 60 days of learning about the additional tenant. This rent increase can only be up to 10% and must be reduced by the same amount if the additional tenant moves out. This additional member does not include the first minor dependent child. Landlords can only raise the rent once every 12 months, and a 30-day notice must be given
3) Raising Rent To Recover Costs:
Any rent increase that is desired by a landlord to cover building costs must be approved. There are a few different government programs that fall into this category:
- Capital Improvement Program: Landlords can recover costs for improving property through a permanent structural change to the rental unit or common areas. If this improvement is to prolong its life, increase its value, or enhance its capabilities and will benefit the tenant for 5 years, it may qualify for a cost recovery plan.
- Primary Renovation Program: Landlords can recover costs for major renovations of building systems or to reduce exposure to hazardous materials.
- Seismic Retrofit Program: Landlords can recover costs for seismic retrofit work mandated by Soft-Story Ordinance No. 183893.
- Rehabilitation Program: Landlords can recover costs for work in a unit or common area to comply with an order issued by LAHD or other government entities.
- Just and Reasonable Rent Increase: A landlord can apply for a rent increase when their net operating income adjusted for inflation is not sufficient to cover the property’s operating expenses.
How Much Can Rent Be Increased In Compliance With Rent Control?
If a tenant remains in a property lawfully, a landlord has specific ways in which they are allowed to increase the rent. Rent may be increased once every 12 months by the allowable rent increase percentage. As of January 31, 2024, and until June 30, 2024, the board agreed to increase the allowable rent increase to 4%. The landlord can add 1% per utility paid by the landlord (gas and/or electricity). 30 days’ notice must be given before the rent increase.
About The Bienstock Group:
The Bienstock Group, led by Sheri Bienstock, is an expert real estate group in Los Angeles, Hancock Park, and Miracle Mile. Sheri is committed to her clients and will invest all her effort to get you the best results possible. Sheri has 235+ five-star reviews on Zillow, and has been ranked #1 listing agent in 90036 since 2009 and in Hancock Park since 2016.
