Effective January 1, 2026, landlords must allow tenants to opt out of landlord-mandated Internet, cellular, or bulk billing plans. 

Tenants will no longer be compelled to pay for a service or speed they don’t need, or pay a provider that they don’t choose.

California lawmakers have recently inked a bill (AB 1414) that landlords must “allow the tenant to opt out of paying for any subscription from a third-party Internet provider, such as through a bulk-billing arrangement, to provide service for wired content, cellular, or satellite services that are offered in connection with the tenancy.”

Suppose that landlords/property managers do not empower tenants with the consumer choice of selecting their own providers. In that case, tenants may deduct the cost of the subscription from the rent, and any retaliation by the landlord will be prohibited.

The chief architect of the initiative, Assemblymember Rhodesia Ransom, says that the bill is “not super reactive.”

She points out that the law will not prevent a landlord or their agent from offering bulk-billing arrangements to their tenants. The agenda, she says, is not to ban bulk billing or even limit how much money housing providers can take.

The goal, according to Ransom, is merely to give tenants the ability to opt out of an agreement.

AB 1414 sailed through the state Assembly in a 75-0 vote and passed the state Senate with 7 dissenters. It has now landed on Governor Newsom’s desk, and he is sure to sign it.

Related: Feds say drop a proposed Biden administration plan to ban broadband Internet “bulk billing” for renters

Takeaways for housing providers

AB 1414 reflects California’s consumer protection trend: increasing tenant choice while limiting mandatory charges. It is also part of a larger movement to bolster tenant rights and create more transparency in the rental relationship. 

Think the disfavor for Ratio Utility Billing Systems (RUBS), a method for dividing the total cost of utilities among tenants in a property by using a formula based on factors like square footage or number of occupants. The right of tenants to unionize, or to elect to have a timely, positive rental history reported to a credit bureau. Having important correspondence translated into the tenant’s native language. The list can go on. 

Let’s go over some concerns the rental housing community has over the new legislation. 

Loss of bulk discounts: To realize discounted rates, bulk-billing rates rely on near-total participation. When tenants opt out, housing providers risk losing negotiated rates or facing penalties for failing to meet subscriber thresholds.

Administrative burdens: No matter how sensible legislation may be, additional administrative work is foisted on landlords when new laws are passed. Managing opt-ins and opt-outs adds an additional layer of complexity to rent billing and recordkeeping. Adjusting systems to ensure only participating tenants are charged may reduce efficiency and raise the risk of errors. 

Existing contract liabilities: For housing providers who have entered into a long-term ISP agreement, they may still be liable for the full contract costs while unable to recover expenses from all units if there is lackluster participation by the tenants. 

Heightened risk of tenant disputes: Opt-out rights make it likelier that disputes arise over charges. These disputes may open the door to tenant claims of unlawful retaliation.

Landlords in rent-controlled jurisdictions face unique challenges under AB 1414, beyond what market-rate landlords deal with. 

Housing providers in rent-controlled cities like San Francisco, Oakland, and Berkeley face less flexibility in adjusting rents, invite more scrutiny from local boards, and higher risks of tenant challenges compared to landlords in non-controlled markets.

Difficulty adjusting rent: Landlords cannot freely raise rent to offset lost revenue if tenants say “no thanks” to buk Internet service. Since rent increases are typically pegged to annual allowable percentages, housing providers may be stuck absorbing the cost of ISP contracts.

Complications with banked rent increases: Although some rent-controlled jurisdictions allow “banked” increases from prior years, landlords are hard-pressed to justify a mid-lease adjustment tied specially to lost Internet revenue, making recovery uneven or delayed.

Pass-through restrictions: Many rent-controlled cities tightly regulate “operating expense” pass-throughs to tenants, yet even if Internet costs are framed as an operating expense, boards may bar pass-throughs when tenants have an opt-out right under state law.

Potential treatment as a “housing service”: Bundled Internet may be treated as a housing service, much like parking, laundry, storage, etc. If so, removing or reducing it because the tenants opt out could be deemed a reduction in a housing service that the tenant may argue requires a corresponding rent decrease.

Administrative overlap with local boards: Rent-controlled jurisdictions often require landlords to submit annual registration forms listing provided services. Opt-outs could create discrepancies between what the lease promises, what the landlord provides, and what the Rent Board recognizes. Of course, Bornstein Law spends a great deal of time on the Rent Board circuit, and while it is not necessary to be represented by counsel in front of these local bodies, having an attorney present will greatly increase the chances for landlords to prevail.

Ironically, the only constant in the landlording business is change. To survive and thrive, housing providers must adapt by restructuring billing practices, rethinking lease provisions, and carefully managing service contracts. Proactive planning now will help minimize risks and maintain tenant relationships when the law takes effect in 2026. Landlords and their agents can rely on proper counsel as we get acclimated to a new regulatory regime.