Update for landlords, property managers, and the real estate professionals who serve them.

State lawmakers have closed the curtain on the 2024 legislative session, so let’s review new laws for housing providers to follow in the New Year. We’ll anxiously await the results of ballot initiatives on November 5th but here is a legislative lowdown.

 

Increased timeframe for tenants to respond to unlawful detainer (eviction actions)

Transitioning problematic tenants out of a rental unit is already a lengthy process. The biggest determinant of how long it takes is which attorney the tenant gets and how hard they fight. Oftentimes, the tenant gets free legal representation and their counsel is adept at dragging out the eviction process as long as possible, potentially leaving landlords bereft of rent for several months.

Consider this eviction process elongated.

Under the current law on the books, tenants have five days to file an answer to an eviction action, excluding weekends and judicial holidays, but they will soon have ten days.

 

Tenants have the opportunity to boost their credit scores by having a notation when they make a timely rent payment. 

This applies to tenants occupying buildings with 15 or more units. Effective April 1, 2025, landlords are required to offer a credit reporting option at the inception of the tenancy and this offer must be extended moving forward.

We like this law for a couple of reasons. One is that a tenant who seeks to elevate their credit by making rent payments will likely pay rent. We can draw the analogy with renter’s insurance; if a tenant obtains renter’s insurance on their own, they probably care about their home and will take good care of it. It’s a strong indicator that you have a good tenant.

But let’s look at the flip side. What if the tenant, having opted into credit reporting, doesn’t pay, moves out, and seeks another abode? The new landlord can run a credit check and identify red flags. Why not a positive payment history?

This law is a double-edged sword for tenants and one we approve of.

 

Smile. Your before and after photos when making security deposit deductions will be on camera.

Housing providers will have an increased level of transparency in their security deposit accounting in 2025 after lawmakers have mandated photo documentation of rental units in three events:

  • Before a tenant moves in

  • At the end of the tenancy

  • Before and after any necessary repairs or cleaning

Interestingly, there are two time periods for landlords to comply with the law. The requirements for pre-repair and post-repair photographs will take effect on April 1, 2025, while taking pre-move-in photographs apply to tenancies beginning on or after July 1, 2025.

Ordinarily, we are sticklers for documentation, taking photos to visualize before-and-after conditions, and being diligent in security deposit accounting, so we agree in principle with this law.

It's amusing and perplexing that ALL landlords know that they need to take a security deposit before the keys are handed over to the incoming tenant but comparatively few landlords know what to do with the deposit when the tenant leaves.

It's an unscientific number, but perhaps 80% of housing providers do not get the security deposits right. That's why security deposit disputes are the most common reason landlords are dragged into small claims court, and normally they lose.

Since we know there are already rampant errors in security deposit accounting and now even more rules and procedural requirements are foisted upon housing providers and their agents, we predict that landlords will have even more rope to hang themselves.

We'll have to get security deposit accounting right, or there will be consequences, especially when the withholding of security deposits is determined to be in "bad faith," exposing landlords to liability above and beyond the amount of the security deposit. That's right - landlords may be sued for treble damages.

 

Balcony inspections postponed to 2026.

A birthday party on June 16, 2015, became horrifying when six people were killed and several others injured after a fifth-floor apartment balcony collapsed. The balcony gave way due to severe dry rot in the wooden supports, which had not been properly treated for water damage. Investigators determined that construction defects and possible negligence were the culprits, leading to improved inspection standards for balconies and other outdoor structures.

Under the original law of SB 7210, multifamily buildings with 3 or more units must have met a deadline of January 1, 2025, to be inspected. Namely:

All balconies, decks, porches, stairways, walkways, hand and guardrails that extend beyond the exterior walls of the building and are elevated 6 or more feet above ground and that rely in whole or substantial part on wood or wood-based products for structural support or stability.  What to look for is potential issues related to dry rot, water intrusion, termite damage, and rust.

Yet owners have bought some time with AB 2579, a law that pushes the deadline for the initial round of inspections to January 2026. No inspection is required until that date if the property was inspected within three years prior to January 1, 2019. Just because no issues are identified, buildings can still atrophy over time; inspections are required every six years thereafter.

It's worth noting that certain locales like San Francisco, Berkeley, and Oakland have their own inspection and procedural requirements.

Our advice is to not wait. Get it done now.

Our view has always been that housing providers should not wait until the last minute to comply with the law. An easy example is complying with rent registry requirements and we were proactive in reporting information on properties well before the deadlines to do so. As much as we disagreed with rent registries and Big Brother prying into our businesses, we still had to comply.

This message of early compliance is especially important with balcony inspections because only civil or structural engineers, architects, or qualified contractors can perform the work. These are skilled professionals; now is not the time to hire Johnny the Handyman.

 

When vetting rental applicants, be aware of changes related to tenant screening fees. 

It’s worth reminding housing providers that under existing law, landlords cannot profit from screening prospective tenants. The fee charged can only cover the cost of obtaining information about the applicant and not a penny more. Moreover, the rental applicant must be provided with an itemized receipt detailing how the screening fee was used.

Landlords and their agents also cannot charge an applicant a screening fee when they know or should have known that no rental unit is available at the time or will be available within a reasonable period unless the applicant states otherwise in writing. Under the existing regulatory regime, rental applicants can request a copy of the consumer credit report used by the property owner or their agent to determine their creditworthiness.

Yet the new law does not make sharing the credit report optional; the landlord or their agent must provide a copy of the report within 7 days of receiving it, whether asked for or not.

Seems reasonable enough, but every time new administrative burdens are imposed on housing providers, there is an additional cost.

The main grievance we have with the bill is that when a tenant screening fee is charged, the first applicant to meet the landlord’s established screening criteria must be approved for tenancy. In other words, the evaluates applications in the order in which they are received and when a suitable candidate is found, the search is over; the first tenant that survives the application process must be offered the tenancy.

Some industry insiders already recommend this as a best practice to avoid claims of housing discrimination. How does the tenant know the established criteria, you might ask? The law requires that the screening criteria must be furnished to the prospective tenant in writing at the time of the application.

How to avoid these requirements? Don’t charge a tenant screening fee. By charging a screening free, housing providers are “self-selecting” into this new regulatory regime. If no tenant screening fee is charged, clearly the rules do not apply. It may be better to get a bigger pool of applicants for a rental unit, narrow them down to a handful of stellar candidates, and run screening reports on them without attempting to pass the cost onto those prospective tenants.

 

This subject matter engenders many questions.

Ironically, the only constant in life and the real estate business is change, but with proper counsel, housing providers, property managers, and real estate professionals can survive and thrive in what is an ever-evolving regulatory regime.