How to Raise Rent in Orange County, California, While Staying Compliant

Understanding the Legal Framework

Statewide Rent Control (AB 1482):

• Tenant Protection Act: Implemented in 2020, AB 1482 caps annual rent increases at 5% plus the regional Consumer Price Index (CPI) or 10%, whichever is lower. This law applies to most properties built before February 1, 1995, but does not cover single-family homes if not owned by corporations or landlords with more than two properties, or newly constructed apartments.
• Just Cause Eviction: Post-lease, landlords need a just cause to evict tenants, which includes the need to raise rent beyond the legal limits. This protects tenants from arbitrary rent hikes leading to displacement.

Local Variations:

• Santa Ana: Has its own rent control ordinance, limiting increases to 3% per year or 80% of the CPI, whichever is lower.
• No Other Local Rent Control: Unlike some other California counties, Orange County doesn’t have county-wide rent control outside of Santa Ana. However, always check for updates as local laws can change.

Steps to Legally Raise Rent

1. Determine if Your Property is Subject to Rent Control

• Check if your property falls under AB 1482 or any local ordinances. Properties like single-family homes or condos not owned by large entities might be exempt.

2. Calculate the Allowable Increase

• CPI Measurement: Use the CPI from the Bureau of Labor Statistics for the Los Angeles-Long Beach-Anaheim area (since Orange County is part of this region).
• Example Calculation: If the CPI increase is 2%, you can increase rent by up to 7% (5% + 2%).
• Annual Cap: Remember, the increase cannot exceed 10% even if the CPI plus 5% would exceed this.

3. Provide Proper Notice

• 30-Day Notice: For rent increases under 10%, you must give at least 30 days’ written notice before the increase takes effect.
• 60-Day Notice: If the increase is 10% or more, provide at least 60 days’ notice.
• Format: The notice must be in writing, and many landlords use a standardized form to ensure compliance. Include the old rent, new rent, and the effective date of the increase.

4. Documentation

• Keep Records: Document the notice given, including how it was delivered (e.g., certified mail, personal delivery), and retain copies for legal protection.

Best Practices for Raising Rent

Communicate Early and Clearly:

• Transparency: Explain the rationale for the increase. Whether it’s due to rising costs, property improvements, or market rates, tenants appreciate understanding why their rent is going up.
• Advance Notice: Even when not legally required, giving tenants more than the minimum notice can foster goodwill.

Incremental Increases:

• Instead of large jumps, consider smaller, more frequent increases if permissible. This can be less jarring for tenants and align with gradual cost increases.

Improvements and Value Added:

• Justify the rent increase with property enhancements like new appliances, better security, or aesthetic upgrades. This can make the increase feel more like an investment in their living experience.

Tenant Retention:

• Consider offering incentives for lease renewals if you’re increasing rent, like a month of free rent or no increase for the first year of the new lease term.

Legal Compliance Check:

• Before implementing a rent increase, consult with a local real estate attorney or check with the Orange County housing authority to ensure adherence to all regulations.

Common Pitfalls to Avoid

Retaliation:

• Increasing rent as a form of retaliation against tenants exercising their rights (like complaining about repairs) can lead to legal action. Always ensure rent increases are justified by market conditions or legal allowances.

Discrimination:

• Rent increases should never be discriminatory. Ensure they are applied uniformly to all tenants in similar situations.

Non-Compliance with Notice Periods:

• Failing to provide the correct notice period can invalidate the rent increase and potentially lead to tenant lawsuits.

Overlooking Local Laws:

• Even with state guidelines, local laws or recent changes might affect your ability to raise rent. Always stay updated.

Handling Tenant Reactions

Discussion:

• Be open to discussing the rent increase with your tenants. Sometimes, a conversation can mitigate any potential fallout or lead to a mutually beneficial agreement.

Negotiation:

• If a tenant is struggling, consider negotiating terms. This might mean a smaller increase or offering to offset part of the increase with minor property improvements.

Legal Disputes:

• If disputes arise, mediation through organizations like the Fair Housing Council of Orange County can be a less adversarial way to resolve issues compared to court.

Special Considerations in Orange County

Seasonal Trends:

• Understand that demand for rentals might spike in certain seasons, influencing your timing for rent increases.

Market Rates:

• Regularly assess market rates, especially in high-demand areas like Newport Beach or Huntington Beach, to ensure your increases are competitive but not excessively above market.

Tenant Demographics:

• Orange County’s diverse tenant base might require different approaches to communication or negotiation, especially if catering to families, students, or professionals.

Conclusion