Investing in San Francisco real estate is lucrative and always interesting.
But it’s also risky.
Your investment properties are worth a lot of money and there are a lot of laws that dictate how you lease them, manage them, maintain them, and interact with the tenants who rent them.
California is notoriously strict when it comes to rental laws. San Francisco’s regulations are even more robust when it comes to tenant protections. This can leave you in danger of making an expensive legal mistake, especially if you don’t know the laws or you haven’t been able to keep up with changes in the laws.
As an investor, you need to know the laws or partner with a
professional San Francisco property manager who can keep you above board. Property managers invest in continuing education and work closely with attorneys and other experts to ensure all state, federal, and local laws are followed and understood.
Your tenants are well-informed about their rights. You need to be informed, too.
For the most part, California’s state laws are stricter than the federal rental laws that are currently in place. Two examples that come to mind are the eviction moratorium, which went further during the height of the pandemic to protect California renters from eviction than the federal moratorium did, and the fair housing laws. In California, we have a long list of protected classes than the seven identified by federal laws. While you need to know the federal Fair Housing Act, The Fair Credit Reporting Act, and the Americans with Disabilities Act, when you focus on complying with California’s state laws and San Francisco’s local laws, you can usually expect that you’re more than complying with those federal requirements.
Statewide rent control went into effect on January 1, 2020, and that didn’t change too much for a lot of rental properties in San Francisco, because we already had our own rent control laws on the books.
For your San Francisco investment properties, the amount and application of rent control depends on your property type and age. The most important date for our rent control laws is June 14, 1979.
When you own rental units that were built after that date, you are exempt from rent control. However, if your property has a certificate of occupancy that’s dated before June 14, 1979, you’re subject to San Francisco rent control laws. Single-family homes and condos are exempt from the rent control mandate, but they are still subject to eviction controls.
If you own a multi-family building or you’re renting out units in a building, you’re likely going to need a solid understanding of rent control limits and requirements.
In San Francisco, the Rent Board decides how much of an increase is acceptable year to year. It’s important to note that you can only raise the rent once every 12 months, and only by the allowable increase.
The annual allowable increase amount announced in November of 2021 and effective March 1, 2022, through February 28, 2023, is 2.3 percent.
Enter the statewide rent control law, which applies to some of the properties that may have been exempt under San Francisco’s rent control laws. It caps rental increases to five percent plus the cost of living increase set by the Consumer Price Index.
You’ll need to make sure your lease agreement reflects whether your property is bound by the San Francisco rent control law or the statewide rent control law. The language has to be specific, so make sure you have an attorney-approved template or verbiage provided by a local property manager.
Evictions are also heavily regulated in San Francisco.
You cannot simply terminate a tenancy because you don’t want to rent your unit to a particular tenant anymore. You can’t evict a tenant because you want to start over with a higher rental amount.
You must have just cause if you want to terminate a tenancy and not renew a lease agreement.
Legally, there are actually 16 different just causes for eviction in San Francisco:
The just causes for eviction are:
In some of these cases, a tenant relocation payment will be required.
One of the statewide laws that were included in the Tenant Protection Act of 2019 concerns Section 8 tenants and renters who benefit from housing voucher programs. You need to understand why it’s essential to consider all applicants, regardless of how they earn their income. Those housing vouchers used by Section 8 tenants can be legally considered a source of income.
This impacts how you market your rental property and screen your potential tenants. In the past, you could actively advertise that you did not accept Section 8 tenants for a property. There was some distinction about whether certain units were approved for Section 8. You cannot make this distinction anymore.
Make sure your qualifying rental criteria are written and updated. When you’re screening tenants, you need to be consistent about the standards that applicants have to meet, and you must consider Section 8 applicants. All of your screening criteria can remain the same, but when it comes to your income standards, you have to consider a housing voucher as part of an applicant’s income. You cannot deny a Section 8 tenant if all their other qualifications meet your criteria.
Security deposit laws are also important to know, and we can tell you that this is one area where San Francisco landlords and property owners make a lot of mistakes. In fact, a majority of tenant disputes occur because of misunderstandings or arguments over the security deposit.
Here’s what you need to know about security deposit laws and your San Francisco rental:
You can use the deposit for damage, unpaid rent, and unpaid utilities. You can use it to clean the unit. You cannot use the security deposit to make repairs and replacements that are normal wear and tear items.
There are frequent disputes between what should be considered tenant damage and what should be considered normal wear and tear. Your move-in inspections and move-out inspections need to be well-documented. You are legally required to offer your tenants a walk-through before they move out to give them an indication of what you might deduct. If you lose a security deposit lawsuit, you can be accountable for paying the tenants three times the amount of the initial deposit.
We focused on some of the biggest and most important rental laws in San Francisco and California. But there are others you’ll need to know. Habitability standards, for example, are important to understand. You need to know the difference between a pet, a service animal, and a companion animal. Specific disclosures are required in your lease agreement. There’s a lot to keep up with, so make sure you’re educating yourself on the laws and their changes or working with someone who knows them well.
We understand the laws in San Francisco and California, and we prioritize our ongoing education and professional development. At BanCal Property Management, we’ve been tracking rent control, eviction, and security deposit laws since 1987. We can make sure you and your property are protected and compliant.
To hear more about our leasing and management services and to ask questions about San Francisco’s rental laws, please
contact us. We also welcome your comments, questions, and suggestions for topics you want to learn about, so please share those too. We’d love to address a question you have in one of our future blogs.