The Overlooked Solution to California's Ab 1482 Notice Requirement

When the California legislature passed the Tenant Protection Act in 2019, it instituted rent and eviction control throughout California but provided a critical exemption from the statewide rent controls and just cause to evict protections for owners of residential real property units that are “alienable separate from the title to any other dwelling unit.” Put simply, the exemption applies to those residential properties that can be sold separately from any other

property, like single-family homes and condominiums.

To qualify for this exemption, owners of single-family homes and condominiums must ensure that two things are true. First, the owner must ensure that title is not held by a real estate investment trust as defined by Section 856 of the Internal Revenue Code (this is a special kind of investment vehicle as contrasted with a typical family trust), a corporation, or a limited liability company in which at least one member is a corporation. Second, the owner must ensure that the tenant has been provided notice of the property’s exemption from the statewide rent controls and eviction protections using the exact language prescribed by the Civil Code.

It is the Civil Code’s notice requirement that has caused so much consternation among landlords and has ignited a debate among landlord-tenant lawyers. The reason for this angst and debate is that the Civil Code specifies that for “any tenancy commenced or renewed on or after July 1, 2020, the notice required … must be provided in the rental agreement.” The requirement

that the notice of exemption be included as a term in a tenant’s lease leaves two classes of landlords in an apparent dilemma: those landlords with older leases entered into before enactment of the Tenant Protection Act in 2019 (sometimes years ago) and those landlords who more recently entered into a lease for a single-family home or condominium but either forgot to include the exemption notice or didn’t know they needed to include it in their lease. What, if anything, can be done for these landlords?

Black letter California law provides the answer to that question. Civil Code Section 1945 provides that if a tenant remains in possession of a rental unit after the expiration of a fixed-term

tenancy and the landlord accepts rent from him, “the parties are presumed to have renewed the hiring on the same terms” month-to-month. When a tenant’s lease is a periodic tenancy month-

to-month, California law allows landlords to unilaterally change the terms of their tenant’s lease. Under California Civil Code Section 827, in all leases of lands or tenements from month-to-

month, a landlord may change the terms of the lease to take effect after service on the tenant of a notice changing the terms of the tenancy. (Wilcox v. Anderson (1978) 84 Cal.App.3d 593, 596.)

Once served upon the tenant, the notice changing the terms of tenancy operates to establish the specified terms and conditions as part of the lease, provided the tenant continues to hold the

premises after the notice takes effect. (Id.) In other words, provided a lease is month-to-month, Section 827 empowers landlords to unilaterally change the terms of that lease using a 30-day

notice and the change is automatically incorporated into the lease so long as the tenant remains in possession of the rental unit.

Section 827 is a very powerful tool. It allows landlords of single-family homes and condominiums with older leases, or those with a more recent lease who didn’t know to include the exemption disclosure required by the Tenant Protection Act, to unilaterally add the exemption language from the Tenant Protection Act to their leases after the fact and thus qualify for the exemption from statewide rent controls and just cause to evict protections.

Tenant lawyers have begun to challenge whether landlords can legally make this unilateral change. In their view, allowing landlords to unilaterally take away rent control and eviction protections violates important public policies designed to protect vulnerable tenants. These tenant lawyers are wrong, and the rules of statutory construction prove it.

Under California law, the rules of statutory construction hold that when enacting a statute, the legislature is conclusively presumed to be aware of existing related laws and to intend to maintain a consistent body of rules. (People v. Lamoureux (2020) 57 Cal.App.5th 136, 145.) If there is any possibility of concurrent operation, courts are bound to maintain the integrity of both the prior and new statutes. (County of Tulare v. Campbell (1996) 50 Cal.App.4th 847, 853.) Taken together, these rules of statutory construction mean that it is conclusively presumed that when the legislature enacted the Tenant Protection Act it knew that landlords could serve a notice of change in terms of tenancy under Civil Code Section 827 unilaterally changing the terms of an existing month-to-month lease and that it intended to maintain the integrity of both Section 827 and the new statute.

The language of the Tenant Protection Act itself manifests the legislature’s intent to preserve a landlord’s rights under Section 827 notwithstanding the enactment of broad new tenant protections. Specifically, the statute provides, “Addition of a provision containing the [emption notice] … to any new or renewed rental agreement” constitutes a similar provision for purposes of the just cause to evict in those cases where a tenant refuses to execute an “extension or renewal of the lease for an additional term of similar duration with similar provisions.” That is, when it enacted the Tenant Protection Act, the legislature knew that Civil Code Section 1945 provides that fixed-term tenancies renew into a month-to-month tenancy and that Civil Code Section 827 would allow a landlord to unilaterally include the required exemption disclosure language to an existing month-to-month lease. With that in mind, the legislature nevertheless decided that, if a landlord served a notice under Section 827 to add the exemption disclosure, the inclusion of the disclosure language to the existing lease would not deny the landlord the ground to evict a tenant who refused to sign a lease extension “for an additional term of similar duration with similar provisions.”

The bottom line is this: California law allows landlords to make unilateral changes to a month-to-month lease. The Tenant Protection Act not only allows landlords to unilaterally add

the required exemption notice to leases for single-family homes and condominiums, but it contemplates that they will. There is nothing wrong or illegal in doing so and thus owners of single-family homes and condominiums with older leases or who didn’t know of the exemption provided for those kinds of properties are not left behind.