SB985 PASSED... NOW WHAT?

As you probably know by now, SB985 was signed by Governor Davis and will become law January 1, 2002. There have been a lot of articles written by me and others about the pernicious nature of SB985. However, there still seems to be a lot of questions about how it applies to individual circumstances. Some of these questions will take a long time to sort out, and others can be cleared up relatively quickly. In this article, I’ll briefly outline what SB985 does and doesn’t do, and some of the possible scenarios and answers to some of the oft-asked questions.

SB985 requires that a landlord give a sixty-day notice in order to terminate tenancy for other than just cause. However, under Santa Monica Rent Control, landlords do not have the right to give a notice to terminate tenancy anyway. Therefore, there will be virtually no impact in Santa Monica by this part of the legislation. Owners have been calling Gwen at ACTION and asking for a sixty-day notice to terminate tenancy. Unfortunately, the bill did not give us a new right to evict tenants.

SB985 also requires that all notices regarding non-payment of rent must include the name and address of the owner or the address at which the rent can be delivered and must also include the phone number. This is a fairly self-explanatory provision of SB985. Please make sure that you get the new notice to pay rent or quit from the ACTION office before serving a tenant. It would prudent to throw away all of your old forms by January 1 so that you don’t make the mistake of using the old form only to find out when you get to court that your notice is defective. This would mean that you would have to re-notice and then re-file the unlawful detainer and go back to court. You could lose several months. Unfortunately, this will catch many an unwary owner.

The more complicated section of SB985 puts Condominiums under rent control. It also requires that the rent be rolled back to May 7, 2001. One of the more common questions that I have been asked goes like this: “The tenant moved in August and pays more rent than the tenant that was living there in May. What rent can I charge?” The answer is upon each voluntary vacancy you will establish a new Maximum Allowable Rent just like a regular apartment unit. However, if you had a tenant in place prior to May 7, then any subsequent rent increase other than as allowed by the general adjustment will not be allowed.

The other big question that will come up is “Should I sell my condo unit or rent it?” That requires a much more lengthy analysis, which would entail the consideration of Market prices, rental rates, personal goals, tax considerations and the current mortgage and financial structure of your building among others. All of the possible questions and scenarios have not been fully considered at this time. Next months article will be a compilation of questions and answers regarding SB985. Please feel free to call me in the next thirty days and ask your questions regarding your property. This will enable me to come up with a comprehensive list of questions and answers. However, I am sure that some of my answers and comments won’t be “printable”.

It is most unfortunate that Santa Monica will inevitably lose many rental units because of this legislation.