One of our top New Years resolutions for rental property owners was to have an emergency preparedness plan in place when Mother Nature strikes, and we are sad to fast forward to today when disasters have become the new norm.
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During tragedy, it is time for Californians to come together and extend our hands to victims, not for opportunistic merchants and housing providers to take advantage of the most vulnerable. Yet prosecutors throughout the state are fielding a steady stream of complaints by struggling or displaced residents who stare at rent or lodging hikes, sometimes in excess of 100%.
This disfavor of unconscionable rent hikes has been codified in Penal Code Section 396, which prohibits raising the price of many consumer goods and services by more than 10% after an emergency has been declared by POTUS, the Governor, or a city/county executive officer.
For any who would give in to the temptation to benefit from others’ misfortune, we will take price gouging and charitable solicitation fraud very seriously and will prosecute to the full extent of the law.
~ Kern County District Attorney Cynthia Zimmer
We hasten to say that local laws may also enact their own bans on price gouging. In recent memory, our neighbors in Vallejo ratified a proclamation capping rent increases above 10 percent per year.
Landlords risk getting down a rabbit hole of complexity
While the rules seem straightforward, our hard-won experience has taught us the law is cleaner on the page than it is in real life.
If you own rental housing that was not advertised for rent prior to a declaration of emergency, the law reads that landlords cannot increase the price cannot exceed 160% of the fair market value of rental housing, as determined by HUD.
There are no gambits to circumvent the spirit of the law
Landlords cannot justify an unlawful price by providing added-on services like cleaning, utilities, gardening and the like, because they offer a shorter lease term. Nor can landlords charge more than the allowable price when an insurance company offers to pay a higher price.
Finally, the statute criminalizes the act of evicting a tenant and then re-renting the property at a rate that the landlord would have been prohibited from charging the evicted tenant under the price gouging statute.
There are many nuances with the price gouging ban, best journeyed with an attorney experienced in handling landlord-tenant relationships. If you are contemplating raising rents in any circumstance, much less during a disaster, please seek informed advice first.
In parting thoughts, the vast majority of housing providers have shown great restraint and compassion for those affected by disasters, and we trust that this will continue. It is not only right. It’s the law.