City Council’s most significant step since it revisited the rent stabilization ordinance is the new prohibition on no-just-cause termination. Unfortunate tenants will remember the traumatic moment they received notice to find a new home. Some didn’t even know it could happen. We are grateful that the city put an end to it. But City Council recently backtracked by agreeing to create a probationary tenancy by making the first lease year a ‘trial’ period, after which the landlord could terminate for no cause and with no relocation fee. The provision would affect more than 400 households with new tenancies each year.
For more on the potential impact to new tenants from the probationary tenancy provision, scroll down to the section titled, Tenant Impact: The Probationary Provision. To learn about what constitutes no-just-cause termination read on!
What is No-Just-Cause?
The city’s consultant HR&A Advisors states it clearly in an issue memo on the topic:
No-cause evictions are involuntary terminations of tenancies for which no reason for eviction is stated by the housing provider. In contrast, just-cause evictions are involuntary terminations of tenancies for reasons stated under California Code of Civil Procedure or the terms of a rent stabilization ordinance. — HR&A Advisors, ‘No-Cause Eviction Policies in the Beverly Hills Rent Stabilization Context’ (2018)
Indeed the law allows for a tenancy to be involuntarily terminated due to reasons that include failure to pay rent, damage to the unit, unlawful activity in the unit, the landlord’s repossession of the unit for his own use and more. These are not no-just-cause terminations, though, but rather are for-cause terminations but not because the tenant is at fault. (That is a reminder of the critical distinction between owning and renting: nobody can take your home if you own it, but it’s far too easy to take it when you rent it.)
No-just-cause termination occurs not because the tenant is at fault; or even if she is not at fault but the law allows the tenancy to be ended. No-just-cause is an end to the tenancy for no reason at all and solely at the discretion of the landlord. In California the landlord need only give the tenant 60 days notice. Here is the subsection in the California Civil Code that makes 60-day no-just-cause termination lawful:
An owner of a residential dwelling giving notice pursuant to this section shall give notice at least 60 days prior to the proposed date of termination.— CIV §1946.1 (B)
That’s it: only 26 words. And the landlord need not pay any relocation fee! However that is where rent control comes in: nearly every city in California that has adopted some form of rent control has also chosen to prohibit the landlord from evicting a tenant for no-just-cause. Only substantiated tenant fault or an allowed reason under the law for termination suffices in those cities.
Until last month, though, Beverly Hills was not one of those cities. While Beverly Hills has protected Chapter 5 rent stabilization tenants from no-just-cause termination since 1978, there was no such protection when it created Chapter 6 three decades ago.
Here is the relevant Chapter 6 section from Municipal Code section that allowed it until last month:
Written notice provided in accordance with state law shall be given to any tenant in order for a landlord to terminate the tenancy of a rental unit subject to this chapter. — BHMC 4–6–6 INVOLUNTARY TERMINATION OF TENANCIES BY LANDLORDS
That’s the entirety of the Chapter 6 section titled ‘Involuntary Termination of Tenancies By Landlords.’ Only 31 words! The landlord only needed to comply with lawful notice to the tenant (and some who evicted tenants for no-just-cause didn’t even meet that condition).
Over three decades, City Council never did muster three votes to end the practice. However last month the current City Council took a significant step when it banned no-just-cause termination. Councilmember Lili Bosse and John Mirisch supported this clear win for tenants so that no longer could a landlord use the threat of termination for no cause to discourage complaints about rent increases or substandard housing conditions. (However we have no local protection against bad-faith actions like ‘constructive eviction’ or retaliation.)
No sooner had our councilmembers unanimously shut the door on no-just-cause termination than did it swing open that door again.
More Protection for Landlords, New Worries for Tenants
City Council on November 20th agreed to make each new tenancy probationary. When the lease expires, or at the conclusion of a six-month period following notice (whichever is later), the landlord can decline to offer a new lease and decline to continue accepting rent. At that point the tenancy is discontinued and the occupant(s) will move.
When ending a tenancy at the conclusion of that first ‘trial’ year, the landlord need not give any cause and need not pay any relocation fee. (However he cannot raise the rent for the next tenant. But a 1-year old tenancy is probably close to market rent anyhow.)
How would the probationary termination work in practice? Let’s take three scenarios:
- Six months after moving in to a new apartment a tenant is notified that she will have to move once the lease expires. The six-month notice period coincides with the last six months of the first-year’s lease. At lease expiration she’s out.
- Nine months into a lease the landlord notifies the tenant that he will not continue her tenancy after the lease expires. But because he must give six months notice, she can remain in the apartment for an additional three months beyond the lease.
- Just as the lease is about to expire, the landlord notifies the tenant that her tenancy will be discontinued. The required notice is six months so she can stay six additional months beyond the lease expiration. The duration of her tenancy is a total of 18 months.
The first instance is the most problematic: six months after moving into the apartment, the tenant knows she will move again at lease expiration. However she cannot move any sooner because she’s locked into the lease; she will continue to pay the rent through lease-end. And she can’t move a day later because the lease expires and she’s out of the unit.
That tenant is held hostage because of the probationary provision. Which may be news to Mayor Gold, who said he believed that leases exist to protect tenants. (However Councilmember Bob Wunderlich responded correctly that leases protect landlords too.)
In the latter two cases, the tenant could move out after the expiration of the lease with the required 30 days notice to the landlord. But she will pay rent through that notice period at the same time as she raises money for the first and last months rent and a deposit on the new place (not to mention to pay the movers again). She will leave with zero relocation dollars and she won’t get her deposit back from the former landlord for weeks.
City Council did not discuss the ‘hostage’ scenario, nor did City Council even talk seriously about awarding a relocation fee. Councilmember Lili Bosse raised the fee issue but there were four votes to move ahead. Instead of talking about a fee, the seven-plus minutes spent on this topic was focused solely on providing the landlords with the benefit of the ‘trial’ year. That provision exists in no other rent control city in the country as far as I know.
Tenant Impact: The Probationary Provision
City Council agreed to the probationary provision without any discussion about anticipated impacts on new tenants or the unanticipated consequences to them of allowing a ‘trial’ year. That may be understandable because the discussion lasted only seven-and-a-half minutes. But is it excusable?
In fact the actual impact of the probationary period won’t be known any time soon. The city needs data from the first two or three years of new tenancies after the provision goes into effect to count the number of tenants who had to leave.
However we can use the current rate of tenant turnover to estimate the potential effects. The turnover rate approximates the number of new tenancies created in a year. Each is a household that has entered into the ‘trial’ period and unsure if their tenancy will continue after lease expiration. The turnover rate is more or less consistent year-to-year. It is notable that Beverly Hills is tied with City of Santa Monica for the highest turnover in our region. It is higher than West Hollywood and higher still than Los Angeles. None of those cities provides for a ‘trial year’ and (nor does any other city in California.)
What is the rate of turnover? City consultant HR&A Advisors analyzed American Community Survey data between 2010 and 2016 to measure tenancy tenure. The data show that 63% of households moved in over a six year period from 2010 to 2016. On average that’s about 10% of households having moved in any year. Looking at a longer period, 86% of renting households in Beverly Hills moved-in over a 16-year period (from 2000 to 2016) which averages to 5.4% having moved in any one of those 16 years.
Even using the more conservative of the two turnover rates (5.4%) means that in any year there will be more than 400 new tenancies created in Beverly Hills. That figure is calculated by multiplying the 7,701 rental units by the 5.4% households that will turn over in any year. (On average 416 tenancies will be created.) That rough projection suggests the number of households that will be subject to the discretion of the landlord.
What happens when an existing tenant on a month-to-month lease chooses to sign a new lease? City Council didn’t discuss it but presumably the final rent stabilization ordinance would protect tenants who have lived in the apartment after the first year.
Will landlords simply use the probationary tenancy provision as a practical way to screen tenants? Today screening happens largely on paper; a prudent landlord is a careful landlord. But the probationary tenancy gives the landlord a year to reconsider his decision to house that tenant.
Will landlords simply invoke the probationary tenancy provision to terminate a tenant that is in some way disagreeable? Why not? Absolutely no standard for use of this provision apples because the landlord need not give a reason for discontinuing the tenancy. Before the city put an end to that practice we were seeing nearly 40 no-just-cause terminations a year. We don’t know why they were terminated, but we know it wasn’t for non-payment or because the landlord wanted to raise the rent (that was unlawful). Maybe those tenants were ‘disagreeable.’ Or had some character flaw. (Landlords said, “We can’t screen for character.”) Maybe the tenant complained. Whatever. The probationary tenancy provisions opens that door anew.
Why the Backtrack?
Why indeed. Vice-Mayor John Mirisch suggested the probationary provision in the first place, and he explained his rationale. “If you [the landlord] have a year lease but no ability to terminate it, then you don’t have a year lease – you have a forever lease.” He drew an analogy: “If I sign a car leas for a year it’s for a year – it’s not forever.” Without a ‘trial year,’ he added, “We’re effectively saying a lease is forever.”
But rental housing is not like a leased car; it is indeed a home. Where consumer protections exist for car leases, there is a substantial part of the state’s Civil Code that is devoted specifically to regulating rental housing and enumerating tenant protections. Because it is more important than an auto transaction!
Perhaps a better analogy is the mobile home. It’s a home but it’s also portable. Rent is paid on the land but the structure is financed. Yet even here the state is significantly invested in the protection of mobile home tenants than any car buyer. It seems to me that the Vice-Mayor’s rationale for backtracking on the no-just-cause ban fails to recognize the difference. Tenant stability, not landlord convenience, is the objective of rent stabilization after all.
- Tenants often contact Renters Alliance is to complain about conditions that appear to fall short of even the state’s minimum standards for ‘tenantable’ premises. Those conditions would meet the definition of ‘constructive eviction’ in any other rent control city. But the state law’s prohibition on constructive eviction was simply an academic point in Beverly Hills: our complaint-based code enforcement system could not hold bad-apple landlords accountable when tenants were afraid to complain. They either left of their own accord; were given a 60-day notice and then departed; or complained about conditions, received a 60-day notice and then departed. ↩