Rent Control–Coming to a State Near You?
Musicians must control many things to perform a composition. They must play the correct notes, in tune, at the correct time, at the correct length, and with appropriate loudness or softness (dynamic).
On a violin, each musical passage requires continuous control over both hands. With the left hand, which holds the violin, all but the lowest notes can be played on more than one string, or with different fingers. Some notes can be played as harmonics or overtones on the string.
The violinist controls whether left hand shifts up and down the fingerboard are silent or be audible glissandos (slides). The violinist also controls when to use vibrato (slight pitch oscillation which produces a richer sound) and the type of vibrato, wide or narrow, quick or slow.
With right, bow arm, the violinist controls the speed of the bow, how much hair touches the string, how hard the bow presses into the string, and where on the string the bow is placed (near the fingerboard, the bridge, or in between). The violinist also controls whether a note is articulated with a crisp beginning or end or smooth and legato, with a dozen or more different “bow stroke” options.
A violinist has control over the myriad of small decisions which add up to create a musical expression. But there are also things that the violinist doesn’t control. For instance, humidity can affect how the string and violin respond. And the acoustics of the concert hall impact how the violin and the music sound.
Who Controls Rental Rates?
The same is true for landlords and their property investments. Landlords have a lot of control over what is in their leases and how they maintain their buildings. Yet, despite the direct impact on the success of the real estate investment, landlords don’t always have control over the rent charged.
State and local laws traditionally have controlled some rules for landlord-tenant relationships. Usually, these have dealt with property condition and security deposits, and a process for evictions.
In a few major metropolitan areas such as New York City and Washington DC have rent control laws. California, and interestingly, a few Maryland jurisdictions may adopt rent control. However, generally, landlords could set rents as they see fit.
Now, state governments are taking more control over the landlord-tenant relationship by passing rent control laws. In March 2019, Oregon passed the nation’s first statewide rent control law. By June 2019, New York adopted its own statewide rent control law. There is an ongoing battle over whether California should pass statewide rent control, and tenant advocates are promoting statewide rent control in Washington state.
Oregon’s Rent Control Law
Oregon’s “rent control law,” Senate Bill 608 (SB 608) did more than limit rent increases. SB 608 also makes it more difficult for landlords to evict many tenants.
Under SB 608, landlords can still evict tenants who don’t pay rent or breach their leases. But otherwise, landlords usually can’t evict tenants who have lived in their units for more than one year. Unless the tenant lives in a duplex in which the landlord also resides, a landlord can only evict tenants who haven’t violated their leases under these circumstances:
The landlord plans to convert the unit to a non-residential use or to demolish it
The landlord plans major repairs or renovations which will rend the unit unhabitable
The landlord or its family intend to move into the unit
The landlord has sold the unit to a third party who intends to live there
To evict the tenant under these circumstances, a landlord must provide certain notice to the tenant and must pay the tenant one month’s rent to assist with relocation expenses.
SB 608 also limits how frequently and how much a landlord can increase a tenant’s rent. No rent increases are permitted during tenants’ first year of occupancy. After tenants have resided in their units for more than a year, landlords may increase rent only once per year. The rent increase is limited to seven percent above the annualized consumer price index.
New York State’s Rent Control Law
In June, New York’s state legislature passed the Housing Stability and Tenant Protection Act of 2019 (TPA), which was quickly signed by the governor. The regulations previously in effect in New York City and some nearby counties now are a permanent part of state law. Under TPA, rent control isn’t limited to certain parts of the state. Any New York city or town with a vacancy rate less than 5% can regulate rents.
In addition, TPA eliminated a rent control phase-out based upon tenant income so that the law applies to all rental units regardless of tenant income. Plus, TPA limits the amount by which a landlord can increase rents after a vacancy. TPA also limits increases based upon both building-wide improvements and improvements made to individual apartments.
Like SB 608, TPA goes beyond rent control. TPA lengthened the eviction process by providing tenants additional time to respond to notices and petitions. TPA adds teeth to existing law by making certain landlord “self-help” evictions crimes, punishable by hefty penalties.
TPA now allows landlords to evict tenants so the landlord or their family members could live there to one apartment used as a primary residence. Plus, if a tenant has lived in a unit for 15 years, then the landlord usually can no longer evict the tenant so the landlord or a family member can move into the unit.
TPA also caps application fees, changes security deposit requirements, and bans tenant blacklists. Also, now, a majority vote of tenants is required before a rent-controlled or rent-stabilized building can be converted to condominiums or a cooperative ownership structure.
Although laws like SB 608 and TPA may help tenants remain in their homes, those laws usually aren’t good for landlords. These laws reduce landlords’ potential for revenue growth without regard to market factors of supply and demand. These limitations on financial opportunity may disincentivize developers from adding new rental units to an already tight market.
Plus, the laws prevent landlords from recoupling costs of major upgrades, even when tenants benefit directly from them. If additional amenities or renovation of a kitchen or bath won’t yield higher rental rates, landlords have little incentive to advance the cash to make those upgrades. Landlord advocates have predicted that the result will be buildings and apartments which remain in a state of disrepair.
Within days of TPA’s passage, a group representing small building owners filed a lawsuit in federal court, claiming that TPA is an illegal taking without just compensation under the U.S. Constitution. The landlords claim that limitations on rent increases and owner use of property is an unconstitutional “taking” of the property without the “just consideration” required by the U.S. Constitution.
Because the government hasn’t taken actual ownership of anyone’s property, this would be called a “regulatory taking.” A regulatory taking is one which results from laws or regulations that impact property rights. Historically, the U.S. Supreme Court has given governments broad leeway to regulate use of property. So, under current law it's difficult to prove a regulatory taking.
However, landlords appear emboldened by the U.S. Supreme Court’s June 2019, in Knick v. Township of Scott, Pennsylvania. In Knick, the property owner land containing a small cemetery. The government passed a law requiring that she open her property during the daytime hours so people could visit the cemetery. She objected, claiming that the law was a regulatory taking without just compensation.
The U.S. Supreme Court did not rule whether Knick’s situation was a regulatory “taking.” However, the Court did overrule parts of one of its earlier decisions requiring that an owner pursue state remedies before filing a federal lawsuit. This makes it easier for plaintiff real estate owners to pursue federal lawsuits against local governments for regulatory takings. Some believe that Knick reflects the Supreme Court’s willingness to expand the scope of regulatory taking cases.
Landlord Best Practices
With awareness and planning, violinists can minimize the impact of external influences. They can watch weather forecasts, check out acoustics, and rehearse with other musicians in advance.
Landlords, likewise, can benefit from awareness and planning. Landlords should know all laws and regulations governing landlord-tenant relationships. This includes both state and local laws, and any contractual obligations due to tax abatements or federal funding for the property.
Landlords should work with an experienced real estate attorney to be sure new leases comply with requirements. And landlords should review existing leases and know where they fall short on compliance.
Landlords shouldn’t enforce lease provisions which violate current laws. For instance, an Oregon landlord no longer can non-renew a lease for a long-time tenant who hasn’t breached, even if the lease says otherwise.
Landlords shouldn’t rely upon tenant ignorance of new laws. Even if individual tenants don’t know their rights, tenant advocates do, and tenants talk among themselves. Landlords who ignore tenant rights may find themselves on the other side of a group or class action lawsuit.
Finally, just as a violinist should collaborate with other musicians, the landlord should work to develop a good landlord-tenant relationship. With good communication, it is more likely that misunderstandings or disputes can be resolved short of litigation.
© 2019 by Elizabeth A. Whitman
Any references clients and their legal situations have been modified to protect client confidentiality
DISCLAIMER: The content of this blog is for informational purposes only and does not provide legal advice to any person. No one should take any action regarding the information contained in this blog without first seeking the advice of an attorney. Neither reading this blog nor communication with Whitman Legal Solutions, LLC or Elizabeth A. Whitman creates an attorney-client relationship. No attorney-client relationship will exist with Whitman Legal Solutions, LLC or any attorney affiliated with it unless and until a written contract is signed by all parties and any conditions in such contract are fully satisfied.