The 2013 Legislative Year is Over - How Did We Fare

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With California’s 2013 legislative year in the rear view mirror, it’s time to reflect on this year’s bills and see how we fared.

Biggest Bills Failed Passage

Of the 128 bills we tracked in 2013, 16 were ones we outright opposed, and 17 were ones we held an oppose unless amended position. That’s 33 bills that if signed into law could have, at varying degrees, negatively impacted the apart ment industry.

We are very pleased to report, however, that all 16 bills we outright opposed in 2013 failed to become law. Additionally, we successfully obtained amendments that removed our opposition in all 17 bills we held an oppose unless amended position.

Among the 33 bills were four bills that established new rent control regulations, required landlords to pay interest to tenants for holding their security deposits, expanded tenants’ rights to unlawful de tainer jury trials, and penalties for failing to retrofit apartment buildings with water submeters. These four were lobbied against by Apartment Association members on Legislative Day back in April 2013, and represented the most controversial and harmful to the rental property industry.

Each of those bills failed at different points in the year and for different reasons. Because our efforts to oppose those four bills are representative of the year’s success, the following is a short review of each.

AB 1229 (Atkins) Inclusionary Housing


The most hotly contested and controversial of the four bills was AB 1229.

The bill would have restricted the right of landlords to set the initial and subsequent rental rates of newly constructed and privately owned units. It would have established a new precedent in the government’s ability to control rental rates, and ultimately would have made the cost of developing, owning and managing apartment buildings extremely difficult, if not impossible.

Proponents of the bill, including low income tenant groups, cities and counties, argued that the bill provided a necessary tool for cities and counties to use to meet their affordable housing needs. Working in favor of the bill was the immense pressure built up over the last few years since the loss of redevelopment to pass a bill that funds the development of low-income housing.

That pressure was enough to push AB 1229 through the Legislature by the bare minimum number of votes in each house.

We stayed focused on defeating the bill, however, drafting letters, testifying at committees, crashing the offices of lawmakers, and staking out strategic lobby areas of the State Capitol to talk with lawmakers if they did not have time to meet in their offices. When the bill reached the Governor’s desk, we continued our all out effort.

It came down to the last day of the Governor’s deadline to sign or veto all 2013 bills. Our efforts paid off, and the bill was vetoed. In the end, the Governor, who opposed such laws as Mayor of Oakland, understood that on balance the risk of depressing the housing market and overly burdening developers and property owners for what little is provided in terms of creating some affordable housing, was simply not worth it.

SB 603 (Leno) Security Deposit Interest

An administrative nightmare—that is what Senator Mark Leno’s idea of security deposit reform would have been for property owners of all residential rental property types.

SB 603 would have required yearly interest payments to tenants based on the amount of the security deposit held. Landlords would have been barred from placing the deposit in an interest bearing account, and penalized severely for any accounting mistakes.

Penalties for late interest payments included twice the interest, plus damages and actual damages. The penalty for failing to deposit the funds in a federally insured financial institution or being late in notifying the tenant where the funds are located, would have been twice the amount of the security and actual damages.

How much interest was required to be paid to the tenant? $2.60 for every $1,000 held as security. That could have been a big headache for such little return. Plus, and probably what would have been most costly, every aspect of the new law would have been subject to new litigation and court costs—all for $2.60 a year.

Although the bill made it out the Senate Judiciary Committee, it met a lot of resistance on the Senate Floor. So much so that Senator Leno amended out the part of the bill requiring interest on security. Even then, the bill still failed to garner the votes necessary to move on and was subsequently made a two-year bill.

We expect this bill to be back in the 2014 legislative year. It is unclear, however, whether the provision requiring interest will be part of it. We will keep you posted.

AB 969 (Ammiano) Unlawful Detainer Jury Trials


AB 969 gives tenants who have had an unlawful detainer action filed against them the ability to demand that a jury hear and decide their warranty of habitability defense. Under current law, while tenants may demand a jury trial generally, habitability defenses are supposed to be heard and decided by a judge. In practice, however, many courts mistakenly already allow juries to determine habitability defenses. AB 969 codifies this erroneous practice.

The warranty of habitability defense is a proper defense to not paying rent when a landlord fails to provide a dwelling that is not fit for human habitation. Minor repair issues such as a drippy faucet, however, are not sup posed to represent a breach of the warranty of habitability.

But this “drippy faucet” defense is used in many courts across California to help tenants get out of paying rent. This abusive practice forces landlords to settle their cases on unreasonable terms. Because tenant attorneys can play on jury sympathies and confusion about habitability while making landlords pay the expensive cost of going through a jury trial, many landlords simply cut their losses and settle for providing tenants three to six months of free rent, and time to move out. These forced settlements aren’t fair to landlords, and should not be encouraged by the law. As a matter of principle, tenants should not be able to get out of paying their rent by making false claims about the habitability of their dwelling.

Opposing AB 969 is the first step, but more should be done. For example, courts should understand existing law and require all habitability defenses to be heard only by judges. Alternatively, changes to habitability laws and its definition are necessary to prevent confusion and to exclude frivolous claims like drippy faucets from being used to defend an unlawful detainer.

Fortunately, we were able to kill the bill this year by conducting extensive research on the issue, speaking with experts and professionals in the field, bringing in experienced attorneys to testify at committee, and lodging an all out advocacy effort. The hard work paid off, because prior to the first vote on the bill, the author requested the bill be made a two-year bill.

We expect AB 969 to return in 2014.

SB 750 (Wolk) Water Submeter Mandates


The bill that gave us the most heartburn, and by far one of the most time consuming of the bunch, was SB 750. Dealing with the water submeter bill of 2013 was the water park equivalent of sliding down one of those giant water slides—full of twists and turns, and a lot of water in the face.

One of the main purposes of installing water submeters is to conserve water. Because submeters measure the water usage of each dwelling unit, they allow landlords to back charge each tenant for their own water usage. As such, tenants are more likely to conserve water when they have to pay for each drop of water they use. Tenants in apartments that are not submetered typically pay for water as part of the rent. But this type of system does not provide an inducement for the tenant to conserve water.

Originally, the bill sought to require all dwelling units, new and existing, to be submetered. That would have been a retrofit nightmare of impossible proportions. The author soon amended the bill to limit its mandate to new construction.

In our discussions with apartment owners, no one seriously objected to a new building code standard requiring apartments to be built with submeters. But SB 750 was written to include provisions that go way beyond water conservation policies. Changes include increased landlord penalties, inability to evict tenants for failure to pay bills, increased hurdles to deduct unpaid water bills from security deposits, penalties for a landlord’s failure to fix all water issues within just a few days, retrofit mandates, and broadened scope and changes to unlawful detainer actions.

Many meetings were held and many drafts were presented. While stakeholders like us negotiated in good faith to fix the bill, SB 750 was making its way through the Legislature with promises and assurances, including that the bill would not require retrofitting any apartments. It did require retrofits and a host of other mandates and penalties. So we continued to shine a light on the heinous aspects of the bill and continued negotiating. At the last scheduled committee hearing for the bill, it finally stalled.

The author would not budge on some of the most objectionable portions of the bill. We, therefore, had to reach out to committee members and explain why we were compelled to oppose the bill. The Legislators got it. When it came time for a vote, the bill received a mere three “aye” votes out of 14 members on the panel (it needed a minimum number of eight votes to pass out of committee).

This is another bill that we expect to be back in 2014.

Conclusion

It was a great year. No bills that negatively impact the interests of apartment owners were signed into law.

We certainly could not have done it without the support of apartment owners and managers, Association members who attended Legislative Day, and all the Association members, property owners and managers who made calls to their Legislators throughout the year! Those actions in tandem with all the other lobbying efforts helped to keep bad legislation out of the law books this year, while keeping the apartment industry strong. We look forward to serving you in 2014.

Let’s have another successful year.

Ron Kingston can be reached at This e-mail address is being protected from spambots. You need JavaScript enabled to view it

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