What Lies Ahead?


Think 2003 was a crazy political year? Take a look at some of what we have ahead of us in 2004.

Governor Schwarzenegger is aggressively promoting a March 2nd, $15 Billion Bond to finance the state's humongous budget shortfall. Others are sponsoring Proposition 56, the so-called Budget Accountability Act, which would reduce the voting requirement to increase taxes from the present two-thirds vote to a majority vote of only 55 percent of the Legislature. The California Teachers Association is circulating an initiative for the November ballot that will increase the tax on residential rental income property that has an assessed value in excess of $700,000.

Meanwhile, we have the Democratic Primary with upsets in Iowa by John Kerry and John Edwards and the spectacle of Howard Dean's now infamous Iowa yell, "Yeahhaaaaaaaaaaaaa," on the night that he got whipped so badly. On the Republican side, President Bush is touting his tax cuts and strong leadership in the war on terror.

No doubt, California's fiscal crisis combined with a presidential election year sets up a very volatile political season. Here are a few thoughts that I would like to share with you about some of the upcoming fiscal campaigns.

The Schwarzenegger Campaign

In a series of campaign stops around the state, Governor Schwarzenegger proclaimed that if the March 2nd, $15 Billion Bond is not approved, California faces "Armageddon" cuts in programs and services. Democratic State Controller, Steve Westly, who serves as co-chair of the campaign to pass the Bond, said that the March 2nd vote is probably the most important vote Californians have ever been asked to make.

Opponents of the measure think cuts are good. They ask, "Why is it that California has a population that is twice the size of Florida yet a budget that is three times larger? Whatever happened to economies of scale?"

In response, proponents counter that the state will be unable to get its finances in order if voters reject the $15 Billion Bond. This will further erode confidence in California and hasten the exodus of business out of the state, taking with it tax revenues, jobs, etc., etc. In the end, California's fiscal crisis will only get worse.

As with all things political, the truth probably lies somewhere in the middle of the two arguments. While this column has been very high on the changes that the Governor has brought to California, at this writing we cannot recommend a position. But we urge all property owners to carefully follow the issue and vote their conscience.

The So-Called Budget Accountability Act

This measure is supposed to end political gridlock by reducing the voting requirement for new taxes to 55%. The problem, proponents argue, is that the current requirement of a two-thirds vote is too difficult to achieve and allows a tyrannical minority of fiscally conservative Republicans to hold up the budget.

Opponents say hold on. This is not about accountability. This is a "Blank Check Initiative." If it is passed, the Democratic majority in the Legislature will be able to pass tax increases with little or no accountability to anyone.

Opponents also point out that attributing the motive of accountability to this initiative is deceptive. The initiative provides that, until a budget is passed, legislators will have their pay withheld. However, legislators will be paid retroactively as soon as the budget is approved. So, as Trevor Grimm of California Apartment Law Information Foundation asks, "where is the punishment?" And, if there is no real disincentive, where does the accountability come in?

Another significant problem with this initiative is that the Legislature, in an unholy alliance of Democrats and Republicans, created electoral districts that almost guarantee reelection of incumbents and their party followers. This means that until some major shakeup occurs, the Legislature will continue to be dominated by one party - Democrats.

I don't know about you, but I prefer a two-thirds vote requirement for new taxes. I like the idea that our Legislature has to work long and hard to come up with a compromise. In this situation, all gridlock isn't bad gridlock. At the Board of Directors meeting in January, a unanimous vote was cast for the Apartment Association, California Southern Cities to take a "No on 56" position.

The California Teachers Initiative

We will have a lot more to say about this initiative in the coming months. (See Nancy Ahlswede's Political Perspective column in December and January.) For now, remember this, the California Teachers Association (CTA) had a choice between two initiatives that were approved for circulation. One excluded residential rental property. The one they chose to circulate includes your property.

CTA made a calculated decision that a lot more money would be available to teachers if rental property taxes were increased. But, I wonder if they fully considered that their decision promotes the possible development of a major alliance between owners and tenants against the initiative? After all, if the initiative is passed, property taxes will increase significantly and so too will rents!

Greg McConnell is a rental housing consultant and your association's legislative advocate. He represents and advises apartment associations, property management companies, and individual owners throughout California. For more information please visit

( This article is copyrighted and cannot be republished without the consent of the author.

New Laws for 2004


Happy New Year! As we have reported previously, several new laws take effect on January 1, 2004.1

Three new laws that are most important and warrant your close attention concern security deposits, habitability, and contracts in foreign languages.

SB 90 (Torlakson) amends Section 1950.5 of the California Civil Code, relating to security deposits. The law continues to require owners to provide accountings on deductions from security deposits within 21 days of the tenant's departure from the unit. Additional key changes are:
* Owners must provide receipts to prove the cost of deductions.
* Owners can make good faith estimates of costs when work reasonably cannot be completed and paid for within 21 days. Receipts must be given within 14 days after the owner receives them.
* Owners can deduct for in house or self-labor, but they must make an accounting of time spent and amounts charged.
* No receipts are required if the total deduction is in the amount of $125 or less. However, after receiving the accounting, a tenant may request receipts.
* A tenant may waive the right to receipts.
* Owners and management companies that buy in bulk and use in house labor may prove the cost of bulk purchases in a reasonable way.
* Accountings of security deposits and refunds are to be mailed to the tenant at the tenant's forwarding address if it has been provided to the owner. If not, the owner must send the itemization addressed to the tenant at the unit that the tenant has departed.

AB 647 (Nunez) amends Section 1942.4 of the California Civil Code and Section 1174.21 of the Code of Civil Procedure, relating to habitability and attorneys fees. This law addresses situations where the landlord fails to timely repair serious violations of the health and safety code.

* Owners may not demand, accept, or increase rent, or serve a three-day notice when all of the following conditions exist prior to the landlord's demand or notice:

1. A housing inspector, after inspecting the property has determined that the premises are in violation of Sections 1941 and 17920.10 and .3 of the Health and Safety Code2

2. The owner has been served notice that the defective conditions exist

3. The owner has not abated the conditions within 35 days, except for good cause, and

4. The tenant has not caused, by an act or omission, the defective conditions or prevented repairs.

If the owner attempts to evict a tenant when all of the above listed conditions exist prior to issuance of a three-day notice and unlawful detainer, a court may award attorneys fees, in an amount to be determined by the Court, to the prevailing tenant.

AB 309 (Chu) amends Section 1632 of the California Civil Code, relating to contracts in foreign languages. It provides:
* An owner who negotiates a lease/rental agreement primarily in Spanish, Chinese, Tagalog, Vietnamese, or Korean, must provide a contract (lease/rental agreement) translated in that language.
Owners who are unable to provide contracts in foreign languages should not negotiate in foreign languages.

Association Sponsored Legislation

The association is sponsoring legislation to address a threat to vacancy decontrol. It has recently come to our attention that some rent control jurisdictions are applying a new test for when owners may increase the rent when original tenants depart and replacement tenants are allowed into the unit. Essentially, they are requiring the owner to show that the departing tenant has sublet or assigned the unit to the new tenant. If not, the owner may not increase the rent despite the fact that all of the original tenants have departed.

The requirements create two types of problems. If the unit is sublet, the original tenant retains the right to reenter the unit and may not have permanently ceased occupancy of the unit. This can be interpreted to mean that a vacancy has not occurred under the Costa Hawkins vacancy decontrol law.

Also, when a tenant vacates, the tenant has no interest in assigning rights to a new tenant. Frequently, the departing tenant and the new tenant are strangers to one another. Imposing an assignment requirement is very difficult.
The effect of these requirements is to allow tenants to hand units down from one to another without the owner ever having the right to make rent adjustments. The Costa Hawkins Act clearly did not intend this result.

The association has instructed us to look into legislation to fix these problems. We plan to make it clear that whenever the original occupants depart, the owner may adjust the rent to new tenants and to tenants who continue to occupy the property (i.e. replacement tenants who took occupancy after the original tenants took occupancy).

We will provide more information on this and other new legislation in the coming months. For more detail on these and other laws being considered, please visit

( This article is copyrighted and cannot be republished without the consent of the author.

1 Please see October and November Sacramento Reports
2 (These are serious violations that exist to an extent that endangers the life, limb, health, property, safety, or welfare of the public or the occupants of the dwelling. See Section 1942.4 (1))

Spinning Straw into Gold


This was the most difficult legislative year we have ever faced. A small sampling of what we faced includes: potential statewide rent control (AB 1256); mandatory inclusionary zoning on new and rehabilitated units (SB 178); criminal penalties against owners who assert their rights (AB 1059); shorter periods to process security deposits or lose the right to deduct for repairs (SB 90); loss of the right to collect rent based upon minor housing code violations (AB 647); smoking laws that would turn owners into tobacco cops (AB 210); and legislation that would have made it impossible to screen tenants who had been evicted from other units and would have allowed tenants to pay rent even after failing to comply with a three day notice all the way up to the point of judgment (SB 345). To make matters worse, we were confronted by a very liberal Legislature and recall politics that caused the Governor to shift to the left, leaving us with very little hope that bad bills would be vetoed.

Had these bills passed as they were introduced, the impact on owners would have been measurable in the loss of hundreds of millions of dollars.

We are pleased to report that we came out of the year in very good shape. Every bill we faced was negotiated to our satisfaction. Given what could have happened, this year, we spun straw into gold. (See Legislative Reports in the magazine for more detail.)


As we enter into 2004, we now have an ally in the Governor’s office. Arnold Schwarzenegger has pledged to make California business friendly and we intend to make sure that he knows that operating rental property is one of California’s most important businesses. But, it would be a huge mistake to rely on this alone. We still face strong threats from the liberal elements in the Assembly and Senate that seek to promote social justice at the expense of property owners.

Several legislators still want rent and eviction control all over the state. They still want to transfer equity from you to tenants and if they cannot get it directly, they will subject you to death by a thousand regulatory bites.

As we have stated many times in the past, owner participation in the association is crucial to our success. We cannot protect your interests unless we have your full support. That includes your membership and your active participation in writing emails, red alerts, and being the front line troops that help us tell the real story of what it takes to provide housing to California’s tenants.

With your help,we can continue to beat them back. Let’s move the agenda back to the middle and make this a truly housing friendly state.

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