Despite the numerous laws surrounding the landlord/tenant relationship in California, owning rental properties is regarded as an excellent investment strategy. Let’s be honest, people who own rental properties in Studio City, and the Greater Los Angeles area, don’t own those properties as a public service; the purpose of rental properties is to earn passive income. Nothing can cut into your bottom line more than the expense of avoidable lawsuits. Here at the Chernov Team, we take two things very seriously: doing the right thing, and helping our clients realize their real estate goals.
Prior to placing a “For Rent” sign in front of a property, or placing an ad online, it is critical that you understand the laws applicable to being a landlord. As a landlord in California, virtually everything you do is regulated by one law or another. These laws range from regulations on security deposits, when it is required to hire a property manager, and restrictions on selecting potential tenants. Landlords are required to comply with local, state, and federal fair housing laws when choosing tenants; failure to adhere to these laws may result in protacted (and expensive) discrimination lawsuits. This article will briefly discuss the federal laws surrounding housing as well as the California laws.
What Can You Do When Choosing a Tenant?
While this is not the Wild West, you do have wide latitude in determining what parameters you want a potential tenant to meet. Most attributes that render an individual a “bad risk” serve as an acceptable basis for denying them a tenancy; examples include: (1) poor credit history, (2) poor references from prior landlords, (3) repeated inability to pay rent on time, and (4) an unstable employment history. In short, nearly anything that legitimately supports the inference that an individual will be unable to meet their obligations under a contract, which is all a rental agreement is. There are limits to this latitude however, and those limits are most pronounced when it comes to denying tenancy to someone based on their inclusion in a group (race, religion, national origin, sexual orientation, etc.).
What Are the Federal Fair Housing Laws?
If you are seeking to fill a vacancy in one of your rental units, you are prohibited from discriminating against protective tenants based on their race, religion, ethnic background or national origin, familial status, or physical or mental disabilities.
What Are the California Fair Housing Laws?
California landlords must not only comply with the Federal Housing Act, briefly discussed above, but the must also comply with California’s Fair Employment and Housing Act (“FEHA”) as well as California’s public accommodations law (referred to as the “UNRUH Act”). In conjunction, FEHA and UNRUH prohibit discrimination in housing decisions based on characteristics including but not limited to: (1) sexual orientation, (2) marital status, (3) personal physical attributes, and (4) receipt of public assistance.
What Are the Consequences of Discrimination in the Landlord Context?
If a Court or Agency determines that you have engaged in discrimination in relation to filling a rental unit, the Court or Agency may force you to rent the unit to the person who has been discriminated against or force you to pay substantial sums of money to the individual who was discriminated against. Further, the Court or Agency may require you to pay something known as “punitive damages”, which act as additional punishment to deter similar conduct in the future. Finally, the Court or Agency may force you to pay the fees of the attorney representing the individual.
In conclusion, if you want to maximize your profit on a rental unit it is in your best interest to become familiar with the applicable laws and avoid questionable conduct at all costs. As mentioned above, nothing cuts into your bottom line like unnecessary legal expenses.