Many California rental owners never planned to be one. A relative leaves you a house with a tenant in it, or you move for work and keep the home instead of selling it. The tenant is already there, the rules are not optional, and the deadlines start running. This guide covers the landlord-tenant steps that apply to a new housing provider (landlord), each one checked against the California code.
What do I have to do in the first 15 days?
Civil Code section 1962 requires the owner, or whoever signs the lease for the owner, to give the tenant in writing the name, telephone number and street address of each person who manages the property and of each owner, or of the person who can accept legal papers for the owner. The statute lets the owner name someone authorized to act on the owner's behalf for legal papers and notices instead of listing the owner personally, so a manager can fill that role. Ask your attorney how to set that up. The tenant must also be told who receives rent payments, and how rent can be paid.
This duty passes to a successor. A new owner or manager has 15 days after taking over to give that information. Until it is done, the successor cannot serve a three-day notice for rent that came due during the period of noncompliance, although the tenant still owes the rent.
What happens to the security deposit?
A tenant's deposit belongs to the tenant, not to the seller or the estate. Civil Code section 1950.5 says that when a landlord's interest ends, whether by sale, assignment, death or otherwise, the landlord or the landlord's agent must, within a reasonable time, either transfer the deposit that remains after lawful deductions to the successor and notify the tenant, or return it to the tenant with an accounting.
If the transfer does not happen, the new owner is jointly and severally liable with the previous landlord for repaying what the tenant is owed. In plain terms, ask for the deposit records before you accept the keys.
Can I raise the rent?
California limits increases. Under Civil Code section 1947.12, an owner cannot raise the rent more than 5 percent plus the change in the cost of living, or 10 percent, whichever is lower, over any 12-month period, and cannot raise it more than twice in that period. An increase needs written notice as Civil Code § 827 provides.
Some single-family homes and condominiums are exempt, but only if both of these are true. The owner is not a real estate investment trust, a corporation, or an LLC with at least one corporate member. And the tenants were given a specific written notice, using the exact wording in the statute, that the property is exempt from the rent limits and from the just-cause rules. Owning a house is not enough by itself, so check the lease for that notice before you assume the exemption applies.
Can I end the tenancy to move in or sell?
Civil Code section 1946.2 says that once a tenant has lived in a home continuously and lawfully for 12 months, the owner cannot end the tenancy without just cause, and the cause must be stated in the written notice.
Just cause is either at-fault, such as unpaid rent, breaking a material lease term, a nuisance, waste, or refusing a lawful entry, or no-fault, such as an owner or close relative moving in for at least 12 months under the conditions the statute sets. Whether a home is exempt turns on the same single-family rules described above.
What about entering the home?
An owner cannot just walk in because the home is now theirs. Civil Code section 1954 lists the only reasons for entering an occupied rental and requires written notice for most of them. Our guide to landlord entry and quiet enjoyment walks through it.
Will an inherited home keep its old property tax?
Not automatically. California's parent-child exclusion, which comes from Proposition 19 and is in Revenue and Taxation Code section 63.2, applies only if the home was the transferor's principal residence and becomes the new owner's principal residence within one year, and the new owner files for the homeowners' exemption within a year. A home kept as a rental does not meet that test. Ask the county assessor, and talk to a tax professional about your situation, including how the sale of an inherited home is taxed.
Do I need a property manager?
You are not required to hire one, but the people who do must be licensed. Leasing a property for someone else, collecting rent, and soliciting tenants for pay are broker activities under Business and Professions Code section 10131, so the manager must hold a real estate broker license, directly or through a salesperson working under one. Check the license on the DRE lookup before you sign, and read how the rules fit together in our guide to who regulates property managers.
Sell or keep it?
The law does not decide this for you. Compare the monthly numbers with a clear head: rent against mortgage, taxes, insurance, repairs and any HOA dues, and how much time you can give the home. Our guide to selling a rental with tenants in place covers the selling side, and our self-manage or hire a manager guide covers the other.
If you are an accidental landlord in Pittsburg, Antioch, Brentwood, Oakley, Bay Point or Concord and want the paperwork put in order, schedule a call.
This guide is general information about California law and is not legal or tax advice. Confirm your situation with a California attorney and a tax professional.
Frequently asked questions
What should an accidental landlord do first in California?
Within 15 days of taking over, give the tenant in writing the name, phone and street address of the manager and of the owner or the person authorized to act for the owner on legal papers and notices, plus where rent is paid (Civil Code section 1962). Then get the lease and the security deposit records, because the deposit must be transferred to you or returned with an accounting (section 1950.5).
What happens to the tenant when I inherit a rental property in California?
The tenant does not have to leave. The new owner takes over the landlord duties, and can end the tenancy only by following the notice and just-cause rules. After 12 months in the home, that means a just cause stated in the written notice (Civil Code section 1946.2).
Can I raise the rent on an inherited rental in California?
Yes, within limits. Civil Code section 1947.12 caps increases at 5 percent plus the change in the cost of living, or 10 percent, whichever is lower, in any 12-month period, with written notice. Some single-family homes are exempt only if the owner qualifies and the tenants were given the statutory exemption notice.
Does an inherited rental keep the old property tax?
Not automatically. The parent-child exclusion in Revenue and Taxation Code section 63.2 applies only if the home was the transferor's principal residence and becomes the new owner's principal residence within one year, with a filing for the homeowners' exemption. Ask the county assessor and a tax professional.
Do I need a license to manage an inherited rental?
No, not to manage your own property. But anyone who leases or collects rent for you for pay needs a real estate broker license, directly or through a salesperson working under one (Business and Professions Code section 10131(b)). Verify any manager on the DRE license lookup.
