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Los Angeles Landlords and Rental Investors Must Know About Los Angeles Rent Control Ordinance

#1:   OBTAIN YOUR BUSINESS LICENSE
As a property owner, if you are renting four or more units in the city of Los Angeles, you are required to obtain a business license from the city’s Office of Finance. 

The initial set up to register your business is free and can accomplished online at www.finance.lacity.org.  Online submissions take six to eight weeks to receive your certificate.  If you need your certificate right way, you need to bring your application to a branch location nearest you which may be found on their website.

Report Your Income

Once you have completed your obligation to obtain your business license, you are then required to report your income annually between January 1st and the end of February.  

To report your income, go to www.finance.lacity.org and obtain the Business Tax Renewal form.  You may submit this form online or bring it to one of their locations before the annual deadline of the last day of February.  Currently, taxes on rental income are at $1.27 per thousand dollars collected, however, there are small business exceptions that may apply where no tax is due.

Tax Exemption:  If you file on time and your gross receipts are under $100,000

IMPORTANT:  Failure to file the informational return by February 28th will cause the loss of the exemption, and the taxes PLUS penalties and interest will then be due.

#2:  REGISTER WITH L.A. RENT STABILIZATION (LA RSO)

If your building was built and certificates of occupancy were obtained before February of 1978 and there are two or more units on the same lot, your rentals are under and will be governed by the Los Angeles Rent Stabilization Ordinance – (LA RSO).  As a new owner, you must register your units with RSO.

Exempt Units

1.  Luxury Units:  Landlords may be exempt from Rent Control if the building qualifies under the Luxury Exemption and a certificate must be issued from LAHD.  You will have to prove that the rent collected met minimum amounts set by LA RSO on certain dates. To find out if your building qualifies for this exemption, call (213) 808-8888 or (866) 557-RENT.

2.  Owner-Occupied Units:  Your unit may also be exempt if you or a family member occupy the premises and no rent is collected. This exemption must be requested on a yearly basis.

#3:  PAY ANNUAL REGISTRATION AND SCEP FEES 

For all rent controlled buildings, two annual registration fees per unit must be paid.

  1. Rent Registration Dues
  2. Systematic Code Enforcement Fees (SCEP)

To begin this process online, go to www.lahdbill.org, register as a new owner with the website to log on, print out the Ownership Registration, and send a copy of your completed application with a copy of your Grant Deed to:

Los Angeles Housing Department
Attention:  Billing and Collections
P.O. Box 17280
Los Angeles, CA 90017

If you are unsure whether or not your units are subject to the L.A. Rent Control Ordinance, you should call the RSO at 877-614-6873 and give them your Assessor’s Parcel Number (APN).  They will check to see if the previous owner was properly registered and is current on the required dues.

Once you are registered as the new owner of this property, you will automatically receive annual registration and SCEP bills from the Los Angeles Housing Department, which must be paid timely each year to avoid substantial late fees.

#4:  POST RENT CONTROL NOTICE AT YOUR BUILDING 

You must post a notice to the tenants advising them that your building is subject to the Los Angeles Rent Control Ordinance.  The notice must be posted (in English and Spanish) in a conspicuous spot, (near the mailbox area, in the building’s lobby or on the entrance to the building).  The form may be found on www.lahd.lacity.org website and is titled RSO Notification.

#5: PASS-THROUGH REGISTRATION AND SCEP FEES TO TENANTS

A.  Registration Fees

Once your building is registered, you will automatically receive an annual invoice from the RSO which is due each year by February 28.

The Los Angeles Rent Stabilization Division allows owners to pass-through one half of the required registration fees with a 30-day notice, collectible in the month of June only.  That means you MUST serve the notice of the one time annual rent increase in the month of May in order to collect this annual fee from your tenants.  we strongly recommend you serve the notice before or on May 1st each year to collect this fee along with the rent due on June 1st.

IMPORTANT NOTE:  The notice of the one-time annual charge must be accompanied with a copy of your Rent Stabilization registration certificate to show that you paid the fees.

B. SCEP Fees

The SCEP fee per unit charge for the Housing Department’s code-enforcement inspection fee may also be passed through to your tenants.  This fee, however, must be amortized over a 12 month period and is collectible at a monthly rate. As an example, using the 2013 figures, ($43.32 divided by 12 = $3.61 per month).   

A 30-Day Notice of Change of Terms of Tenancy must be served to each tenant after you pay your bill before you can collect this fee.  That means with proper written service of this form, you can legally raise your rents (as long as you paid your bill!), $3.61 per month. Every little bit helps!  Your tenants may pay this fee all at once, however, they will not be awarded a refund should they move before the end of the year. When performing this calculation, be sure to check your bill for the actual fees paid as they do change periodically. 

#6:  NOTIFY TENANTS OF ANNUAL RENT INCREASES

Los Angeles Rent Control only allows an annual rent increase at a percentage established by the RSO each year in the month of July. At the end of your 12-month lease and on each anniversary after that, you may raise a tenant’s rent by that percentage with a 30 Day Notice to Change the Terms of the Tenancy. 

Should a lease expire in June, you may raise the rent each June.  If you miss that date and don’t raise the rent until, say for example in September – you create a new anniversary date and can only raise the rent each September after that.

#7:  SECURITY DEPOSIT INTEREST

A set interest rate must be paid on all security deposits for units under the jurisdiction of L.A. Rent Control.  The amount, which changes annually, can be obtained from the LARSO and must be paid to tenants once a year and when the deposit is refunded at the end of tenancy.  A landlord may pay tenants a lower, actual rate of interest earned by providing a copy of the bank statement showing the actual interest rate earned for the year.

#8:  RESIDENT MANAGERS

In California, buildings with 16 units or more require a resident manager to live on the premises.  It is highly recommended that you have a manager agreement in writing and follow all the rules for resident manager laws regarding the recording of the hours they work each week and proper compensation with taxes deducted.

NOTE:  If your building is less than 16 units and you do not have a resident manager on the premises, make sure to post an emergency phone number and contact for tenants to call.

#9:  Proper Application, Tenant Screening Criteria

Written Criteria List for Applicants – Having a written criteria list for your rental applicants is pertinent in your rental business and serves several purposes.  By attaching a copy of your rental criteria to each blank application form, you are informing your applicant of a list of conditions that must be met for them to be considered as a future tenant in your building.  It will also help you to avoid discrimination lawsuits.  Applicants who have evictions on their records or unfavorable credit will not waste your time.  Those who do not qualify financially will be dissuaded.  Applicants with criminal records will choose to apply elsewhere.

Along with a comprehensive Lease Agreement, you are required by law to provide the EPA booklet on lead-based paint listed below.  Be sure to have your tenant’s initial receipt of the booklet.

Additional optional addendums which are highly recommended follow.

  1.  REQUIRED EPA BOOKLET: “Protect Your Family from Lead in Your Home” which may be printed from the EPA’s website at http://www.epa.gov/lead/pubs/leadpdfe.pdf.
  2. Pet Agreement
  3. Service Animal Agreement
  4. Smoke Free Addendum
  5. Smoke and Carbon Monoxide Detectors Addendum
  6. Enter/Exit Condition of Premises Checklist
  7. House Rules
  8. Pool Rules
  9. Bedbug Addendum

#10:  EDUCATE YOURSELF

  • Obtain a copy of the “Landlord-Tenant Handbook for Rental Units Subject to the L.A. Rent Stabilization Ordinance” which is provided free of charge from the City of Los Angeles Housing Department.  You may call 866-557-RENT to have one mailed or pick one up at one of their offices.
  • We also highly recommend every landlord own a copy of Nolo’s California Landlord’s Law Book:  Rights and Responsibilities which contains essential legal information that every landlord should be equipped with.

#11:  Check to see if you should do it yourself or outsource to a professional property management company such as Real Property Management Choice

With a licensed real estate broker and an experienced appraiser in the team at RPM Choice, we know what works, what rents, and how to maximize the returns.

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We are pledged to the letter and spirit of U.S. policy for the achievement of equal housing opportunity throughout the Nation. See Equal Housing Opportunity Statement for more information.