A recent California Appellate Court decision provided tenants with additional protections when it clarified that local rent control laws applied to a single-family home in which the landlord[1] rented rooms in the home to separate tenants despite the landlord’s belief that single-family homes were excepted from rent control laws. Specifically, in Owens v. City of Oakland Housing, Residential Rent and Relocation Board (“Owens”), Division Three of the First District of the California Court of Appeal clarified that the landlord’s argument that an exception to local rent control laws found in the Costa-Hawkins Housing Act (“Costa-Hawkins”) did not apply.

In Owens, the landlord owned and lived in a single-family home located in Oakland, California, and rented individual rooms in the home to three unrelated tenants.  One of those tenants filed a petition pursuant to Oakland’s Rent Adjustment Program complaining about disruptive construction work and hazardous conditions at the premises.  The tenant alleged that the landlord did not provide her notice about the Rent Adjustment Program and terminated her lease when she sought a reduction in rent due to the construction work.  The landlord responded that the lease was not subject to the Rent Adjustment Program since the rental was for “sole use of one or more rooms and shared use of common areas (such as a kitchen) in the residence,” which was a single-family home.

In its decision, the court focused on the definition of a “dwelling unit” as used in the exception found in Civil Code section 1954.52(a)(3)(A), which provides that “an owner of residential real property may establish the initial and all subsequent rental rates for a dwelling or a unit about which the following is true…It is alienable separate from the title to any other dwelling unit….”  .  While the landlord defined the dwelling unit as his single-family home; the court, after analyzing the statutory definitions of the term, the determined that the dwelling unit at issue was the separate room being rented to the tenant.[2]  As a result, the landlord had converted his single unit dwelling into a multi-unit dwelling that was subject to Oakland’s Rent Adjustment Program since the individual rooms were not alienable separate from the title to any other dwelling unit.

Under the court’s decision, tenants in Oakland renting rooms in a single-family home or a condominium are entitled to the protections provided by Oakland’s Rent Adjustment Program.  By extension, other California tenants living in municipalities that have rent control laws are likely protected to the extent the landlord was relying on the same Costa-Hawkins exception as the landlord in Owens and operating under a similar leasing arrangement.  It is important to note that the court here did not consider the landlord’s argument that the tenant was in actuality renting and sharing the entire home, and not just a room because the landlord raised this argument for the first time on appeal.

The Owens decision encourages landlords to review applicable lease agreements, and consider revising the definition of the premises each tenant is leasing to ensure the “dwelling unit” being leased is defined as the entire home or condominium.  Such a definition will allow landlords to make a stronger argument that the Costa-Hawkins exception applies since the “dwelling unit” is the entire home or condominium.  In addition, homeowners and condominium owners should be careful to document any such leasing activity, even to a parent or friend  (especially given the impact of the COVID-19 pandemic) since it may subject the “landlord” to local rent control laws.

FOOTNOTES

[1] The terms “landlord” and “owner” shall be used herein interchangeably.

[2] Referencing Civil Code section 1940(c), the court interpreted “dwelling unit” to mean “a structure or the part of a structure that is used as a home, residence, or sleeping place.”