California Apartment Association

The California State Legislature is finishing up its summer recess and will return in August to wrap up the first year of the 2013-14 Legislative sessions.

To date, 2013 has been one of the most challenging Legislative sessions for the apartment industry in a decade. The California Apartment Association has actively lobbied on 75 bills to make certain that the industry is protected from over-reaching legislative proposals.

Three measures in particular would have had far-reaching economic impacts on the industry but were successfully stopped or amended by CAA.

Senate Bill 750 – Water sub-metering and RUBS

The issue of ratio-utility billing systems (RUBS) and sub-metering is not new to the State Capitol. For years, tenants groups have sought to ban RUBS and all administrative fees associated with sub-metering and ratio-utility billing system programs. Additionally, given the heightened concern about water conservation, environmental groups have been seeking a mandate for water sub-meters on new apartment construction for several years.

With Democrats gaining supermajorities in both houses of the California Legislature, and with a pro-environmental governor sitting in the Capitol, the tenant advocates and the environmental advocates joined forces to introduce Senate Bill 750.

Sponsored by the Natural Resources Defense Council and the Western Center on Law and Poverty, SB 750, in its original form, banned RUBS, prohibited administrative fees and mandated water sub-meters in all newly constructed apartment units beginning Jan. 1, 2014.

The California Apartment Association (CAA) successfully inserted amendments that removed the ban on RUBS, allows an administrative fee of $4 per unit (with an annual CPI increase) and pushed out the effective date for sub-meters on new construction to January 2015.

Additionally, CAA continues to negotiate with the sponsors of the bill to increase the proposed 5 percent late fee and is confident it will be increased to $5 – $10.

Recognizing the politically difficult dynamics faced by the utility-billing companies to be front and center on this bill, CAA has worked with the Utility Conservation Coalition and its lobbyist to coordinate testimony and messaging on SB 750. The bill will likely reach the governor in August or at the latest, in September.

SB 603 – Security deposits- landlord penalties and interest

A bill that would have unfairly penalized landlords who make honest mistakes regarding security deposits has died in the Senate, thanks largely to opposition from CAA.

Although the bill had undergone substantial amendments, SB 603 remained bad for the rental housing industry. The bill would have forced a small-claims court judge to award penalties against an owner if a tenant successfully demonstrated that he or she did not receive a legally owed security deposit – regardless of the landlord’s reasoning for withholding it. At the same time, it would have mandated high penalties for any security deposit error, even a minor mistake, such as with calculating deductions. All mistakes would be treated as if committed in bad faith.

The original, more problematic version would have required that landlords pay interest on security deposits, a mathematically faulty provision that was removed after CAA waged a strong lobbying effort.

AB 59 – Parcel/property tax for apartment communities

Assembly Bill 59, which would have authorized local governments to charge apartment owners a parcel tax plus a per-unit tax — instead of a flat-rate parcel tax like those charged to all other property owners within a local government’s jurisdiction — has died, thanks to CAA and a large coalition of other business interests.

Specifically, AB 59 would have overturned an industry favorable California Appellate Court decision (Borikas v Alameda Unified School District). In Borikas v. Alameda Unified School District, the California First Appellate District Court held that a “split roll” parcel tax exceeded the Alameda Unified School District’s taxing authority under state law, because it did not apply “uniformly” to all parcels in the district. Specifically, Measure H imposed different tax rates on commercial and residential property.

CAA, along with the coalition of business groups, mounted a large-scale opposition campaign to AB 59. As a result, the bill was not even brought up for a vote in Assembly Revenue and Taxation Committee this year. However, it is likely that the author will make another attempt next year with AB 59.