California Landlords: inhariating tenants

[Jordan Batchelor]

Attention California investors

I have a hypothetical situation that I'm thinking through if it comes up.

Purchasing a duplex with an ADU (three total units) and there are tenants living in two of the units.

I plan to owner occupy the property.

Property make up is 

2/1, 2/1, and studio.

The lease ends for one of the 2/1’s and Id like to move into that unit once their lease is up. It needs more work then the other, so my plan is to do that while I live in it. They have been there for over a year and it ends in April. Is it just cause to  terminate their lease or will they be able to dispute it?

Secondly, the studio is far below market rent and the rental cap of 9.1% increase still lands it below market rent. I have read that if you owner occupy a duplex, rent caps do not apply. Does that sound correct? 

Any and all perspectives are welcome :)

[Dan H.]

>It needs more work then the other, so my plan is to do that while I live in it.  They have been there for over a year and it ends in April. Is it just cause to terminate their lease or will they be able to dispute it?

To more in yourself or close family is one of the legal reasons for no-fault lease termination.  As long as you move in for more than a token amount of time (usually considered to be a year), there should be zero issue.  In addition, if you are rehabbing the unit (which is what you indicate), a rehab extensive enough that it cannot be reasonable occupied by the tenant is another legal reason for a no fault lease termination.  So you have 2 valid reasons for a no fault lease termination.  The no fault lease termination does require you to pay the tenant one month rent.  Pay this after they have vacated the unit (by law you can forgive the last month's rent but doing so places you further in the rear if the tenant does not move out).

>the studio is far below market rent and the rental cap of 9.1% increase still lands it below market rent. I have read that if you owner occupy a duplex, rent caps do not apply. Does that sound correct?

You are mostly correct but missing one critical component. The owner must have occupied before the tenant. So the existing tenants are covered by AB1482 (rent control), but tenants that occupy after you owner occupy will not be rent controlled. However, once the ADU is 15 years old, the property from a AB1482 perspective is a triplex. At that time all tenants will be covered by AB1482 and have rent control.

Hopefully I covered all conditions from current to future.

Good luck