Need suggestions for handling rent increase and updating lease

[Andy Chen]

Hi all,

I am looking for your ideas for handling this. Sorry for the long post.

=== [Background] ===
I am in California and I have a unit on month-to-month lease which is including a detached garage. The garage is used as storage but the tenant does get an assigned open parking space.

I purchased the property last May and haven't raised rent since. The current rent is 17% below market rent (including garage rent).

Because I have different plan for the garage. However I am not sure when I will start the project. Hence I need to be able to take back the garage/storage when I want to. Of course with probably 60 days notice and any compensation / assistance anyway I can to vacate the garage.

===[Goal]===
I am trying to raise rent at the same time to rent the garage/storage separately (update the lease). I also don't want to lose the tenants as possible as I can.

===[Options]===
- Option 1:
Can I simply give the tenant a notice of (1) rent increase and
2) of renting the garage/storage separately?
And then total rent increase (rent + garage rent) is within rent control (5% + CPI).

- Option 2:
Raise the rent normally and offer discount on the garage and promise the discounted rate will remain after the project is finished.

Just don't want the tenants feel that they are not gaining anything. Do you have other suggestions or any guidance?

I am a bit concerned that if the tenant does not agree with the new term. He may keep staying and paying the same rent. Or even worse stop paying. But I cannot do anything due to the temporary eviction moratorium until 6/30. Note: The tenants have been paying even one has lost his job.

Thanks,
Andy