Selling Tenant-Occupied Property in California: Costa-Hawkins, AB 1482, and Just-Cause Eviction

The two-layer framework: state floor plus local ceiling

California's residential rent-control and just-cause framework operates in two layers. The bottom layer is state law: the Costa-Hawkins Rental Housing Act (1995) sets the floor for what local jurisdictions can do, and the Tenant Protection Act of 2019 (AB 1482) applies a statewide cap on rent increases and a statewide just-cause requirement for evictions. The top layer is local: cities and counties can adopt stricter rent control and just-cause ordinances within the limits Costa-Hawkins allows. Sacramento, Oakland, San Francisco, Berkeley, San Jose, Los Angeles, and many other cities have local ordinances that go beyond the state floor.

For an owner selling a tenant-occupied property, the question "what do I have to do?" depends on which combination of state and local rules applies to the specific property. The relevant variables: when was the building first occupied? Is it a single-family home, a condo, or a multi-family building? Is the owner an individual or a corporate entity? Is the property in a city or unincorporated area with its own ordinance? These four answers usually determine the entire procedural picture.

The California Department of Real Estate's landlord-tenant guide publishes the current statewide rules in plain English; the California Courts Landlord-Tenant Self-Help Center covers the procedural side for owners considering enforcement actions.

What Costa-Hawkins did and didn't do

Costa-Hawkins is the 1995 state law that preempted certain forms of local rent control. The headline rules:

Single-family homes and condominiums are exempt from local rent control on the rent amount. Local ordinances can still impose just-cause eviction protections on these properties (and AB 1482 also imposes a statewide just-cause rule discussed below), but a city cannot tell a single-family-home landlord what rent they can charge a new tenant.
Buildings first occupied after February 1, 1995, are exempt from local rent control. This created the "1995 line" — newer buildings are largely exempt from city-level rent caps. Some cities use their own earlier date for ordinance applicability.
Vacancy decontrol is required. Even in rent-controlled units, landlords can reset rent to market rate when the unit becomes vacant. Cities cannot impose vacancy controls that would limit this reset.

The Wikipedia overview of Costa-Hawkins covers the legislative history and the failed 2018 ballot initiative (Proposition 10) that attempted to repeal it. Costa-Hawkins remains the active framework defining what cities can and cannot do with rent control.

What AB 1482 added in 2019

AB 1482, codified at California Civil Code §1947.12 (rent caps) and §1946.2 (just-cause eviction), filled the gaps Costa-Hawkins left. The law applies statewide except where preempted by stricter local ordinances. Headline provisions:

Annual rent increase cap. Maximum 5% plus local CPI, capped at 10% total per year. Applies to most multi-family rental property.
Just-cause eviction. After 12 months of tenancy, landlords can terminate only for one of the statutorily-enumerated causes. Two categories: "at-fault" (non-payment, breach of lease, nuisance, criminal activity, refusal to allow lawful entry, refusal to sign similar lease renewal, subletting in violation of lease, failure to vacate after notice in some other approved scenarios) and "no-fault" (owner-move-in, withdrawal from rental market under the Ellis Act, demolition or substantial renovation, government order).
Relocation assistance. No-fault terminations require the landlord to pay relocation assistance equal to one month's rent (or waive the final month).

AB 1482 exempts:

Single-family homes and condos owned by an individual (not by a corporation, REIT, or LLC where any member is a corporation), provided the landlord has given specific written notice of the exemption to the tenant
Buildings constructed in the last 15 years (rolling)
Duplexes where the owner occupies one unit
Properties already subject to a stricter local rent-control ordinance
Certain owner-occupied accessory dwelling units

The single-family-home exemption is the one most relevant to small landlords. An individual who owns a single-family rental and gave the AB 1482 exemption notice can terminate a tenancy without just cause — subject to the 60-day notice period for tenancies over one year, or any stricter local ordinance.

Selling with the tenant in place: the default path

The most administratively simple way to sell a tenant-occupied California rental is to sell to a buyer who will inherit the tenancy. The lease (or month-to-month tenancy) runs with the property — the new owner becomes the new landlord on the same terms. The selling landlord owes specific procedural duties:

Notice to tenant of intent to enter for showings. California requires 24 hours' written notice for landlord entry to show the property to prospective buyers, under California Civil Code §1954. Entry must be at "reasonable" times.
Disclosure to buyer of all lease terms. Existing leases, side agreements, deposits, undocumented rent concessions — all of it has to be disclosed. Failure to disclose creates contract claims by the buyer after close.
Security deposit transfer at close. Under California Civil Code §1950.5(h), the selling landlord must either return the deposit to the tenant (less proper deductions) or transfer it to the new owner and notify the tenant in writing of the new holder. Selling the deposit at close (transferring to buyer as a closing credit) is standard practice.
Notice to tenant of new ownership. Within 15 days of close, the new owner must serve the tenant with notice of the change of ownership — name, address, telephone, and where rent is to be paid going forward. Standard form is included in many landlord-tenant guides.
Estoppel certificate. Buyers typically require an estoppel certificate from the tenant — a signed statement confirming rent amount, deposit amount, lease term, and the existence of any pending disputes. The estoppel protects the buyer from later tenant claims of undisclosed concessions or disputes.

Sales with the tenant in place are attractive to investor buyers (who acquire occupied rental properties as a portfolio strategy) and unattractive to owner-occupant buyers (who need vacant possession at close to move in). The buyer pool is significantly smaller, which is the main reason landlords sometimes opt to vacate before listing — fewer procedural complications during the sale but more legal exposure during the vacating process.

Vacating before sale: owner-move-in and the alternatives

If the selling landlord wants vacant possession before listing — or if the buyer is conditioning the purchase on vacant possession — the tenancy has to end first. Under AB 1482 (and stricter local ordinances), terminating an occupied tenancy without at-fault grounds requires a no-fault cause. The most common no-fault grounds:

Owner-move-in (or qualified relative)

The landlord (or a specific category of relative — spouse, domestic partner, child, parent, grandparent — defined in the statute) intends to occupy the unit as their primary residence within 90 days of the tenant vacating, and for at least 12 continuous months thereafter. Notice required is 60 days for tenancies over one year (30 days for shorter tenancies). Relocation payment of one month's rent required.

The owner-move-in path is heavily regulated because of historical abuse. Some local ordinances (San Francisco, Berkeley, Oakland, Los Angeles) impose additional requirements: the landlord may have to be a natural person (not LLC); the move-in has to be documented in advance; sometimes the unit can be re-rented only at the previous rent for a specified period after the OMI tenancy ends. Owners considering OMI in a local-ordinance city should consult counsel before serving the notice — the procedural complexity is significant and the penalties for wrongful OMI evictions are severe (treble damages plus attorney fees in some jurisdictions).

Substantial remodel or demolition

The landlord plans to demolish or substantially remodel the unit. Substantial remodel means work that cannot reasonably be done with the tenant in place, requiring a permitted scope and a permit number on the termination notice. Cosmetic work (paint, flooring, fixture replacement) doesn't qualify. The relocation payment requirement applies.

Government order or unsafe-housing condemnation

If a building inspector or court order requires the tenant to vacate, the landlord can terminate. This is the involuntary path and not usually a planning tool for a sale.

Ellis Act withdrawal

Under the Ellis Act, a California landlord can withdraw the entire property from the rental market — every unit at once, not selectively — by following specific procedure that varies by jurisdiction. Notice periods are typically 120 days (1 year for senior or disabled tenants). The property generally cannot be re-rented for several years after the Ellis withdrawal without restoring it under the original rent-control terms. This is the nuclear option, used when other no-fault paths aren't available or when the landlord plans to convert to condos or sell to an owner-occupant.

Local ordinances that go beyond state law

Cities and counties with their own rent-control or just-cause ordinances stack on top of AB 1482, generally with stricter requirements. Cities to be aware of around Northern California:

San Francisco. Long-standing rent ordinance covering pre-1979 buildings, comprehensive just-cause framework, separate Ellis Act procedures, heavy relocation payment requirements.
Oakland. Rent ordinance for pre-1983 buildings, Just Cause for Eviction Ordinance, ban on most no-fault terminations except enumerated grounds.
Berkeley. Rent Stabilization Ordinance with annual rent board adjustments, just-cause framework, strict OMI requirements.
San Jose. Apartment Rent Ordinance (pre-1979 properties of 3+ units) and Tenant Protection Ordinance (just-cause).
Sacramento. Tenant Protection and Relief Act adopted 2019, stricter than AB 1482 on certain points, applies to most multi-family properties built before 1995.
Concord, Antioch, Richmond. Each has adopted local just-cause ordinances in recent years.

Landlords should not assume that the state framework is the only one that applies. Many jurisdictions impose registration requirements, annual rent-board filings, and procedural notice requirements (notice to the rent board, posting on the building, etc.) that are completely separate from the state law. The penalty for ignoring local procedure is often the same as for ignoring state procedure: the eviction is invalidated.

Notices the tenant gets during a sale

For a sale-with-tenant-in-place, the tenant should receive (in approximately this sequence):

Informal notice from the landlord that the property is going to be listed for sale (courtesy, not legally required, but good practice)
24-hour written entry notices for each showing during the listing period (legally required for entry under CC §1954)
Estoppel certificate request from the buyer's escrow company (the tenant signs to confirm lease terms — not legally required of the tenant to sign, but most do as a cooperative gesture)
Notice of change of ownership within 15 days of close (legally required from new owner to tenant)
Notice of where to pay rent going forward (typically included in the change of ownership notice)
Notice of new security deposit holder (CC §1950.5(h) — if deposit was transferred at close rather than returned to the tenant)

For sales where the landlord vacates first, the sequence includes the no-fault termination notice (typically 60 days), relocation assistance payment, move-out coordination, and only then the listing and sale.

Tax implications: rental property is not the same as primary residence

Selling a rental property has different tax treatment than selling a primary residence. The primary residence exclusion ($250,000 single / $500,000 married) doesn't apply to property used as a rental in the years before sale. The seller owes capital gains tax on the entire appreciation (less any improvements), plus depreciation recapture on the depreciation deductions taken during the rental period (taxed at 25% federal). The IRS Publication 527 (Residential Rental Property) covers the calculations.

Landlords selling appreciated rental property frequently use a §1031 like-kind exchange to defer the gain by reinvesting in another investment property. The exchange has strict timing rules — 45 days to identify replacement property, 180 days to close — and procedural requirements (qualified intermediary, exchange documentation). The IRS Publication 544 covers §1031 mechanics.

For landlords who want the cash rather than another property, the gain is taxable in the year of sale with no exchange. Some landlords accept the tax hit because they're ready to exit landlording and don't want to manage another property.

When the landlord is ready to exit fast

Some California landlords need or want to exit the rental business quickly — the tenant relationship has soured, the property needs major capital repairs the landlord doesn't want to make, the landlord is moving out of state, the rental income no longer justifies the management headache, or a 1031 timeline has expired and the gain is owed regardless. For these owners, a fast sale matters more than maximizing the last few percent of price.

The fast-exit options:

Sell with the tenant in place to an investor. Smaller buyer pool, typically lower price than vacant-possession sale, but no vacating procedure required. Closes faster because there's no need to navigate AB 1482 or local OMI procedure.
Vacate via the appropriate no-fault path, then list. Larger buyer pool, higher likely price, but slower (60+ days notice plus 30+ days listing plus 30+ days escrow). Procedural risk if the vacating notice is later challenged.
Sell directly to a cash buyer who will take the property in its current state. Fastest path. Some Sacramento-area landlords ready to exit sell tenant-occupied rentals directly to a Sacramento cash buyer who will close in seven to fourteen days, take the lease assignment, and handle the tenant relationship going forward. The trade-off is price — cash buyers offer below-market in exchange for the speed and the willingness to take a tenanted property. For landlords whose alternative is months of vacating procedure plus capital repairs plus a listing cycle, the speed/certainty trade-off can pencil out — particularly when the carrying cost of holding the property through the conventional cycle eats into the price difference.

Comparison-shopping is the only way to know whether the cash-buyer discount actually costs more than the conventional path's time and risk. Some properties have the kind of issues (deferred maintenance, code complaints, tenant relationships in dispute) where a conventional listing would underperform even before accounting for time; others have clean condition and cooperative tenants where a vacant-possession listing would substantially outperform a cash offer.

Documents to gather before listing

A tenant-occupied California rental should have a clean document file before listing. Buyers and escrow will ask for:

Current lease(s), all addenda, all rent-increase notices
Rent roll showing current rent, deposit, lease start date, lease end date for each unit
Security deposit ledger and bank statement showing the deposit funds
Maintenance and repair history for the last 2-3 years
Operating statements (income and expenses) for the last 2-3 years
Property tax bills and payment records
Insurance declarations page
HOA documents if applicable (CC&Rs, bylaws, current dues, recent minutes)
Any pending or recent tenant complaints, habitability claims, or code citations

The cleaner this file, the better the buyer's diligence experience, the more likely the deal closes at the negotiated price. Owners who can't produce these documents face buyer renegotiation or termination at the end of the diligence period.