California Rent-to-Own Lease Agreement

Requirement to Record: California law does not require an option to purchase be recorded to be valid. However, recordation is recommended if the parties wish to avoid future disputes.^[1] Options are recorded with the recorder’s office for the county where the property is located.^[2]

Expiration: State law does not specifically address the expiration of constructive notice. Notice expires when the option itself expires without being exercised.

Maximum Term: A nonvested property interest is invalid unless it expires 21 years after the death of an individual then alive, or within 90 years after it is created.^[3]

No Duration: If no duration is explicitly included in an option, the option is not perpetual, it may be exercised in a “reasonable time.”^[4]

Signing Requirements: The option must be signed by the property owner.^[5]

1. AB 1482 (Just Cause and Rent Limit Addendum): AB 1482 is a law that took effect in California on January 1, 2020. It has two main impacts: (1) it limits how much a landlord may increase the rent on a property from year to year, and (2) it requires that a landlord have “just cause” for terminating a tenancy. For any tenancy beginning after July 1, 2020, all tenants must be provided a written notice for signature, with the following printed in size 12-point font or larger:

• Exempt Properties:^[6]
  • Units constructed in the last 15 years;
  • Units restricted by a deed, regulatory restrictions, or other recorded documents limiting the affordability to low or moderate-income households;
  • Certain dormitories owned and operated by an institution of higher education or a kindergarten and grades 1 to 12;
  • A property containing two separate dwelling units within a single structure, provided the owner occupies one of the units; and
  • Single-family homes only if they are not owned by a real estate trust, a corporation, or an LLC with at least one corporate managing member;
  • Units that are already subject to a local rent control ordinance.

The exemptions mentioned above do not apply if the property owner is a real estate investment trust, a corporation, or an LLC in which at least one member is a corporation.

If a property falls into one of these exemptions, landlords must provide each tenant with an exemption addendum.^[7]  The tenants must sign the document and return it to the landlords, who must also provide them with an additional copy.

2. Bedbug Disclosure: Gives the landlord’s acknowledgment that there are no bed bugs on the property. Tenants are required to read the guidelines and sign the document.^[8]

3. Carbon Monoxide Detector Compliance: The landlord is required to have carbon monoxide monitors throughout all living units that have fossil-fuel-based heaters and/or appliances.^[9]

4. Carcinogenic Material (conditional): If the property has known carcinogens mentioned on the Current Proposition 65 List, notice must be made to the tenant.^[10][11] This only applies to landlords with 10 or more employees.^[12]

5. Consumer Agency Reporting (conditional): Landlords of rental properties with 16 or more units, assisted housing developments, or if the owner is a corporation, real estate investment trust, or LLC with at least one corporate member must offer the option to have rent payments reported to at least one credit bureau.^[13] Landlords can charge tenants up to $10/mo or the cost of reporting, whichever is less.^[14]

6. Demolition (conditional): If the landlord has received permission from their respective municipal office to demolish a residential unit, it must be disclosed to the tenant before accepting a rental contract or deposit.^[15]

7. Death in Rental Unit (conditional): Landlords must disclose to prospective tenants any death that occurred on the premises within the last three years, except deaths from HIV or complications related to AIDS.^[16]

8. Flood Hazard Area Disclosure (conditional): The landlord must inform the tenant if the property is in a flood hazard area.^[17]

9. Lead-Based Paint Disclosure & EPA Pamphlet (conditional): For any housing type built prior to 1978, the landlord must notify the tenants that the hazardous lead paint material may exist in the under-layers of paint in their walls/ceilings.^[18]

10. Megan’s Law Disclosure: Every California residential lease agreement must include a Megan’s Law statement.^[19]

11. Methamphetamine or Fentanyl Contamination Disclosure (conditional): The landlord must provide written notice to all prospective tenants if the dwelling unit has been deemed contaminated or is under remediation, and the landlord must provide the tenant with a copy of the order.^[20]

12. Mold Disclosure: Landlords must attach a mold disclosure to every residential lease agreement.^[21][22]

13. Ordnance Locations (conditional): If the property is located within one mile of a former federal or state ordnance location, the tenant must be notified. An ordnance is defined as an area that was once used for military training purposes, which may contain explosive munitions.^[23]

14. Pest Control (conditional): If the landlord has a written contract with a pest control company that regularly services the property, the landlord must provide the tenant with a copy of the pesticides used.^[24] If not, the landlord can be subject to fines of up to $2,500.^[25]

15. Renter Protections Notice (City of Los Angeles ONLY): Must be attached to the lease.^[26]

16. Shared Utilities (conditional): If the unit has a shared electrical or gas meter between multiple units, the agreement must mention how the utilities are billed.^[27]

17. Smoking Policy Disclosure: The landlord must include an addendum outlining the smoking policy.^[28]

18. Water Submetering Disclosure (conditional): If the tenant is separately charged for water from the rent, the landlord must provide a disclosure stating they will be billed during the rental period. An estimate of the monthly bill for the water service must be mentioned, which can be the average median bill for any three of the past six months.^[29]

1. Death on Premises (conditional)– A landlord must disclose to a prospective buyer if a death occurred in the unit less than three years before the buyer offers to purchase the unit.^[30]

2. Environmental Hazards Pamphlet (required)- The buyer must receive a copy.^[31]

3. Homeowner’s Guide to Earthquake Safety (required)- Required to be given to the buyer.^[32]

4. Lead-Based Paint Disclosure (conditional) – Must accompany any purchase agreement about the sale of a property built before 1978.^[33]

5. Lead-Based Paint Pamphlet (conditional) – Gives general information about lead-based paint for properties built before 1978.^[34]

6. Local Option Real Estate Transfer Statement (conditional) – Only complete if local jurisdiction requires it.^[35]

7. Megan’s Law (required) – The buyer must be provided with the necessary information to search the surrounding area for sex offenders.^[36]

8. Natural Hazard Disclosure Statement (conditional) – Seller must complete if the property is near any natural hazardous area.^[37]

9. Real Estate Tax Disclosure (required) – The following must be included in the agreement in 12-point font and a 14-point font title:^[38]

10. Transfer Disclosure Statement (TDS) (required) – Specific form required by law to be completed by the seller of a residential property.^[39]

11. Water Heater and Smoke Detector Compliance (conditional) – If the property has a water heater and/or the house was built on or after 1986, this form must be provided to the buyer to certify compliance.^[40][41]

12. Water-Conserving Fixtures and Detector Notice (conditional) – To inform the buyer about water-conserving fixtures that need to be replaced in new construction and the status of carbon monoxide detectors.^[42]

13. Wood Destroying Pests and Organisms Inspection Report (optional) – To be given to the buyer after the inspection is complete.^[43]