On January 7, 2025 (updated on February 19, 2025), Governor Newsom declared a State of Emergency in Los Angeles and Ventura Counties due to the devastating fires. On that same day, Mayor Bass declared a State of Emergency in the City of Los Angeles. Because of this, there is currently a cap on the amount of money a landlord can charge a tenant to rent their property. This means that if a landlord charges or even advertises for more than the allowable amount in the affected counties, they are price gouging.
This situation continues to evolve; sometimes faster than articles can be revised. For example, Governor Newsom amended his state of emergency declaration to add very complicated provisions imposing requirements that are only applicable to specific zip codes. Therefore, anyone reading any article about price gouging should confer with a knowledgeable attorney about their specific situation before making any decisions on what they have read about price gouging.
Overall, landlords need to be aware that they may be found criminally guilty of, and/or civilly liable for, price gouging without even understanding what it is. Price gouging has serious consequences, i.e. possible jail time and/or civil litigation resulting in hefty payouts to tenants. For those that are not aware, and for those purposefully trying to make a profit off of the loss of others, it is important to understand what price gouging is and how to avoid it. The price gouging law is complicated and presents traps for the unwary.
What is Price Gouging?
Price gouging of rental properties is when a landlord advertises or rents a property for more than 10% of what it was rented for within the past 12 months during a State of Emergency. Alternatively, if the property has never been rented, or was not rented in the past 12 months, it cannot be rented for more than the 160% of the Department of Housing and Urban Development (HUD) Fair Market Rent value multiplied by 10%.
Here are a couple of examples:
The property was rented within the past 12 months or offered for rent: if the property rented previously for $5,000 in the past 12 months, that is the base rental price. This means that the landlord can charge $5,000 x 10% = $5,500 during the state of emergency. If the property is newly fully furnished, an additional 5% can be charged, or $5,500 x 5% = $5,775.
The property was never rented nor offered for rent within the past 12 months: in cases where the property was never rented or offered for rent within the past 12 months, the landlord needs to determine the legal base rent. In order to make that determination, the landlord needs to look to HUD. The base rental price is 160% of the HUD Fair Market Rent. Unfortunately, HUD has not taken into account many important factors when determining rental value. It is important to seek the proper counsel when determining what to set a rental price at during a California State of Emergency.
But not all scenarios are this straight forward. What if rent is being paid by an insurance company or a tenant’s employers? If your property is not located in a wildfire affected area, does this cap still apply? What if a landlord wants to charge separately for amenities such as a pool or parking? How are short-term rentals such as Airbnb and VRBO impacted? How long do price gouging protections last? These questions further show that price-gouging is a complicated issue and residential property owners who have concerns about whether price gouging controls apply to them should consult with an experienced real estate attorney.
Are there Exemptions?
Yes, but exemptions are also complicated so it is best to seek proper counsel to explore whether an exemption would apply, and whether the property is, or is not, subject to price gouging controls.
Penalties for Price Gouging
There are criminal penalties for violating price gouging laws. Each violation is a misdemeanor with up to a year in county jail. Additionally, a court may order restitution to the tenant for the excessive rent and fines up to $10,000.
Violations are also considered to be unlawful business practices and unfair competition within the meaning of California Business and Professions Code Section 17200. If a tenant brings a Section 17200 cause of action against a landlord, the tenant can receive restitution and a court order compelling the landlord to comply with the law. If an authorized government agency, such as the California Attorney General, brings an action, the civil penalties are recoverable, which are greater if a tenant is over the age of 65, disabled or a military service member.
Remedies are not exclusive, so there can be cumulative liability under different statutes. For example, under Civil Code Section 1770, inserting an unconscionable provision in a contract (which a rental amount greater than that permitted by the price gouging statute would be) permits the recovery of punitive damages and attorneys’ fees.
Conclusion
In summary, the consequences for price gouging can be stiff and expensive. You should take the necessary steps to avoid being accused of, or even worse, sued or criminally prosecuted for price gouging. Landlords, agents, brokers, and property managers need to be aware of and understand price gouging laws, their consequences, and how to continue to smoothly operate when these laws are in effect.
TRN Law Associates is available to help. We have been practicing real estate and landlord-tenant law in California for over 15 years. We have offices in San Francisco, San Rafael, and Santa Monica. Contact us at (415) 823-4566 to make sure that you are not at risk of violating price gouging laws during these challenging times.