What New Legislation Assembly Bill 2747 Mean for Landlords?
What is AB 2747 you ask?
It is a California law approved by the Governor and filed with the Secretary of State on September 22, 2024. Effective January 1, 2025, this law mandates landlords of residential properties to offer tenants the option to have their positive rental payment information reported to at least one nationwide consumer reporting agency. In a world where credit reporting is increasingly important, AB 2747 is designed to assist tenants in building their credit by recognizing timely rent payments. This is a benefit for tenants who are looking to improve their credit scores or a tenant who has limited or no credit history.
There are some exemptions to this law, any landlord of a residential rental building that contains 15 or fewer dwelling units is exempted, unless that landlord 1) owns more than one residential rental building and 2) is either a real estate investment trust, a corporation, or a limited liability company with at least one corporate member.
To ensure compliance with AB 2747, landlords, exempt or not must provide this information to all tenants. For new Leases entered on or after April 1, 2025, the offer must be made at the time of the lease agreement. For Leases outstanding as of January 1, 2025, the offer must be made to the tenants no later than April 1, 2025. It is very important to note that in both cases, the offer must be made once annually thereafter. To be in compliance, all tenants must receive this information by April 1, 2025. Tenants at that point have the option to opt in or opt out.
In the case where a landlord is not exempt from this law and tenants opt in for this service, the landlord should have a system in place to track rental payments, maintain accurate records and ensure that the reported information is correct. Non-compliance can lead to legal challenges and unhappy tenants. Do you have property management software that keeps track of tenant payments? Do you have a system in place that will remind you to send this information to tenants annually? These are all questions to ask yourself if you choose to self manage.
As mentioned, this is a benefit to a tenant who is looking to improve their credit but there are also many landlord benefits. This service can encourage and motivate tenants to make on-time rental payments. It can also establish a landlord-tenant relationship. If a tenant knows that their on-time payments are being reported and in turn strengthening their financial life, they may become long term renters, causing less turnover for your property.
What about fees associated with this service? The bill would authorize a landlord to charge a tenant that elects to have positive rental payment information reported the lesser of $10 per month or the actual cost to the landlord to provide the service, unless the landlord does not incur any actual cost to provide positive rental payment reporting. Landlords can cover the cost. If the tenant elects positive rental information reporting, landlords will report the information to the following consumer agency(ices): Transunion, Equifax, Experian or other.
Once opt in, tenants may instruct the landlord to stop the reporting at any time. However, if a tenant elects that the landlord stops reporting after previously opting-in, then the tenant may not require resumption of positive rental information for at lease six months after making the request to opt-out.
In conclusion, AB 2747 represents a progressive step in recognizing the importance of rental payments in credit reporting. Both landlords and tenants should familiarize themselves with the provisions of this legislation to maximize its benefits and ensure compliance.
Some Key Points:
- AB 2747, effective January 1, 2025, mandates that landlords offer tenants the option to have their positive rental payment information reported to at least one nationwide consumer reporting agency. The primary goal is to assist tenants in building their credit profiles through timely rent payments.
- The bill exempts landlords of residential rental buildings containing 15 or fewer dwelling units, unless the landlord owns multiple properties, or the property is owned by a corporation, real estate investment trust (REIT), or a limited liability company (LLC) with corporate members.
- As of April 1, 2025, all tenants must be notified in writing of this option. This offer must be made at the time of the lease agreement for leases entered on or after April 1, 2025. For existing leases as of January 1, 2025, the offer must be extended no later than April 1, 2025.
- AB 2747 must be offered to tenants annually as of April 1, 2025.
- Set up a system to track and report on-time rental payments.
- AB 2747 has no provision for reporting negating credit information.
Are you exempt from this law? As a landlord keeping up to date with new laws is essential for staying compliant. Landlords must stay informed about changes in laws and regulations to avoid legal issues and maintain a positive rental experience.
Remember AB 2747 can be beneficial to both you and your tenants. Tenants can positively improve their credit while you receive on-time payments. But for the landlord, staying up to date with new laws takes time and effort. As your property manager, we will follow the progression of this law to ensure you, and your property are in compliance. Please let us know if you have any questions.
Disclaimer: This information contained here is provided for informational purposes only and do not constitute legal advice. The author of this document is not an attorney, and the information presented should not be considered as a substitute for professional legal advice. We are licensed Real Estate agents and are not permitted to give legal nor tax advice.
