Price Gouging Is Against the Law in California: What You Need to Know for Real Estate Leases
On January 7, 2025, Governor Gavin Newsom declared a state of emergency in California due to the Palisades Fire in Los Angeles County, which has caused significant damage. During this time, it's important for both landlords and tenants to understand that price gouging is illegal, specifically for real estate leases.
Is Price Gouging Illegal in California? Yes, it is. California's anti-price gouging law, Penal Code Section 396, prohibits raising the prices of many goods and services by more than 10% following an emergency declaration. For goods or services that were introduced after an emergency, the price cannot exceed 50% of what it cost the seller to provide.
When Does the Law Apply? Following a state of emergency declaration, the law comes into effect immediately and generally lasts for 30 days. However, for reconstruction and cleanup services, protections last for 180 days. These protections do not apply to real estate sales, only to leases and rental properties.
How Does This Affect Rental Housing? In the context of real estate leases, landlords cannot increase rent by more than 10% of the previously charged or advertised price following an emergency declaration. For rental properties that were not previously rented or advertised for rent before the emergency, the price cannot exceed 160% of the fair market value as set by the U.S. Department of Housing and Urban Development.
If the rental housing is offered on a daily basis, like an Airbnb or VRBO listing, landlords are prohibited from increasing the daily price by more than 10% after a state of emergency.
What About Real Estate Sales? It is important to note that these price gouging protections do not apply to real estate sales. The law only applies to rental housing and services related to rentals.
Consequences for Violating the Law Violating this law can lead to serious consequences, including criminal prosecution with penalties of up to one year in county jail and/or fines of up to $10,000. Civil penalties of up to $2,500 per violation may also apply.
Report Price Gouging If you suspect price gouging related to real estate leases, you should report it to the Attorney General's office. Visit their website or call (800) 952-5225 to file a complaint.
If there is anything I can do to assist, please feel free to let me know. I am committed to connecting you with the resources and support you need. For essential resources for those affected by the recent wildfires, Click Here.
Stay safe and take care of each other.
Hamid Koochak
Disclaimer:
The information provided in this blog is for informational purposes only and does not constitute legal advice. While every effort has been made to ensure the accuracy of the information, laws and regulations are subject to change. For specific legal concerns or advice, please consult with a qualified attorney. Hamid Koochak and Compass assume no liability for any actions taken based on the information in this post.
