Costa Hawkins & Certificate of Occupancy for New Construction

The Costa-Hawkins Act of 1996 is a critical law governing a local jurisdiction's power to enact rent control on certain rental units. It was originally written to exempt newly constructed units in an effort to encourage new construction and exempted any unit built after the inception of Costa-Hawkins (1995). In 2019, the Tenant Protection Act (aka AB 1482) modified the language of Costa-Hawkins to limit the new construction exemption to a 15-year rolling period. Meaning the first 15 years of the life of a new unit could not be controlled by a local jurisdiction's rent stabilization program. 

Over the years, local rent boards have made an attempt to limit the Costa-Hawkins exemption as much as possible. In the ensuing years, the Berkeley Rent Board has honed in on the definition of "new construction," limiting it to any unit that had received a Certificate of Occupancy from the Building Department. This hindered some newly created units that typically would not receive a Certificate of Occupancy due to their size or location (i.e., newly renovated basement or attic).

The Berkeley Rent Board further clarified new construction in Regulation 510. It speaks to units that are constructed and lack a Certificate of Occupancy. For any "detached" rental unit created after February 1, 1995 (after the inception of Costa-Hawkins), units are exempt as long as they have received "all applicable building permits issued and finally approved by the City."

For units created before February 1, 1995, and those without a Certificate of Occupancy, the exemption only applies if it is a "detached rental unit" that is "constructed from the ground up after June 30, 1980, but before February 1, 1995..." They further define "ground up" as "...construction of an entirely new structure, not attached to any other structure and not created by the partial demolition of an existing structure." Any newly converted space within the envelope of the main dwelling (i.e., an attic or basement) or exterior space created from an existing structure, such as a redone garage, carriage house, or upgraded shed, even if the foundation is all that was used, would not be considered new construction unless it receives a Certificate of Occupancy from the Building Department.