Buying a Los Angeles Multifamily Property: Due Diligence Checklist

by Andrei Rafols

An income property’s numbers depend as much on local rules as on rents. Before you remove contingencies on a building in the City of Los Angeles, including East Hollywood, Hollywood, Silver Lake and Northeast LA, work through this list.

1. Rent Stabilization Ordinance (RSO)

The RSO generally covers rental units in buildings with a first certificate of occupancy on or before October 1, 1978. Allowable annual increases are set by the Los Angeles Housing Department. Confirm RSO status and registration for every unit.

2. State and city tenant protections

Non-RSO units may still fall under California’s Tenant Protection Act (AB 1482), which caps annual increases at 5% plus local CPI, up to 10%, and the city’s Just Cause Ordinance. Exemptions exist, so verify each unit.

3. Soft-story retrofit

Los Angeles requires retrofits for many older wood-frame buildings with a weak first story, such as tuck-under parking. Ask for the retrofit order and proof of completion.

4. Permits and unit count

Compare the certificate of occupancy and permit history to the actual units. Unpermitted units can affect rent, financing and insurance.

5. Estoppels and leases

Request current leases, rent rolls and tenant estoppel certificates, and compare them line by line.

6. Transfer taxes on exit

Sales in the City of Los Angeles above annually adjusted thresholds pay the Measure ULA tax. Factor it into your hold and exit plan.

West Hollywood is a separate city with its own rent stabilization ordinance, so the City of LA rules above do not apply there. Call me to review a specific building.

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