The Ban On Price Gouging has been EXTENDED until Dec 4, 2018 In Lake, Mendocino, Napa, Solano, and Sonoma Counties EXECUTIVE ORDER B-51-18 – Governor Edmund G. Brown Jr.
California Penal Code section 396 prohibits price gouging (defined as increases over 10%) for necessary goods and services after the governor declares a state of emergency. Housing – defined in the law as “any rental housing with an initial lease term of no longer than one year” is specifically enumerated as one of the services for which the price cannot be raised over 10%. The costs of hotel rooms are also covered by the law. Under the price gouging law, there is a narrow exception for price increases over 10% if the landlord proves that the increase is directly attributed to cost increases. Tenants who face rent increases over 10% in areas where the state of emergency has been declared should seek help immediately. Resources include local legal aide offices and local district attorneys. Price gouging tenants is not just a civil violation, but a criminal misdemeanor under the law.
Please refer to the Q& A below regarding whether the price gouging ban extends to areas outside the 5 counties listed above.
Question: Does the prohibition on price gouging after a declaration of emergency impact prices outside the area where the natural disaster occurred.
Answer: Yes. California Penal Code Section 396 prohibits charging a price that exceeds, by more than 10 percent, the price of an item before a state or local declaration of emergency. There is no geographical limit stated in the statute.
This raises an obvious question: does the statute ban price increases over 10% if they occur far away from the location of the emergency? For example, would a rent increase over 10% in Fresno be banned after the Governor’s declaration of a state of emergency due to wildfires in Sonoma? There is no case law interpreting the statute or answering this question.
The Attorney General’s office recognizes that price gouging is prohibited outside the immediate area where the disaster is located, but the AG implies in an FAQ that there must be a connection between increased consumer demand and the declared emergency:
“The statute does not restrict its protection to a city or county where the emergency or disaster is located. It is intended to prevent price gouging anywhere in the state where there is increased consumer demand as a result of the declared emergency." (emphasis added)
The California Apartment Association’s interpretation is the same as the AG:
"Protections under California’s anti-price-gouging law are not restricted to the city or county where the disaster occurred. The aim is to prevent price gouging anywhere in the state with an increased consumer demand resulting from the declared emergency.” https://caanet.org/gov-brown-extends-ban-price-gouging-six-months/
Tenants anywhere in the state can try to object to rent increases over 10% during the period in which a state of emergency has been declared, but we urge tenants who are not in the immediate area of the disaster and are making such an argument to be prepared to also argue that the emergency impacts demand in their area. It is not clear that such a showing is required by Penal Code 396, but given the Attorney General’s interpretation, a court may require such a connection.
We encourage tenants who raise this argument to contact TT to let us know of any court rulings or other outcomes that help clarify the geographical limits of Penal Code section 396.
Download the following fact sheets on renters' rights after natural disasters like fires:
Tenants who face rent increases over 10% in areas where the state of emergency has been declared should seek help immediately. Resources include local legal aide offices and local district attorneys. Price gouging tenants is not just a civil violation, but a criminal misdemeanor under the law.