Just Inherited a Rental Property in Pasadena? Here's What Happens With the Tenants
When you inherit a rent-controlled property in Pasadena, you inherit everything: the tenants, their lease terms, the current rent, and all Measure H obligations. You cannot evict tenants simply because you inherited. Your options are: continue as landlord, sell with tenants in place, pursue owner move-in (with relocation assistance), or Ellis Act the property. Proposition 19 may significantly affect your property tax basis depending on your plans.
The Inheritance No One Prepared You For
Inheriting real estate sounds like a gift. And sometimes it is.
But when that inheritance comes with tenants, especially in a rent-controlled city like Pasadena, the gift comes with obligations, restrictions, and decisions most heirs are not prepared to make.
The tenants do not leave when the owner dies. The lease does not end. The rent control protections do not disappear. And the choices you make in the first few months can have property tax consequences that last decades.
What You Inherit (Whether You Want It or Not)
👥 The Tenants Stay
Under California law, leases survive the death of the landlord. Your parents' tenants are now your tenants. They have the right to continue occupying the property, the same lease terms they had before, all Measure H protections (just-cause eviction, rent caps if applicable), and no obligation to renegotiate or move out.
You cannot evict tenants simply because you inherited the property. "New ownership" is not a just-cause reason under Measure H.
💰 The Rent Level Is Locked
Whatever rent the tenants were paying, that is what you are entitled to collect. If the property is rent-controlled (multifamily built before February 1995), you are limited to the 2.25% Annual General Adjustment.
Even if market rent is $3,500 and your inherited tenant is paying $1,800, you are stuck with $1,800 plus allowable increases.
📋 The Obligations Continue
As the new owner, you are immediately responsible for:
- Rental Housing Board registration ($238/unit annually)
- Security deposit interest payments (0.26% for 2025)
- Maintenance and habitability requirements
- All Measure H compliance obligations
The city does not care that you just inherited and do not know the rules yet. Non-compliance consequences apply regardless.
Just inherited and not sure what to do? I specialize in probate and inherited property situations.
📞 (213) 444-2225Your 4 Options as an Inheriting Owner
1Continue as Landlord
You step into your parents' shoes and operate the property as a rental.
✓ Pros
- Rental income continues
- No relocation costs
- No immediate decisions required
- Property may appreciate
✗ Cons
- You are now a Pasadena landlord
- Rent-controlled rents may not cover expenses
- Property taxes reassess under Prop 19
- Ongoing Measure H compliance
Best for: Heirs who want passive income, are comfortable with property management, or need time to decide.
2Sell With Tenants in Place
You sell the property while tenants remain. The buyer becomes the new landlord.
✓ Pros
- Fastest path to liquidity
- No relocation costs
- No eviction process
- Simplest legal path
✗ Cons
- 15-25% lower sale price
- Limited to investor buyers
- Tenants may complicate showings
Best for: Heirs who need cash quickly, do not want to be landlords, or face relocation costs that exceed the price discount.
3Owner Move-In
You (or an immediate family member) move into the property as your primary residence, displacing existing tenants.
Requirements
- Own at least 50% of the property
- Genuine intent to occupy for 36+ consecutive months
- Move in within 60 days of tenant vacating
- Pay relocation assistance to displaced tenants
- No comparable vacant unit available
If you do owner move-in and actually make the property your primary residence within one year, you may preserve the favorable tax basis (subject to the $1,044,586 cap).
Best for: Heirs who genuinely want to live in the property, especially if Prop 19 benefits apply.
4Ellis Act Withdrawal
You remove the property from the rental market entirely, evicting all tenants.
Requirements
- Pay full relocation assistance to all tenants ($6,720-$22,075+ per unit)
- Provide 120-day notice (1 year for seniors/disabled)
- Property cannot be re-rented for 5-10 years
- Original tenants have right of first refusal
Best for: Heirs planning major renovation, redevelopment, or who want maximum sale value and can wait.
The Proposition 19 Factor
Proposition 19, passed in 2020, significantly changed property tax rules for inherited properties. This directly affects your decision-making.
The Old Rules (Pre-Prop 19)
Children could inherit property and keep the parent's low property tax basis regardless of how they used it. A home assessed at $200,000 in 1985 could pass to children who kept that basis even while renting it out.
The New Rules (Post-Prop 19)
Inherited properties only keep the parent's tax basis if:
- It becomes the child's primary residence within one year of transfer, AND
- The value difference does not exceed $1,044,586 (2025-2027 threshold)
If you inherit a rental property and continue renting it, the property gets reassessed to current market value for property tax purposes.
You must move in AND file for homeowner's exemption within one year of the transfer. Missing this deadline by even one day means permanent reassessment with no exceptions.
What This Means for Your Decision
| Your Plan | Property Tax Impact |
|---|---|
| Move in as primary residence (within 1 year) | Keep parent's low basis (with $1,044,586 cap) |
| Continue renting | Reassessed to market value |
| Sell immediately | Reassessed (but you are selling anyway) |
| Ellis Act then move in | May preserve basis if you move in within 1 year |
Example: The Real Cost of Continuing to Rent
Your parents' Pasadena duplex was assessed at $150,000 (1980s purchase). Current market value is $1.4 million.
That $15,700 annual tax increase changes the math on whether keeping the rental makes sense.
Need help running the numbers? I can show you exactly what each option costs for your specific property.
📱 (213) 444-2225Inherited Property Decision Checklist
Step 1: Gather Information
Before deciding anything, you need:
Common Mistakes Heirs Make
Assuming Tenants Must Leave
"My parents died, so the tenants have to go, right?" Wrong. Tenants have full legal protection. You need a qualifying reason to evict, and "inheritance" is not one.
Waiting Too Long to Decide
You have one year from the date of transfer to move in and preserve Prop 19 benefits. Waiting 18 months to figure things out means you have lost that option permanently.
Not Registering the Property
The property must remain registered with the Rental Housing Board. If your parents' registration lapses and you do not renew, you lose important landlord rights, including the ability to raise rent.
Ignoring the Tenants
The tenants are scared too. A new owner is uncertainty for them. Communicating early, even if you have not decided, builds goodwill that matters for every option.
DIY Complex Transactions
Inherited rent-controlled property involves probate law, property tax law, rent control law, and real estate transactions. This is not a DIY situation. Professional guidance often pays for itself.
Inherited Property Requires Specialized Expertise
As a Pasadena real estate agent who specializes in probate and rent-controlled properties, I help heirs work through exactly these situations. The right answer depends on your specific numbers, property, and situation.
Free inherited property consultation - honest analysis of all your options
Frequently Asked Questions
Can I evict tenants after inheriting a rental property in Pasadena?
Not without a qualifying reason. Inheritance alone does not give you the right to evict under Pasadena's Measure H. You would need to pursue owner move-in (with 36-month residency commitment), Ellis Act withdrawal, or have a for-cause reason such as non-payment or lease violation.
Do I have to honor my parents' lease terms after inheriting?
Yes. Under California law, leases survive the death of the landlord. Whatever terms your parents agreed to, including rent amounts, now bind you as the new owner. The tenants have the same rights they had before.
What happens to property taxes when I inherit a rental in Pasadena?
Under Proposition 19, inherited rental properties are reassessed to current market value. You can only preserve your parents' low tax basis if you move in as your primary residence within one year and file for the homeowner's exemption. The one-year deadline is strict with no exceptions.
Should I sell the inherited property or keep renting it?
It depends on the numbers and your circumstances. If rents are far below market and property taxes will reassess under Prop 19, selling may make more sense. If you want to live there, owner move-in could work and preserve tax benefits. Run the math on all options before deciding.
How long do I have to decide what to do with inherited property?
No hard deadline, but Proposition 19's one-year window for preserving tax basis creates a practical decision point. If you want to preserve your parents' low property tax basis, you must move in and file for homeowner's exemption within one year of the transfer.
Do I need to tell tenants I inherited the property?
Yes. Tenants have a right to know who their landlord is. You must provide written notice of the ownership change and new contact information for rent payments and maintenance requests.
What is the Proposition 19 exclusion amount for 2025-2027?
For transfers occurring between February 16, 2025 and February 15, 2027, the reassessment exclusion amount is $1,044,586. If the property's market value exceeds your parents' tax basis by more than this amount, only the excess gets added to the new tax basis.
What if I miss the one-year Prop 19 deadline?
The one-year deadline is absolute with no exceptions or extensions. Missing it by even one day means the property is permanently reassessed to market value. This reassessment cannot be reversed, resulting in significantly higher property taxes forever.
