Introduction:
Child care is a vital need for Californians where the majority of families are now two income with both parents engaged in at least part time work. Recognizing that economic fact of life, California has passed legislation seeking to ease the ability of small child care providers to offer services in their own homes.
When someone cares for a small number of children in his or her own home and has a state-issued license to do so, he or she is a “family child care provider” operating a “family child care home.” Note that such family child care providers are regulated and must comply with health and safety standards. Inspections are carried out by the State and licenses can be revoked if violations are found.
Working parents often choose family child care because of a home-like atmosphere, flexible hours, and convenient location. About one-third of California children cared for in licensed settings are in family child care homes. These percentages are increasing.
Based on the need to have such facilities, California has passed statutes that protect the right to provide licensed family child care in rental property. This article shall discuss obligations and rights provided by such statutes.
The Basic Law:
Section 1597.40 of California’s Health and Safety Code provides that a lessor may not prohibit a tenant from providing family child care for six or fewer children in a “small family child care home” or twelve or fewer children in a “large family child care home.” The care center may be operated from any rental dwelling resided in by the operator, regardless of the type of unit (single-family house, apartment, etc.).
Provisions in the lease indicating that no business or commercial use may be operated on the premises are voided by the law. Section 1597.40(b) of the Health and Safety. The same provision of the law also prohibits a landlord from limiting the hours that care is provided.
The landlord needs to be advised of the operation of the family child care center and the Department of Social Services has a preprinted form that can be downloaded to give notice to the landlord. In terms of timing, if you intend to open the center you are required to give the landlord thirty days prior notice with lesser notice times being required if you are moving an existing operation to a new locale.
Note that such notice must be given annually, indicating that you are still operating the program. And, of course, all the provisions of the lease must be adhered to or the landlord will have the right to evict. The law simply provides that the landlord cannot evict you for operating a licensed family home care business.
Further, the lessor is not allowed to increase the rental because a family home care business is being operated on the premises. However, the lessor can require a larger security deposit due to the operation of the business. According to the Health and Safety Code (Section 1597.40(d)(4)), “…upon commencement of, or knowledge of, the operation of a family [child] care home on his or her property” a landlord may charge a family child care provider the maximum security deposit that is legal, even if the landlord charges other tenants less.
The maximum security deposit a landlord may charge is two months’ rent for an unfurnished unit or three months’ rent for a furnished unit. Oddly, the landlord cannot require the operator to purchase liability insurance. Since most homeowner’s insurance policies do not cover such operations, the wise operator will purchase appropriate liability insurance whether the landlord requires it or not.
And note that if you do have liability insurance, the landlord can require to have his or her name added to the policy but only if certain requirements are met:
• the lessee already has or is purchasing a liability insurance policy;
• the lessor demands in writing to be added to the policy;
• the policy will not be cancelled because the landlord is added; and,
• the landlord pays any additional premium due to being added to the policy.
Conclusion:
The entire thrust of the law is to encourage and facilitate the operation of home family child care businesses. Put simply, the landlord is not going to be able to interfere unless other terms of the lease are violated by the lessee.
But also note that all the other business requirements of operating a business (getting appropriate insurance, creating a limited liability entity, having a good CPA, having a business plan, planning your budget, having the right parent contracts, and knowing employment laws, etc.) are still going to be confronted by the operator seeking to make the business successful.