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Rent Control Explained: History Of LA’s Tenant Protections

Rent Control Explained: History Of LA’s Tenant Protections

Rent Control Explained: History Of LA’s Tenant Protections

by  Caitlin Hernández  | Aug 30,2023

Rent control can either be your friend or your enemy.

The laws are often the bane of landlords who’d like to charge more and a potential safety net for tenants who can’t afford steep rent hikes. But why it’s around isn’t necessarily because politicians want to protect the little guy — rent control has historically been used to mitigate another problem.

If you want a breakdown of how rent control may work in your area today, here’s the guide for that. But in this one, we’ll explore more of the backdrop: how high inflation, wartime efforts and a housing crisis birthed different eras of rent control.

The wartime effect

L.A.’s first round of modern rent control came more than 80 years ago — and it was perhaps the strictest we’ve seen.

When World War II began in 1939, industrial employment ballooned. The Great Depression was easing, so workers migrated to Los Angeles in the tens of thousands for employment. But the surge in population, combined with the war effort, created a perfect housing storm that lasted for years.

More people were coming at a time when our housing stock couldn’t keep up. About 15,000 residential projects went unfinished because labor and supplies were diverted to the war, according to research from the UCLA Luskin Center. With demand way up, many people had no choice but to live in severely overcrowded and unsuitable conditions. The situation was so dire when a federal study was conducted that a veteran shar

A 1945 poster letting tenants know about their rights under rent control. (United States Office of Price Administration/ Illinois Digital Archives, Illinois State Library, and Secretary of State Alexi Giannoulias)

ed how he was living in a house with 18 other people while trying to turn a chicken coop into a place to stay.

The ultimate solution would be more housing, but that would take years to improve. In the interim, the federal government deployed a rent freeze (and other price controls) in 1942 to ensure essentials remained affordable. Alisa Belinkoff Katz, lead author of UCLA’s study of rent control in L.A., says this move made rent control part of the war effort and more acceptable to landlords.

“It was considered sort of the patriotic thing to do, at least at first while the war was going on,” she said. “It became something that was widely publicized and that people were engaged in.”

That publicity campaign helped to make tenants aware of their rights. Landlords and renters were also required to sign a property registration form that recorded the rent amount under the freeze. To Katz, the tenants who kept tabs on compliance, along with federal enforcement, is what made the rent freeze effective.

The support of landlords didn’t last long, though. The L.A. County apartment association’s president at the time, David Culver, complained about treatment in a meeting with landlords, and together they vowed to take action. They argued that the rent cap was too low to afford taxes and maintenance, and some threatened to take their rentals off the market.

Once the war ended, rent control became a ticking clock. After a postwar federal housing act went into effect, allowing local governments to lose the rules, the L.A. City Council voted to decontrol. Residential rents went back under the sway of the market.

Rent Control

Property owners cheer as the L.A. city council votes 10 to 4 in favor of rent decontrol on July 2, 1950. More than 2,500 owners and tenants packed the council chamber. (Herald Examiner Collection / Los Angeles Public Library)

 

‘Stagflation’ in the 1970s and Proposition 13

Decades later, L.A. was in a different predicament.

An oil crisis was going on, aiding a surge in inflation while economic growth was at a snail’s pace. This is when the term “stagflation” was coined (a portmanteau of stagnation and inflation). Among a number of other things that became more expensive, L.A. home prices were skyrocketing along with owners’ property tax bills.

Landlords again organized around this issue. Howard Jarvis, then-executive director of the L.A. County apartment association, went down in history as the champion of 1978’s Proposition 13 — a measure that aimed to cap property tax rates. But in order for it to pass, he knew that the state’s renters — which made up 45% of households, according to Katz’s research — needed to be convinced to vote for the proposition.

Rent Control

Howard Jarvis and Paul Gann, co-sponsor of the measure, celebrating after Proposition 13 was declared a winner on June 6, 1978. (Ken Papaleo / Herald Examiner Collection/Los Angeles Public Library)

Landlords got involved to persuade their tenants. They argued that getting their tax bills reduced would trickle down to their tenants, too. Some even offered rent rebates if it was successful. But after Proposition 13 prevailed at the polls, the rose-colored glasses fell off. Despite what they’d said previously, many owners continued to raise their rents — some by more than 20% that same year.

“It should be an incentive to keep rents low, one would think,” Katz said. “But it hasn’t worked out that way because property values continue to rise all over the city. [It helps landlords] because their taxes aren’t going up. So if their taxes are stable and their rents are allowed to increase all the time, then of course it helps them.”

In effect, the law was a type of rent control but for landlords, because it lowered their property taxes and limited increases.

Renters feeling the pinch

Demand for tenant protections was high in this decade, especially in middle-class communities. Renters had few rights and people were feeling the pinch.

“Our phone started ringing off the hooks,” said Larry Gross, executive director of the Coalition for Economic Survival. “It appeared that the speculators discovered Los Angeles. They were buying up rental units throughout the area, raising rent, putting a fresh coat of paint on it, some minor repairs, and then selling it again.”

Gross was one of the key people leading the fight for rent control and helped organize tenant unions. He says some apartment buildings were getting flipped four to five times a year. And after Proposition 13, he says the “lid blew off” with rent.

It was the first of many broken promises that landlords provided to their tenants. — Larry Gross, executive director of the Coalition for Economic Survival

Renters rallied, urging L.A. leaders to take action. The city council members who represented white, middle-class districts supported the measures, but the ones leading Black and Latino districts did not. Back then, rising rent was viewed as a middle-class problem, and community leaders in lower-income districts worried that rent control would drive away investment in their communities.

Still, the council got enough support to roll back and temporarily freeze rents. Mayor Tom Bradley claimed it was a necessary step to halt “outrageous rent increases.”

The freeze gave the council time to draft a long-term response, which is where the Rent Stabilization Ordinance in place today came from. With this law, landlords can only increase rent in certain properties (built on or before Oct. 1, 1978) generally between 3% and 8%, based on inflation. (There’s a rent freeze on these properties currently because of COVID-19.)

Where we are now

Since the ’70s, a lot has changed. Rent control has grown to multiple cities, but so have the legal battles surrounding it.

“It’s literally been somewhat of a cat-and-mouse game with landlords,” Gross said. “Because landlords will find loopholes in the law and then use that to evict tenants or increase rent. And then we’d identify those loopholes and we get the city council to close them.”

Property owners looked to change these rules, too, and they got key laws passed from higher up.

New rent laws

1985: The Ellis Act, a California law that allows landlords to evict residential tenants in order to leave the rental business, passes. A landlord filed a lawsuit against Santa Monica, which instituted rent control six years earlier, for refusing to let him demolish his rental property, claiming it was in bad repair. He lost the case when it reached the California Supreme Court, but shortly after the state legislature passed the Ellis Act.

1995: The landlords’ grand slam, the Costa-Hawkins Rental Housing Act, passes. This was the state legislature’s response to landlords’ building frustration with rent control laws, which were more regulated in some cities.

West Hollywood and Santa Monica, had the strict “vacancy control” rule. Under that provision, owners couldn’t raise rents to market rates between tenants, but small increases were allowed during tenancy. The act made that provision illegal statewide.

It literally puts a bullseye target on the back of particularly low-rent, long-term [rentals]. — Larry Gross, executive director of the Coalition for Economic Survival

“It literally puts a bullseye target on the back of particularly low rent, long-term [rentals],” Gross said on the removal of vacancy control. “If they get those tenants out by any means, they can jack up rents to whatever they want.”

The act also prohibited rent control on residential properties built after Feb. 1, 1995, excluded single-family homes and condos, and generally tied city leaders’ hands.

“It froze existing local rent control laws,” Katz said. “It had a huge impact because it prohibited what local governments were able to do to protect renters in their jurisdictions.”

2019: The Tenant Protection Act created a statewide rent increase cap. This cap is adjusted yearly based on inflation. It’s intended to prevent very large increases. And, coming soon, California will be voting on rent control in 2024 (for a third time).

Navigating rent control

It can be tough to easily understand how, when, and where rent control affects you. Everything can change depending on what city you’re in, your building type and when it was built.

Some basics you should be aware of are the main types of rent control:

  • Rent freeze (rents are not allowed to rise at all in a given period).
  • Vacancy control (rent can’t rise to market rates between tenants, but smaller increases are allowed during tenancy — this is illegal in California).
  • Vacancy decontrol (rents can rise to market rates between tenants, and increases are allowed during tenancy — the standard in the state now).

Another way that rent control can change is with how much of the consumer price index, which measures inflation, gets factored in.
For example, the city of L.A. typically lets rent controlled properties increase between 3% and 8% a year, depending on the full rate of inflation. But Katz says that other cities have used a lower percentage of CPI. And the city of L.A. has a freeze on increases in rent controlled buildings until February 2024.

Cities with floors for increases, like L.A., can wind up with a problematic deal for renters and a better one for landlords if rents rise above CPI.

“Several times in the last few years, CPI has actually risen less than 3%, but landlords were allowed to raise the rents by 3%. So that’s another question, whether that should be adjusted,” Katz said.

Figure out where you stand

Rent control is a tangled web of seemingly boring rules, but it does have real effects. To supporters of the protections, the aim is about keeping things affordable and fair.

“It helps to give some security to tenants in a sense that it extends the protections that homeowners have,” Gross said. “What rent control does is level the playing field.”

If you’re a renter and would like to know more about where your home stands with rent control, check out my colleague David Wagner’s cheat sheet to rent hike. If you’re in the city of L.A., you can also put your address into ZIMAS and check the housing tab to see what laws apply.

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Can My New Landlord “Bank” My Rent Increases?

Can My New Landlord “Bank” My Rent Increases?

Can My New Landlord “Bank” My Rent Increases?

Can the new landlord bank rent increases?

I live in a house in San Francisco with 3 apartments built before 1979. I’ve lived in my apartment for 10 years, I am 44 and my rent is $1350 plus $150 to park in the garage. I moved in in 2004 and in 2006 the house was sold and bought by a single woman. This is her only property. She lived in the house until 2011 when she moved out of state.  

We’re friendly and over the years I became the de facto property manager as my schedule is flexible, I am the longest running tenant in the house, and know a lot of its history from the previous owner, who I am also friendly with. I’m not compensated for this role.

My rent has never been raised until this year. We had a phone conversation as the landlord didn’t want me to first learn of this increase via official notice. I haven’t received this letter as of yet. The increase will start in June.

My question is: my rent is being increased by 14%. Not a big deal, but I’ve added up the past allowable increases and it seems like my rent is being increased for 10 years of allowable increases (tho slightly under as it adds up to 14.4% or 15.4% if you include 2014-2015).  

Is she allowed to increase my rent by a percentage that includes a time when she didn’t own the house? Or is there a different formula for an increase percentage when the rent has never been raised?

Before I answer your question, a little historical context is in order. After rent control measures were passed in Berkeley (1972, later voided by the Supreme Court and passed in its current form in 1980), Santa Monica (1979) San Francisco (1979), landlords filed many lawsuits questioning the ordinances’ constitutionality. They argued that the statutes violated due process; that they overstepped the municipalities’ police power thereby constituting a “taking ” of landlords’ properties (think eminent domain); and that the limitations on rent increases so interfered with landlords’ return on investment that the increases were unconstitutionally confiscatory.

After the dust settled, the courts generally found that municipalities were within their rights to control rent based upon necessary action to deal with emergency housing shortages. Of course, that emergency has continued to this day.

In one of the earliest cases dealing with rent control, Birkenfeld v. City of Berkeley (1976) 17 Cal.3d 129, the California Supreme Court voided the first Berkeley rent control ordinance (1972) because it sought to roll rents back to 1971 levels and prohibited any adjustments in maximum rents except under a unit-by-unit procedure. Essentially the court found that the process to increase rents would be procedural nightmare, creating an undue burden on the landlords. The court did not decide if regulating rent increases could have a “confiscatory” effect on landlords’ return on investment because the ordinance had been enjoined from the outset, making the assertion speculative. But they did make it clear that return on investment had to be considered when adopting a rent control ordinance.

The provisions are within the police power if they are reasonably calculated to eliminate excessive rents and at the same time provide landlords with a just and reasonable return on their property. However, if it is apparent from the face of the provisions that their effect will necessarily be to lower rents more than could reasonably be considered to be required for the measure’s stated purpose, they are unconstitutionally confiscatory. Birkenfeld v. Berkeley at page 165.

Why is this relevant to your question? Going forward, those who administer various rent ordinances (the San Francisco Rent Board in this case) have always been careful to consider the question of return on investment when they establish guidelines to deal with rent increases.

So the short answer to your question is that any landlord may bank the rent increases on a unit if the increases are within allowable annual limits. It doesn’t matter if the landlord owned the building during the entire increase period, because the increases could have been levied annually by any landlord. This is a method to ensure the allowable return on investment.

See the Rent Board’s annual allowable increase chart to see how much a new landlord can increase your rent. Just add the increases from one year after the inception of your tenancy or last rent increase to understand how much a landlord can “bank.”

But the increase cannot take place in June!

California Civil Code §827 is very clear that a rent increase over 10% requires a 60-day notice. You wrote me in early May and you hadn’t yet received notice. There’s no way that the increase could be effective today.

Call the Tenant Lawyers now for a free consultation.
(415) 552-9060

Why Can’t My Wife Sign Our Rent Check?

Why Can’t My Wife Sign Our Rent Check?

Why Can’t My Wife Sign Our Rent Check?

The weirdest thing happened today. My landlady sent me a note saying that I should be signing the rent checks (I have been doing this till now but the last check was written by my wife). We have a joint account and when I signed the lease I put my wife’s name on the lease.

I feel my landlady is bordering on harassment (there are other incidents) with these nonsensical notes she keeps leaving for me.

What is the law on this? Am I the only one who can pay her? What difference does it make, if the money is from a joint account and she can very well cash the checks?

If you are the only signatory to the lease, one could argue that you should be the one signing the rent checks. If both you and your wife are named on the lease then your landlord is just being an idiot.

Your landlord probably read some half-baked legal argument somewhere that advised her to be cautious about inadvertently accepting subsequent occupants.

If you are the only named tenant on the lease and you want to take care of this once and for all, you should read San Francisco Rent Board Rules & Regulations §6.15D. Section 6.15D outlines the process by which you can add your wife to the lease as an approved subtenant.

If you and your wife moved into the unit together and the land lord was aware of that fact, you can simply tell the landlord that your wife is a “co-tenant” entitled to all of the same rights you have. You should be familiar with San Francisco Rent Board Rules & Regulations §6.14 before you make that claim.

I’m guessing that your landlord simply doesn’t know what she’s doing as evidenced by the notes (always wonderful damning evidence if a case comes to court.) Your landlord is also too cheap to hire an attorney to advise her about how to professionally manage her building.

What difference should it make? Not a bit. Especially when the Costa Hawkins Rental housing Act, which screwed rent-controlled tenants everywhere in California and should be repealed says:

Acceptance of rent by the owner shall not operate as a waiver or otherwise prevent enforcement of a covenant prohibiting sublease or assignment or as a waiver of an owner’s rights to establish the initial rental rate […] California Civil Code §1954.53(d)(4).

I’d be willing to bet that you have lived in your unit for about five years. That’s the time  some landlords begin to exhibit their “eccentricities.” Your landlord probably thinks it’s time for you and your wife to go so she can give herself a pay raise.

Call the Tenant Lawyers now for a free consultation.
(415) 552-9060

Can Our Landlord Kick Us Out When Our Roommate Moves?

Can Our Landlord Kick Us Out When Our Roommate Moves?

Can Our Landlord Kick Us Out When Our Roommate Moves?

I’ve lived at my home for over 2 years, my girl friend and I replaced two roommates who were on the original lease. The house was built in the 1940s and monthly rent has been $2400 the entire duration of lease. The original roommate still left on the original lease is moving out on the first. We would love to stay at the home and replace his room with a good roommate.

The landlord has contacted us stating that he needs us to fill out an application for a new lease – as well as pay a security deposit for the home. To make a long story short, the house has been in terrible shape since we moved in due to the prior roommates who were kicked out- holes in walls, filthy pet damaged carpets, plumbing leaks, paint peeling inside and outside, possible roof leaks/mold, leaking/moldy basement, large gashes in a few walls, broken doors throughout home and the front door frame is extremely damaged and not secure from a safety standpoint.

We spoke to the landlord for the first time today and he wants to meet us to discuss the application and what will happen after he conducts a walk thru with the old roommate to figure out how much security they will get back. After being told about the security deposit and need to show the room to potential roommates.

We asked if/when he would do things like paint and replace carpets and make fixes to the home because of the extreme shape the home was in and he gave us the impression that he wasn’t planning to fix anything and it was up to him to decide if we can even stay here and if he will fix anything while requiring a security deposit.

I’ve done some research and saw that we might qualify for a novation from our roommate who is moving out, which would then make us responsible for paying him any security deposit that would be due back. I do not know if this would be a option for us?

We are just worried that the landlord will either kick us out after we fill out a application, require a huge security deposit without making any fixes to the home or raise rent to an extreme amount. We are in great standing with our old roommate so I’m sure he would be ok with a novation or another option I don’t know about.

What are our options at this point? We are PT students with FT jobs, so a rent raise, having to suddenly move or huge deposit requirement would be too much for us at this point. I would appreciate any advice you could send me- thank you for your time spent on my questions.

I worked at the Homeless Advocacy Project while I was attending law school. In the first year of law school one usually studies contracts. In my case the class was two semesters. I came across the concept of “novation” one day and I asked my boss, a former California Supreme Court clerk, to clarify the meaning.  She looked at me, wryly smiled and said, “You know, Dave, it’s been a long time since I was in law school, but I think novation occurs when the sun goes supernova.”

I still get a laugh when I think of that moment and I have come to understand the irony of her comment–discussing the legal concept of novation in an office full of people desperately trying to survive a bit like rearranging deck chairs on the Titanic.

A novation is the substitution of all new parties in an existing contract. For example, if you stay in the house under the old lease, the landlord is essentially allowing the old roommate to assign the lease to you. By offering you a brand new lease, the landlord is offering a novation. Signing a new document with your roommate, depending on the terms of the existing lease, is usually a waste of time.

Back to my original point, you’ve got bigger fish to fry.

Remember, because you live in a house, a single-family dwelling, you are only protected by the “just cause” provisions of the Rent Ordinance, not the price controls. The landlord can increase the rent as much he wants unless:

1) The dwelling or unit has been cited in an inspection report by the appropriate governmental agency as containing serious health, safety, fire, or building code violations, as defined by Section 17920.3 of the Health and Safety Code, excluding any violation caused by a disaster.
(2) The citation was issued at least 60 days prior to the date of the vacancy.
(3) The cited violation had not been abated when the prior tenant vacated and had remained unabated for 60 days or for a longer period of time. However, the 60-day time period may be extended by the appropriate governmental agency that issued the citation. (California Civil Code §1954.53(f))

However, because you may be approved subtenants, despite the landlord’s request for new applications, it is unlikely he has just cause to evict you, unless he wants to hold you and your roommates responsible for the damage caused by the former roommates (waste).

I think you’re doing everything you can to try to convince the landlord you can be good tenants. I understand that the rental market is tough out there, but why would you want to continue to rent from a slumlord who won’t spend the money to fix a leaky rook? Believe me, from your description, the roof leaks. Why should you have to spend the time and money to repair deferred maintenance? I do believe that you should repair damage caused by you or the other tenants, but that’s it.

Finally, let’s say the landlord does make an agreement with you. You lease the house and sign a one-year lease. Let say you fix up the place and make it cozy. That will certainly give the landlord incentive to increase the rent to whatever the market will bear next year.

If you really want to try to make a deal with the landlord, take your photos and documents to the San Francisco Tenants Union to develop a strategy, which may include calling a housing inspector.

My personal opinion is that you shouldn’t waste your time and energy on this joint. You should be looking for another place to live. You know, bigger fish to fry.

Call the Tenant Lawyers now for a free consultation.
(415) 552-9060

Can My Landlord “Bank” My Annual Rent Increases?

Can My Landlord “Bank” My Annual Rent Increases?

Can My Landlord “Bank” My Annual Rent Increases?

I live in a 15 unit building that was built in 1907. I’ve lived in my small one bedroom apartment for 19 years, and in that time, the building transferred ownership once, in 2001. At that time, the new owners tacked on a rent increase because of “capital improvements,” and this was an increase that actually ended in 2011, so my rent returned to its 2001 price last year.

The landlord hasn’t raised my rent in the past 4 years, not even the small yearly increase that is allowable by law. So my question is, why would a landlord choose NOT to raise rent if they are legally able to? I can’t imagine it’s just to be nice. Is it likely they are banking the increases so they can throw four years worth (or more) at me all at once? And is that even legal?

Is the landlord foregoing the annual allowable rent increases to be nice? I doubt it. Is this some scheme to dump a huge increase on you in the future to force you to move out? I doubt that too. Never ascribe to malice that which can adequately be explained by incompetence. I often substitute the word stupidity for incompetence. In your case it’s probably neither, unless you believe that business decisions are always inherently malicious–an apt conclusion these days.

The annual allowable rent increases under the San Francisco Rent Ordinance for the past four years are, cumulatively, 6.7%. If your landlord has multiple properties, he could be waiting to increase the rents when it is more profitable to do so. He may not think it’s justified to incur the expense to to recalculate the rent and send out notices for, in your case, a 6.7% increase in gross revenue.

By law, a landlord may bank the annual allowable increases. There is no limit to the amount of rent increases that can be banked since April 1, 1982 and there is no time limit for imposition of these banked amounts. Indeed, I have seen banked increase notices that go back all the way to 1982, usually imposed by new owners seeking to immediately increase a building’s income. Is it fair? No. Is it legal? Yes.

As I said a couple of weeks ago. Courts have, time and again, decided that landlords must be able to get a fair return on their investments. Banked increases are a part of that scheme. Landlords will point out that a banked increase is not retroactive and that you should be grateful for all the money you saved over the years.

San Francisco Tenants: You need to understand that your landlord can, at any time, make up for years that he did not increase your rent by “banking” the annual allowable increases and charging them all at once. California Civil Code § 827 requires a landlord to give you a 60-day notice for such an increase if that cumulative increase is over 10% of your existing rent.

Banked increases will almost always be imposed by new owners. If your building has recently been sold and the old landlord has not increased the rent for awhile, plan on a banked increase. For that matter, all San Francisco tenants should always plan for a banked rent increase.

To paraphrase Anonymous, the internet hacktivist collective, “Landlords: They are legion, they do not forgive, they do not forget. Expect rent increases.”

Call the Tenant Lawyers now for a free consultation.
(415) 552-9060

My New Landlord Wants To Jack Up My Rent For “O & M” Expenses Passthrough

My New Landlord Wants To Jack Up My Rent For “O & M” Expenses Passthrough

My New Landlord Wants To Jack Up My Rent For “O & M” Expenses Passthrough

I’m a 26-year-old living alone in a studio apartment on Russian Hill. I’ve lived here for just over a year (~13.5 months), and like clockwork, as soon as my 1-year lease was up my rent was raised 0.5% from $1,600/month to $1,608/month. Fine, big deal. A month and a half into this new rent increase I received a letter from the city notifying me that my landlord has petitioned to raise my rent by the maximum 7% allowed as an operating and maintenance expenses passthrough. Obviously I’m not too happy about this and the prospect of paying $1,720/month for a studio apartment is stretching my definition of sanity. 

A little bit about the building- it’s a 17 unit apartment building built in 1928. During my initial lease period the building changed ownership and management companies. The letters I received from both the old and new management companies specify a changeover date of 1/1/2011 while the petition application lists the current owners as owning since 12/31/2010- I’m not sure if this is relevant or not. The petition claims a total increase of O&M costs of roughly $127,000 from year 1 to year 2. The bulk of these costs are from a $9,000 increase in water/sewer, $25,000 in property taxes, and $88,000 in debt service (the previous owner apparently had no mortgage). 

My main gripes are these: 1) how can this new owner claim increased operating costs year over year when they haven’t even owned it for a year? Do they get a credit for what the previous owners paid? The Years are one 6/1/09-5/31/10 and two 6/1/10-5/31/11, giving this owner only 5 months of ownership in this two year period.  2) Can the owner really expect to pass the bulk of his mortgage and property taxes on to the tenants? It just doesn’t feel right. 

This whole thing seems to violate the spirit and intent of every rental protection law that San Francisco has on its books. If there were a genuine increase in O&M expenditures- increased garbage and water costs, maybe new carpet in the hallways, new windows, etc.- then I would be more open to this. I know the laws are there to protect landlords in addition to tenants, and I understand the reasoning for taking into account debt service in these passthroughs, but can it really apply to a new owner? The whole thing just reeks, especially coming on the heels of my first “regular” annual increase. 

 I know I can protest the increase at the hearing which is TBD. But do I have any legal arguments here or will the rent board just happily listen to my protest at the hearing and then just as happily approve the owner’s petition? 

I don’t see anything in my lease about operating and maintenance expenditure passthroughs. I also haven’t heard anything from the landlord about their intent to increase the rent and am wondering if I should get in touch with the management company and just talk to them. I’m willing to work with them and am open to a small increase to offset their costs. I also have not heard anything from my neighbors. The petition applies to 13 of the 17 units in the building (the rest of which I assume are under a new lease or vacant). Should I talk to the tenants of the other units facing an increase? Will a protest be more effective at a hearing with more of the tenants present? 

Thanks for your help with this. Its a new world for me…

It ain’t a new world. It’s the real world.

In the real world,  in Bakersfield or any other jurisdiction without rent control, a landlord would not have to justify your rent increase at all. In Redwood City you would not have the opportunity to ponder the financial machinations of the landlord business that allow them to do what few business people can–arbitrarily increase the price of their “service” based upon expenditures that they will eventually write off on their taxes. It’s the ol’ double dip.

Free market capitalists will point out that all businesses can choose to raise their prices anytime they want. That’s true, but in a truly competitive marketplace, a business that arbitrarily increases its prices risks losing business to others who are more competitive.

As I said last week, “free market” thinking cannot apply to land, especially land in San Francisco.  Land is ultimately a finite commodity. San Francisco is an instructive microcosm to understand the effects the “free market” on a commodity that is finite. Housing costs are always pegged to the price of land. As demand increases, the value of the land and the housing situated upon it increases.

Imagine a world in the future in which population has increased so dramatically that human beings live on every habitable plot of land on earth. Of course the land will be owned by a very small percentage of landlords. Those landlords will literally have a captive market. Nobody will be able to move to Oakland where the rents are cheaper. Obviously that scenario is a long way off, but cities like San Francisco are the canaries in the coal mine. When a natural resource like land is treated like a commodity, the future is ominous for tenants first and then the landlords upon whom tenants vent their anger.

The direct answer to your question can be found in the “Operating and Maintenance Expense Petitions” information provided by the San Francisco Rent Board:

“Tenants who lived in the building during any part of Year 1, the first comparison year, may be given an O&M increase. Tenants who moved into the building during Year 2, the second comparison year, may not be given an O&M increase unless ownership changed during Year 2 after the tenant moved in. Only one O&M increase based on costs related to the transfer of ownership of a property is allowed. Tenants may object to imposition of an O&M increase if the landlord has failed to perform requested repair and maintenance that is required by law.

First, the comparison of expenses from old landlord to new is allowable, notwithstanding that all of the increases in expenses were calculated and considered by the buyers and factored into final sales price of the building. In other words, the purchaser knew what he was buying, may have received a reduced sales price and now gets to charge a part of the theoretical cost to you.

It chaps my hide when I see debt service costs charged to rent controlled tenants. Again, a speculator who knows he’s paying far too much for a building will still buy it, banking mostly on upside created by more speculators like him, but still understands he can charge part of the cost of debt to the tenant.

All of this is legal and, indeed necessary, to avoid constitutional challenges to rent control ordinances. Courts have, time and again, decided that landlords must be able to get a fair return on their investments. As I said last week, the United States Constitution made property rights sacrosanct.

I read last week’s comment from cedichou with interest last week. Addressing the the problem of finite supply and infinite demand, cedichou said,  “[W]ill ensure that rents go up. Rent control cannot stop this. The perverse incentive of rent control is to artificially hike the rents of open units so as to anticipate as much as possible upfront the later impossible rent increases.” That’s absolutely true.

So what can tenants do, short of advocating to amend the United States Constitution to add a right to housing? (Not a bad idea in itself.) In California, tenants should be demanding that their legislators, with an email every second of every day, repeal the Costa Hawkins Rental Housing Act (Civil Code section 1954.50 to 1954.535), a law passed by so-called conservatives, which among other things,  prevents local communities from establishing price controls on rental housing. To prevent the disparity cited by cedichou, local communities should be able to control prices on every single rental unit if they so desire.

On another note, there are absolutely no studies, of which I am aware, that break down the demographics of landlords. From my own anecdotal evidence Mom and Pop landlords are a thing of the past. Sure, there are landlords who own a single building, but in many cases kindly old Mom and Pop died and the greedy kids either sell the building to a speculator or mercilessly harass the rent-controlled tenants to get out.

The debate over rent control, essentially a debate over private vs public control of natural resources, will be a defining issue of our time. I firmly believe that no one can call themselves a progressive if he or she is also a landlord. Let the Democrats have them.

As I said last week, you should check out the OCCUPY related activities sponsored by the San Francisco Tenants Union. And don’t forget to join the worldwide general strike on May 1.

Call the Tenant Lawyers now for a free consultation.
(415) 552-9060

How Do I Figure Out The Interest My Landlord Owes Me For My Deposit?

How Do I Figure Out The Interest My Landlord Owes Me For My Deposit?

How Do I Figure Out The Interest My Landlord Owes Me For My Deposit?

I thought this might be a good question for people like me who sublet temporarily in SF for a couple of months to give themselves more time to look for more permanent housing.

I am subletting an apartment in a 5 unit old Victorian in the Mission District of San Francisco for about 3 months from the original tenant who I met off Craigslist.  The tenant was temporarily leaving to take care of an ill family member on the East Coast.  I offered to write up the sublet contract because she was leaving for the East Coast in 5 days and was clearly distraught and still had a lot of things to take care of.

The tenant asked for an initial payment of the rent for the first month and the last month and an additional security deposit of a month’s rent of $1700 (in cashier’s check), plus utilities of about $60 in addition to rental reference and credit check.  She also asked me to include an option in the contract letting her move back in a week earlier and she promised to pay me back the prorated one week’s worth of rent before I vacated the apartment.  She has 30 days to return my security deposit.  She told me some other things to put in the contract about her plants and keeping the place clean and we agreed on the final version over phone and by email before meeting in person.

Before I moved in I asked to meet her landlord but she assured me she already talked to him.  We met the day before she left, went over the contract together and signed it then she gave me her keys.  A month into the sublet I ran into the landlord who was surprised to meet me and asked if I was living in that apartment.  I explained to him that I was subletting for about 3 months and was equally surprised that he didn’t know about it.  He told me the tenant had previously sublet to another people without telling him and he was unhappy about it but that generally she was an okay tenant who had lived there four years.  After some small talk, we exchanged contact information and he told me to let him know if there were any problems or anything that needed to be fixed.

Since that time, the tenant has exhibited more worrisome irrational behavior. 

1.     She called me trying to change the move back date in the contract to a much earlier date (not what we agreed to) and then promised both over the phone and by email to mail me the payment for the week’s rent plus utilities before my move out date in March (it’s been two weeks and I have not received it).  There is a specific provision in the contract saying that she needs to pay me that amount before I vacate.

2.     When we discussed the security deposit she was cagey saying that she would mail it back to me but she needed to hang on to it for the 30 days. Honestly, there is nothing in her apartment repair or otherwise that would be $1700.  I’ve kept everything the way she left it, watered her plants for her, and I don’t use her dishes or cookware because I have my own

3.     When discussing move out the date, she asked me to vacate the apartment and leave the keys in an envelope in her mailbox because she was going to “emotional” coming back to her apartment and wanted to be alone.  I objected saying that I felt more comfortable handing her the keys in person to make sure she received them, also that we should inspect the apartment together before I left so she could point to things that were “broken” she would use the security deposit to fix.  She reluctantly agreed but I have the feeling she wanted to avoid me.

I am worried that she is going to try to keep both my security deposit and also my week’s rent.  What can I do?  Refuse to vacate the apartment until she pays me at least the week’s rent?  Should I ask for a cashier’s check?  Get her landlord involved in this?  If she doesn’t pay me my security deposit what would I be able to do?  Small claims court?

Do I have any rights as a subletter?  What can I do to protect myself at this point?

I feel bad thinking this way but she has given me the impression that she is hanging on to my money because she’s not doing so well financially.  I don’t think she’s working right now.  Of course, I am hoping for the best but in our interactions with each other she has given me a negative impression of her in a short amount of time.  At first, I felt bad for her and thought this arrangement was mutually beneficial but now I feel like she’s trying to take advantage of me. 

Cases like this drive me crazy. It’s not enough that we in the tenant defense business have to deal with unscrupulous and/or uninformed landlords, we have to deal with tenants who decide they own their units and rent them out like landlords.

Master tenants who sublet in this manner rarely obtain the landlord’s consent to sublet. I write thousands of words complaining about landlords who don’t give a rat’s ass about their tenants. It’s always money. money, money, me, me, me.

The master tenant here is no different. She didn’t bother to consider that she could be subjecting you to a costly lawsuit that could ultimately effect your credit rating to the extent that future landlords won’t rent to you, not to mention that this could be a scam. She’s a Bad Master Tenant.

Luckily you’re not presenting the worst case scenario. The landlord could have served a notice to cure or quit alleging illegal subletting. Then the master tenant and you could spend the next couple of months defending an unlawful detainer (eviction) action–a lawsuit that the landlord would likely win. I have to say , your landlord gracefully handled the news that you were the new subletter.

The master tenant is either oblivious to the Rent Ordinance or she is relying on your naiveté. Bad.

To understand the scope of your rights as a subtenant you should first read Rent Board Rules & Regulations §6.15C. The regulation is very specific. Unless the master tenant has informed you in writing, before you sublet, that you are not subject to the just cause eviction provisions of the Rent Ordinance, the only way the master tenant can evict you is by alleging one of the just causes like nonpayment of rent, nuisance, habitual late payment, etc.

Even if you have been informed that you are not subject to “just cause” eviction, the master tenant would have to serve you a 30-day notice to quit.

Essentially, you have obtained most of the rights of a subtenant and you could tell your new “landlord” that you plan to live in the unit forever.

You also have to ask yourself if she’s simply scamming you. Believe me, that’s more common than one might think. Is she charging you more rent than she pays? What’s with the $5,100.00 charge for a temporary sublet? Did she use the dough to finance her trip? Check the Superior Court website to see if she has been sued for this before.

And here’s a thought for you: It’s not usually a good idea to give a stranger you’ve met on Craiglist over $5,000.00 unless the services are performed immediately.

So what do you do?

The landlord won’t want to get involved and he doesn’t have any duty to you anyway. He might get fed up and evict the entire household, but that does you no good.

I think you should simply tell the master tenant that you will move out, if she returns all of the unused rent  including the security deposit. (BTW, Civil Code §1950.5 provides that the landlord must return the deposit in 21 days, not 30.) She needed to hang onto to it for thirty days? Bad.

When you move out, the transaction should be a “cash for keys” exchange. That’s cash or a cashier’s check, not a rubbery gotcha note.

If the master tenant balks, you’ll know she spent your money. As distasteful as this may be, you may have to tell her that she just acquired a new roommate until she pays you.

You can also move out and sue her in small claims court, but the likelihood of ever collecting is small. The master tenant is unemployed and, think about it, her only source of income may be the next sucker she finds on Craiglist.

Why am I so freaking nasty when it comes to master tenants like this? They screw it up for the rest of us. Ironically, whatever the internal justifications master tenants sublet in this manner–ineptitude, desperation or greed–those justifications provide the fodder for landlords to demand the repeal of rent control. Of course, the repeal of rent control would further subject tenants to landlords’ greed, desperation and ineptitude.  Bad, bad, bad.

Call the Tenant Lawyers now for a free consultation.
(415) 552-9060