50-50 Capital Legislation Passes on Final Reading

New Legislation Regarding Capital Improvements, File No. 020716

 

On January 13, 2003, the Board of Supervisors passed on second reading a settlement of the Proposition H lawsuit that: (1) dismisses the City"s appeal so that the permanent injunction issued by the Superior Court against Proposition H is final, and (2) amends the Rent Ordinance to enact compromise capital improvement legislation sponsored by Supervisor Ammiano. The new law will go into effect thirty days after the legislation is signed by the Mayor, and will apply to all capital improvement petitions filed on or after November 14, 2002.

 

The Ammiano legislation makes extensive changes to current law concerning the passthrough of capital improvement costs. The major changes are as follows:

 

NEW RULES APPLICABLE TO ALL PROPERTIES:

 

1. Like now, one hundred percent (100%) of the certified costs of seismic work required by law (and other work required by new laws enacted after November 14, 2002) may be passed through to the tenants subject to the 10% annual limitation; however, the amortization schedule is changed from the current 10 years to 20 years;

 

2. One hundred percent (100%) of the certified costs of energy conservation work approved by the Commission on the Environment may be passed through to the tenants and there is no annual limitation on the amount of the passthrough. (At present, a new EPA Energy-Star-compliant refrigerator is the only item approved for certification under this section);

 

3. For the first time, all capital improvement petitions which request certification of more than $25,000.00 in costs must include copies of either competitive bids for the work or copies of time and materials billing for work performed by all contractors and subcontractors; otherwise, the landlord must pay for an estimator hired by the Rent Board; and

 

4. With certain exceptions, the Board may not certify costs of work required to correct code violations for which a notice of violation remained unabated for 90 days.

 

NEW RULES APPLICABLE TO PROPERTIES WITH 1 TO 5 RESIDENTIAL UNITS:

 

1. Like now, one hundred percent (100%) of the certified costs of capital improvements may be passed through to the tenants;

 

2. The amortization schedules are changed from the current 7 and 10 years to 10, 15 and 20 years for specified capital improvements; and

 

3. Capital improvement rent increases are limited to 5% of the tenant"s base rent at the time the petition was filed or $30.00, whichever is greater, in any 12 month period.

 
 

NEW RULES APPLICABLE TO PROPERTIES WITH 6 OR MORE RESIDENTIAL UNITS:

 

1. Only fifty percent (50%) of the certified costs of capital improvements may be passed through to the tenants;

 

2. Like now, the amortization schedules remain 7 and 10 years for specified capital improvements, and capital improvement rent increases are limited to 10% of the tenant"s base rent at the time the petition was filed or $30.00, whichever is greater, in any 12 month period; or

 

3. In the alternative, a tenant may elect to have one hundred percent (100%) of the certified costs passed through to the tenant, with an annual limitation of 5% and a total limitation of 15% of the tenant"s base rent applicable to the capital improvement rent increases.

 

The complete text of the legislation is available at the Rent Board and on the Board"s website at http://sfrb.org under "News and Archives-What"s New at the Rent Board".

 

Note: Revised capital improvement petition forms to implement the new legislation are being developed and will be available before the effective date. Since the new legislation will apply to all petitions filed on or after November 14, 2002, landlords may wish to wait to file petitions on the revised forms.