August 24, 2004 (6:30pm) (Public Hearing)August 3, 2004
NOTICE OF PUBLIC HEARING
DATE: AUGUST 24, 2004
TIME: 6:30 P.M.
PLACE:
25 VAN NESS AVENUE (AT MARKET STREET)
SUITE 70, LOWER LEVEL
SAN FRANCISCO, CALIFORNIA
THE RENT BOARD COMMISSIONERS INVITE THE PUBLIC TO COMMENT ON PROPOSED CHANGES TO THE RULES AND REGULATIONS GOVERNING THE RESIDENTIAL RENT STABILIZATION AND ARBITRATION ORDINANCE, CHAPTER 37 OF THE SAN FRANCISCO ADMINISTRATIVE CODE.
THE COMMISSION IS TAKING PUBLIC COMMENT ON PROPOSED CHANGES TO THE UTILITY PASSTHROUGH REGULATIONS, INCLUDING THE AMENDMENT OF EXISTING SECTIONS 1.19, 4.11 AND 10.12 AND THE ADDITION OF NEW SECTIONS 6.16 AND 10.13, ALL OF WHICH ARE ATTACHED TO THIS NOTICE.
THE PROPOSED CHANGES ARE SUMMARIZED AS FOLLOWS:
· Amend section 1.19 (Definition of Tenant's Utilities) to include a reference to new Section 6.16 and to change the reference to Ordinance Section 37.2(o) to the correct Section 37.2(q).
· Amend Section 4.11(Computation of Passthrough of Gas and Electricity) to limit its applicability to situations where the notice of increase for the utility passthrough was served prior to or on the effective date of new Section 6.16 and to require that passthroughs calculated pursuant to section 4.11 be discontinued twelve months after imposition or by 60 days after the effective date of section 6.16, whichever is later.
· Add Section 6.16 (Utility Passthrough) to provide for a new method of calculating utility passthroughs for situations where the notice of increase for the utility passthrough was served after the effective date of new Section 6.16, including, but not limited to: a requirement that the landlord file a petition for approval of a utility passthrough before giving the notice of rent increase, which petition will be decided without a hearing unless the Administrative Law Judge determines that a hearing is necessary; the initial base year for all tenancies in effect on December 31, 2003 shall be 2002, except a landlord with a current passthrough may petition the board for approval of the earlier base year; the initial base year for tenancies commencing after December 31, 2003 shall be the calendar year immediately preceding the year of the inception of the tenancy; the landlord may petition for approval of an alternate base year under specified circumstances where utility bills are not available; where the initial base year is 2002 or later, a new base year is established at the end of every fifth calendar year after the initial base year; where the initial base year is prior to 2002, the base year utility costs must be adjusted every five years beginning with petitions filed in 2009; various adjustments will be made for utility costs for laundry facilities where the laundry facitities are not separately metered and a user fee is charged; for purposes of allocating utility costs, each parking/garage space included in a tenant's rental or for which a user fee is charged shall be counted as one room, and commercial areas such as management offices and retail space shall also be included in the room count; utility costs shall be allocated to each unit based on the number of rooms in a unit plus the number of garage spaces included in the tenant's rental or for which a user fee is charged; the utility passthrough may be imposed only at the time of an annual increase and must be discontinued after twelve months.
· To amend Section 10.12 (Documentation of Gas and Electrical Increases) which provides for a tenant petition to challenge a utility passthrough calculation, by limiting its applicability to situations where the notice of increase for the utility passthrough was served prior to or on the effective date of new Section 6.16.
· To add Section 10.13 (Improper Utility Passthrough) to provide for a tenant petition to challenge a utility passthrough where the notice of increase for the utility passthrough was served after the effective date of new section 6.16 and the landlord failed to file a petition under section 6.16 or failed to discontinue the utility passthrough after twelve months.
You may either comment at the Public Hearing and/or submit written comments. If you would like to submit written comments, it is requested that they be received at the Department NO LATER THAN 5:00 P.M. ON MONDAY, AUGUST 16TH, 2004, so that the Commissioners can be mailed your comments and review them prior to the hearing. Written comments may also be submitted at the hearing. Please submit 12 copies of your comments in order to facilitate their distribution. You will be able to address the Commissioners during the public comment period at the hearing.
PROPOSED AMENDMENTS TO THE RENT BOARD RULES AND REGULATIONS REGARDING UTILITY PASSTHROUGHS
[additions in double underline; deletions in strikethrough}
- Amend Section 1.19 to reference new Section 6.16 as well as Section 4.11. Also amend the reference to Ordinance Section 37.2(o) to reflect the correct section of 37.2(q).
Section 1.19 Tenant's Utilities
For the purpose of Ordinance Section 37.2(o) (q) and Sections 4.11 and 6.16 of these Rules, "Tenant's Utilities" means charges for natural gas or electricity provided by Pacific Gas and Electric Company directly to the unit occupied by the tenant or to the building in which the unit is located and benefiting the tenant, whether paid by the tenant alone, by the landlord alone, or part by the tenant and part by the landlord.
- Amend Section 4.11 by adding the following language to the beginning of Section 4.11:
Section 4.11 Computation of Passthrough of Gas and Electricity
The following provisions shall apply to utility passthroughs where the notice of rent increase for the utility passthrough was served prior to or on [the effective date of Section 6.16], except that with respect to such utility passthroughs, the passthrough shall be discontinued twelve months after it was imposed or by [60 days after the effective date of Section 6.16], whichever is later.
(a) No landlord may pass through any increase in the cost of the utilities to a tenant until the tenant has occupied one or more units in the subject building for one continuous year. Each utility passthrough may be charged to the tenant only at the time of an annual rent increase.
(b) Where a landlord pays for gas, electricity, and/or steam and seeks to recover the increase in the cost of these utilities from tenants, the landlord shall calculate the amount of such increase by using either of the following two methods, both of which should always yield the same results:
(1) Method 1: Compile the utilities receipts for the two calendar years preceding the first noticing of the utility passthrough. The calendar year immediately preceding the noticing shall be referred to as the "comparison year;" the calendar year preceding the "comparison year" shall be referred to as the "base year." The base year will remain the same for all future calculations, except where the pass through is discontinued pursuant to subsection (c) below. Different tenants in the same building may have different base years depending on when they moved into the building and when utility increases were first passed through to them.
(i) Calculate the total utility cost for the comparison year and the total utility cost for the base year.
(ii) Subtract the total base year utility cost from the total comparison year utility cost. If there is no increase or if there has been a decrease, no pass through for the current calendar year is allowed and any increase levied in a prior year must be discontinued.
(iii) Divide the resulting figure, if greater than zero, by 12 to determine the average monthly utility increase or decrease for the entire building.
(iv) Divide the average monthly utility increase or decrease by the number of rooms in the building. For the purposes of this section the number of rooms in a building shall be calculated by presuming that single rooms without kitchens are one room units, studios are two room units, one bedroom units without a separate dining room are three room units, and so on.
(v) If a utility pass through has been instituted, subsequent passthroughs shall be determined for the immediately following year by calculating the utility cost for the calendar year preceding the noticing of the passthrough. This amount shall become the updated comparison year figure. The passthrough shall then be calculated in accordance with Rules and Regulations Sections 4.11(b)(1)(ii) through 4.11(b)(1)(iv).
(2) Method 2: Alternatively, the landlord may choose, in subsequent years, to use the prior year's "comparison year" as the current base year and subtract the updated base year amount from the new comparison year total utility cost. The resulting amount would be added to the prior year's total utility passthrough. The passthrough shall then be calculated in accordance with Rules and Regulations Sections 4.11(b)(1)(iii) through 4.11(b)(1)(v).
(c) Until such time as an annual rent increase is noticed the current pass through shall remain in effect. However, if a landlord does not recalculate and re-notice the pass through at the subsequent annual rent increase, the entire pass through is discontinued until recalculated and re-noticed. At such time as a new pass through is calculated and noticed, a new base year is established which shall be the calendar year preceding the new comparison year.
(d) In the event that more than one year has passed since the imposition of the last PG&E pass through, the landlord must adjust for any increases or decreases that have occurred since the last pass through was implemented, so that the tenant receives the benefit of any utility decrease that occurred in the intervening period.
(e) Nothing in this section or in these Rules and Regulations shall be interpreted as requiring any landlord to pass through any utility increase or to raise any tenant's rent. However, where the utility costs decrease in years subsequent to the passing through of an increase, the tenant must be given the benefit of such decrease calculated in the same manner as any increase passed through under Ordinance Section 37.2(n). A tenant may petition the Board for an arbitration hearing whenever a pass through charge has been noticed or is in effect and the tenant protests the amount being charged or the calculation procedure being used by the landlord. If the comparison year utility costs fall below the base year costs, the landlord shall not be required to reduce the rent beyond eliminating any utility pass through made in prior years.
(f) If the methods set forth for an increase (or decrease) in utilities in subsection (b) of this Section cannot be applied for reasons beyond the control of the landlord, and in the absence of a relevant agreement between the landlord and the tenant, the landlord may petition the Board for an arbitration hearing to establish an appropriate alternative method, which shall be used for all following years unless another method is approved by the Board.
(g) The amount of rent due from the tenant for any utility pass through shall be due on the same date as a rent payment normally would be due.
(h) No amount passed through to the tenant as a utility increase shall be included in the tenant's base rent for purposes of calculation of the amount of rent increases allowable under the Ordinance and these Rules and Regulations.
(i) The provisions of this Section shall be deemed a part of every rental agreement or lease, written or oral, for the possession of a rental unit subject to the Ordinance unless the landlord and the tenant agree that the landlord will not pass through any utility increases, in which case such agreement will be binding on the landlord and on any successor owner of the building, unless such agreement is changed in accordance with applicable law.
(j) Where a utility increase has been lawfully passed through to the tenant, a change in the ownership of the building in which the tenant's unit is located will not affect the tenant's liability to pay the amount passed through or the tenant's entitlement to the benefit of decreases in the utilities costs.
- Add the following new Section 6.16:
Section 6.16 Utility Passthrough
The following provisions shall apply to utility passthroughs where the notice of rent increase for the utility passthrough was served after [the effective date of Section 6.16]:
(a) Where a landlord pays for gas, electricity and/or steam provided directly to the unit occupied by the tenant and/or to the common areas of the property in which the unit is located, and seeks to recover the increase in the cost of these utilities from the tenant, the landlord must file a petition for approval of the utility passthrough on a form prescribed by the Board. The petition shall specify the units on the property that are subject to the petition. The petition will be decided without a hearing unless the Administrative Law Judge determines that a hearing is required.
(b) Determination of Initial "Base Year"
(i) For all tenancies existing on December 31, 2003, the initial "base year" for purposes of this section shall be calendar year 2002.
(ii) However, where a utility passthrough is in effect for a tenancy on [the effective date of this amendment], the landlord may elect to use calendar year 2002 as the initial "base year" or elect to continue to use the earlier "base year" for all future utility passthrough calculations, provided that the landlord petitions the Board for approval of the earlier "base year" and the Board determines that the earlier "base year" is proper under Section 4.11 of these Rules.
(iii) For all new tenancies commencing after December 31, 2003, the initial "base year" shall be the calendar year immediately preceding the year of the inception of the tenancy.
(iv) A landlord may petition the Board for approval of an alternate "base year" if the landlord became an owner of record after December 31, 2002 and demonstrates a good faith, but unsuccessful, effort to obtain the utility bills from the former landlord and/or the utility company that are necessary to establish the "base-year" utility costs required by subsections (b)(i), (b)(ii) or (b)(iii). The Board will not approve an alternate "base year" that creates exaggerated results unless the proposed alternate "base year" coincides with the landlord's first full calendar year of ownership.
(c) Subsequent Adjustments to Initial "Base Year"
Different tenants in the same property may have different initial "base years" depending on when they moved into the property or whether the Board has approved use of an earlier "base year" pursuant to subsection (b)(ii) above or use of an alternate "base year" pursuant to subsection (b)(iv) above. The initial "base year" utility costs shall be adjusted every five years as follows:
(i) Where the initial "base year" is 2002 or later, a new "base year" is established at the end of every fifth calendar year after the initial "base year". For example, where the initial "base year" is 2002, the new "base year" shall be 2007 for petitions filed between January 1, 2009 and December 31, 2013. If the tenancy continues for an additional five years, the "base year" will become 2012 for petitions filed between January 1, 2014 and December 31, 2018, and so on. For another example, where the initial "base year" is 2004, the new "base year" shall be 2009 for petitions filed between January 1, 2011 and December 31, 2015. If the tenancy continues for an additional five years, the "base year" will become 2014 for petitions filed between January 1, 2016 and December 31, 2020.
(ii) Where the initial "base year" is prior to 2002 and has been approved by the Board pursuant to subsection (b)(ii) above, the landlord may elect to keep said "base year" for purposes of future utility passthrough calculations without regard to subsection (c)(i) above. However, in such a case, the landlord must adjust the "base year" utility costs every five years beginning with utility passthrough petitions filed in 2009. The first "base year" adjustment shall equal the difference, if more than zero, between 2003 utility costs and 2007 utility costs, and it shall be added to the "base year" utility cost used by the landlord. This "base year" adjustment shall be in effect for petitions filed between January 1, 2009 and December 31, 2013. Every fifth year thereafter (i.e. 2014, 2019, etc.), the landlord's petition shall include another "base year" adjustment equal to the difference in utility costs, if more than zero, for each subsequent five-year period (e.g., 2008 and 2012, 2013 and 2017, etc.). If utility costs decrease during any five-year adjustment period, then no adjustment shall be required to the "base year" utility costs, but the landlord must deduct the amount of the decrease from the difference between the initial "base year" utility costs and the new "comparison year" utility costs. For example:
(A) Suppose a tenant's approved "base year" is 1986, and the 1986 utility costs are $15,000. In 2009, the landlord must calculate the difference between the 2003 utility costs ($20,000) and the 2007 utility costs ($30,000). Since utility costs increased between 2003 and 2007, the landlord must add the increase ($10,000 [$30,000 minus $20,000]) to the initial "base year" utility costs ($15,000) and then compare the adjusted "base year" utility costs ($25,000 [$10,000 + $15,000]) to the 2009 "comparison year" utility costs ($35,000) in order to calculate the new utility passthrough ($10,000 [$35,000 minus $25,000]).
(B) If utility costs have decreased (e.g., 2003's utility costs = $20,000 and 2007's utility costs = $15,000), then the landlord does not adjust the 1986 "base year" utility costs ($15,000), but must deduct the decrease ($5,000 [$20.000 minus $15,000]) from the 2009 passthrough as follows: $35,000 (2009 utility costs) minus $15,000 (1986 utility costs) = $20,000 minus $5,000 (decrease between 2003 and 2007) = $15,000 new utility passthrough.
(d) Determination of "Comparison Year"
For purposes of this section, the "comparison year" in all cases shall be the calendar year immediately preceding the filing of the landlord's petition for approval of the utility passthrough.
(e) The landlord must file a petition before giving legal notice of a rent increase for a utility passthrough. The petition must be filed no more than twelve months after the "comparison year" listed in the petition. The notice of rent increase shall be in conformance with the requirements set forth in Section 4.10 above and shall further include the dollar amount requested for the utility passthrough. This increase for the utility passthrough shall be inoperative unless and until the petition is approved by the Administrative Law Judge. Any amounts approved by the Administrative Law Judge shall relate back to the effective date of the legal notice, if given. A landlord may choose instead not to serve legal notice of a proposed utility passthrough until after the decision of the Administrative Law Judge is rendered. In any event, no rent increase approved by the Administrative Law for a utility passthrough shall become effective until the tenant's anniversary date.
(f) No landlord may pass through any increase in the cost of utilities to a tenant until the tenant has occupied the unit in the subject property for one continuous year.
(g) Where the utility bills include the cost of gas and/or electricity for laundry facilities and the landlord charges a user fee for the laundry facilities, the landlord may not pass through any increase in the building's cost of utilities unless the landlord complies with one of the following subsections:
(i) where the laundry facilities are separately metered in both the "base year" and "comparison year", the landlord shall not include the utility costs for the laundry facilities in the utility passthrough calculation; or
(ii) where the laundry facilities are not separately metered in both the "base year" and the "comparison year" and there is a third party vendor that collects the user fees from the laundry facilities, the landlord shall deduct the income actually received by the landlord from the third party vendor from the total utility costs for the building; or
(iii) where the laundry facilities are not separately metered in both the "base year" and the "comparison year" and there is not a third party vendor that collects the user fees from the laundry facilities, the landlord shall deduct 50% of the user fees actually collected by the landlord from the total utility costs for the building.
(h) Where the utility bills include the cost of gas and/or electricity for laundry facilities and the laundry facilities are not available to or operated for the benefit of the tenant, and the laundry facilities are not separately metered in both the "base year" and "comparison year", the landlord may not pass through to that tenant any increase in the building's cost of utilities.
(i) The landlord shall calculate the amount of the utility passthrough as follows:
(i) Compile the utility bills for the "base year" and the "comparison year" as defined in subsections (b), (c) and (d) above. The utility passthrough shall be based on actual costs incurred by the landlord during the relevant calendar years, regardless of when the utility bill was received or paid.
(ii) Calculate the total utility cost for the "base year" and the total utility cost for the "comparison year".
(iii) Where applicable, compile evidence of any and all laundry facilities income actually received or collected by the landlord for the use of the laundry facilities in the "base year" and the "comparison year". Calculate the total laundry facilities income for the "base year" and the total laundry facilities income for the "comparison year".
(iv) Where applicable, subtract the laundry facilities income from the total utility cost for the "base year" and the total utility cost for the "comparison year".
(v) Subtract the total "base year" utility cost (excluding laundry facilities income) from the total "comparison year" utility cost (excluding laundry facilities income) to get the utility cost increase. If there is no increase or if there has been a decrease, no passthrough is allowed.
(vi) Divide the resulting figure, if greater than zero, by twelve (12) to determine the average monthly utility increase for the entire property.
(vii) Divide the average monthly utility increase by the number of rooms in the property to get the amount of the utility passthrough that may be imposed for each room. For purposes of this section, the number of rooms in a property shall be calculated by presuming that single rooms without kitchens are one room units, studios are two room units, one bedroom units without a separate dining room are three room units, and so on. Each parking space and garage space in the building which is included in a tenant's rental or for which a user fee is charged shall be counted as one room. Areas used for commercial purposes but for which no user fee is charged to the tenants, including but not limited to management offices and retail space, shall be included in the room count in a manner that most reasonably takes into account the size of the space and its utility usage.
(viii) To get the monthly utility passthrough for a unit, add the number of rooms in the unit to the number of rooms for parking and/or garage spaces included in the tenant's rental or for which a user fee is paid by the tenant, and multiply that total number of rooms by the monthly utility increase per room.
(j) Each utility passthrough shall apply only for the twelve-month period after it is imposed.
(k) Nothing in this section or in these Rules and Regulations shall be interpreted as requiring any landlord to pass through any utility increase or to increase any tenant's rent.
(l) The amount of rent due from the tenant for any utility passthrough shall be due on the same date as a rent payment normally would be due.
(m) A utility passthrough may be imposed only at the time of an annual rent increase. However, no amount passed through to the tenant as a utility increase shall be included in the tenant's base rent for purposes of calculation of the amount of rent increases allowable under the Ordinance and these Rules and Regulations.
(n) The provisions of this Section shall be deemed a part of every rental agreement or lease, written or oral, for the possession of a rental unit subject to the Ordinance unless the landlord and the tenant agree that the landlord will not pass through any utility increases, in which case such agreement will be binding on the landlord and on any successor owner of the property.
(o) Where a utility increase has been lawfully passed through to the tenant, a change in the ownership of the property in which the tenant's unit is located will not affect the tenant's liability to pay the amount passed through.
-Amend Section 10.12 by adding the following language to the beginning of Section 10.12:
Section 10.12 Documentation of Gas and Electrical Increases
The following provisions shall apply to utility passthroughs where the notice of rent increase for the utility passthrough was served prior to or on [the effective date of Section 6.16]:
(a) A tenant may petition for an arbitration hearing if the landlord has failed to provide the tenant with a clear explanation of the charges for gas and electricity on which an increase is being based.
(b) The landlord shall have the burden of proving the calculations upon which this increase is based.
(c) A petition based on this section shall be accompanied by the notice of increase.
- Add the following new Section 10.13:
Section 10.13 Improper Utility Passthrough
The following provisions shall apply to utility passthroughs where the notice of rent increase for the utility passthrough was served after [the effective date of Section 6.16]:
(a) A tenant may petition for an arbitration hearing if the landlord has increased the tenant's rent based on an increase in utility costs, but (1) has failed to file a petition for approval of the utility passthrough pursuant to Section 6.16 of these Rules, or (2) has failed to discontinue the utility passthrough after twelve months.
(b) The landlord shall have the burden of proving that the utility passthrough has been approved and/or imposed in accordance with Section 6.16 of these Rules.
(c) A petition based on this section shall be accompanied by the notice of increase.