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December 16, 2008 (public hearing)

December 16, 2008 (public hearing)

December 5, 2008

NOTICE OF PUBLIC HEARING

DATE: DECEMBER 16, 2008

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, SPECIFICALLY THE AMENDMENT OF SECTIONS 6.16 AND 10.13, WHICH ARE ATTACHED TO THIS NOTICE.

The proposed changes would: eliminate all pre-2002 base years for utility passthroughs calculated on or after January 1, 2009, which would affect the Golden Gateway Center and eleven other properties. Tenants with pre-2002 base years would have a base year of 2003 commencing January 1, 2009. A new base year would be established for all tenancies at the end of every fifth calendar year after the initial base year. No petition would be required except where the landlord is comparing utility costs for the two most recent calendar years. For other base years used, the landlord would be required to file a Utility Passthrough Calculation Worksheet with the Board, which would be provided to the tenant; 10% of these would be reviewed, as well as at least one Worksheet for properties with no prior utility passthrough petition on file; and tenants would be able to file a hardship application within one year of the effective date of the passthrough. Tenants would be able to file petitions challenging utility passthroughs on several grounds within one year of the effective date of the passthrough.

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 sufficiently in advance of the meeting so that the Commissioners can 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 underline; deletions in strikethrough]

Section 6.16 Utility Passthrough

(Added August 24, 2004; Subsection (i) amended September 21, 2004)

The following provisions shall apply to utility passthroughs where the notice of rent increase for the utility passthrough was served after November 1, 2004:

(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 may pass through the increased costs of the utilities between the "base year" and the comparison year, as set forth below. 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 with the following exception:

(ii) (A) However, For utility passthrough petitions filed prior to January 1, 2009, where a utility passthrough is was in effect for a tenancy on November 1, 2004, the landlord may could 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 petitionsed the Board for approval of the earlier "base year" and the Board determinesed that the earlier "base year" is was proper under Section 4.11 of these Rules.

(B) For utility passthrough petitions and Utility Passthrough Calculation Worksheets filed on or after January 1, 2009, the initial "base year" for all tenancies with an approved earlier "base year" shall be calendar year 2003.

(iii)(ii) 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)(iii) 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) or (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)(i) above or use of an alternate "base year" pursuant to subsection (b)(iv)(iii) 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 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 and Utility Passthrough Calculation Worksheets 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 and Utility Passthrough Calculation Worksheets filed between January 1, 2014 and December 31, 2018, and so on. For another example, where the initial "base year" is 2003, including those tenancies that had an earlier "base year" prior to January 1, 2009, the new "base year" shall be 2008 for petitions and Utility Passthrough Calculation Worksheets filed between January 1, 2010 and December 31, 2010. If the tenancy continues for an additional five years, the "base year" will become 2013 for petitions and Utility Passthrough Calculation Worksheets filed between January 1, 2015 and December 31, 2019, and so on. For another example, where the initial "base year" is 2004, the new "base year" shall be 2009 for petitions and Utility Passthrough Calculation Worksheets 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 and Utility Passthrough Calculation Worksheets 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 Utility Passthrough Calculation Worksheet or ppetition for aapproval of the uutility ppassthrough.

(e) Petition Required for Certain Utility Passthroughs

Effective January 1, 2009, the landlord is required to file a Petition for Approval of Utility Passthrough when using a comparison of utility costs for the prior two calendar years (e.g. 2007/2008 in 2009, 2008/2009 in 2010, 2009/2010 in 2011, etc.). The petition shall be 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.

(e) (f) Where the landlord is required to file a Petition for Approval of Utility Passthrough, T the landlord must file a the 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.

(g) Petition Not Required for Certain Utility Passthroughs

Effective January 1, 2009, the landlord is not required to file a Petition for Approval of Utility Passthrough using a comparison of costs for years other than the prior two calendar years. For example, in 2009, the landlord need not file a petition for "base year" 2003, 2004, 2005 or 2006. However, in order to impose a utility passthrough, the landlord must comply with the following requirements:

(i) The landlord shall file a Utility Passthrough Calculation Worksheet with the Rent Board for each different "base year" used, on a form prescribed by the Board, that shows how the passthrough was calculated. The Worksheet shall be filed within twelve months of the "comparison year" used in calculating the amount of the passthrough. The Rent Board shall review ten percent (10%) of all Worksheets filed with the Board. In addition, if there is no prior utility passthrough petition on file for a property for which a Worksheet is filed, the Rent Board shall review at least one Worksheet for that property.

(ii) The landlord must file the Worksheet with the Board before giving legal notice of a rent increase for a utility passthrough. 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. The landlord must provide the tenant with a file-stamped copy of the Utility Passthrough Calculation Worksheet at the time of service of the notice of rent increase.

(iii) A tenant who receives a utility passthrough under this subsection (g) may file a hardship application with the Board within one year of the effective date of the passthrough, and may be granted relief from all or part of such passthrough based on hardship.

(g) (h) Laundry Facilities

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; or

(iv) where the laundry facilities are not separately metered in both the "base year" and "comparison year", the landlord shall deduct the actual costs of utilities that serve such laundry facilities, if proved by the landlord using a methodology that has been approved by the Rent Board.

(h) (i) 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) (j) Calculation of the Utility Passthrough

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 the laundry facilities are not separately metered in both the "base year" and the "comparison year", compile evidence of and calculate the actual cost of utilities that serve the laundry facilities in the "base year" and the "comparison year".

(A) Where the landlord cannot prove the actual cost of utilities that serve the laundry facilities and a third party vendor collects the user fees from the laundry facilities, compile evidence of and calculate the income actually received by the landlord from the third party vendor for the use of the laundry facilities in the "base year" and the "comparison year".

(B) Where the landlord cannot prove the actual cost of utilities that serve the laundry facilities and the landlord collects the user fees from the laundry facilities, compile evidence of the user fees actually collected by the landlord for the use of the laundry facilities in the "base year" and the "comparison year" and calculate 50% of the amount collected.

(iv) Where the laundry facilities are not separately metered in both the "base year" and the "comparison year", subtract the utility costs for the laundry facilities, as calculated in subsection (iii) above, 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 utility costs for the laundry facilities) from the total "comparison year" utility cost (excluding utility costs for the laundry facilities) 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.

(f) (k) 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.

(j) (l) Each utility passthrough shall apply only for the twelve-month period after it is imposed.

(k) (m) 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) (n) 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) (o) 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) (p) 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) (q) 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.

Section 10.13 Improper Utility Passthrough

(Added August 24, 2004)

(a) The following provisions shall apply to utility passthroughs where the notice of rent increase for the utility passthrough was served after November 1, 2004 where a Petition For Approval Of The Utility Passthrough was required to be filed under Section 6.16 of these Rules:

(a) (i) 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) (ii) 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) (iii) A petition based on this section shall be accompanied by the notice of increase.

(b) The following provisions shall apply to utility passthroughs where the notice of rent increase for the utility passthrough was served after January 1, 2009 where a Petition For Approval Of The Utility Passthrough was not required to be filed under Section 6.16:

(i) 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) did not file a Utility Passthrough Calculation Worksheet with the Rent Board pursuant to Section 6.16 of these Rules; or (2) did not serve the tenant with a copy of the Utility Passthrough Calculation Worksheet, date-stamped by the Rent Board, with the notice of increase for the utility passthrough; or (3) did not properly calculate the utility passthrough or used an incorrect room count; or (4) did not discontinue the utility passthrough after twelve months.

(ii) 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.

(iii) A petition based on this section shall be accompanied by the notice of increase.

Last updated: 10/9/2009 11:26:11 AM