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October 02, 2001

October 02, 2001

MINUTES OF THE REGULAR MEETING OF

THE SAN FRANCISCO RESIDENTIAL RENT

STABILIZATION & ARBITRATION BOARD,

Tuesday, October 2, 2001 at 6:00 p.m. at

25 Van Ness Avenue, Suite 70, Lower Level

    I. Call to Order

    Vice-President Marshall called the meeting to order at 6:16 p.m.

    II. Roll Call

                  Commissioners Present: Aung; Becker; Gruber; Justman; Marshall; Mosser; Murphy.

                  Commissioners not Present: Hobson; Lightner; Wasserman.

                  Staff Present: Gartzman; Grubb; Wolf.

    III. Approval of the Minutes

          MSC: To approve the Minutes of September 18, 2001.

                  (Gruber/Becker: 5-0)

    IV. Remarks from the Public

      A. Tenant Bill Shockley of Lombard Place Apartments (AT010052 thru -89) reminded the Board that there has never been a project before them of this size; said that the project quadrupled in size; that there was the appearance that the Decision was rushed in order to beat the Moratorium; that the petition had to be substantially amended; that the landlord refused to provide subcontractor invoices; and asked that an hour be spent on oral argument to ensure that the process remains "balanced and fair."

      B. Tenant Jose Morales of 572 San Jose Ave. (AT010141) told the Board that he has been a tenant in San Francisco for over twenty-five years and that he is still "waiting for justice." Mr. Morales believes that capital improvement and operating and maintenance rent increases are "just another way for landlords to get more money from poor people."

      C. Tenant Olivia Garcia of 3440 - 25th St. #306 told the Commissioners that she is being "harassed to move out", but that she can’t prove it; that the police won’t do anything; and that the landlord is neglecting repairs.

      D. Attorney Drexel Bradshaw, representing the tenant at 1515 Sutter #253 (AT010138), told the Board that an employment agreement waiving the tenant’s rights under the Ordinance is in contravention of the Ordinance; and that a unilateral error on the part of the landlord still serves to set the rent.

      E. Jeff Belote, attorney for the tenants at Lombard Place, said that the $5.4 million in missing invoices impeded the tenants in putting on their case; and that over $80,000 in mistakes were admitted by the landlord in the amendment to the original petition. Mr. Belote requested an hour or so for oral argument "to do justice to the case."

      F. Bob Aune, attorney for the landlord at Lombard Place, informed the Board that the Administrative Law Judge approved less than 75% of the landlord’s costs in the Decision, and made certain factual findings that the landlord disagreed with. However, because there were no errors of law or abuses of discretion, the landlord withdrew its appeal.

    V. Consideration of Appeals

    A. 1515 Sutter St. #253 AT010138

    The tenant filed a petition seeking a determination as to the lawfulness of his base rent. The tenant had vacated his rent controlled apartment at the premises in order to become the resident manager of the building, and had moved to another unit pursuant to an employment contract. In so doing, the Administrative Law Judge found that the tenant became a licensee, rather than a tenant entitled to the protections of the Rent Ordinance. Upon the termination of his employment contract, a new base rent in the amount of $1,000 per month was found to be lawful. The tenant appeals on the grounds that: the prohibition against a tenant’s waiver of rights under the Ordinance is unequivocal and there are no exceptions; the employment agreement did not alter the petitioner’s status as a tenant in the building, since he was entitled to the exclusive use and occupancy of the rental unit; upon having been fired without just cause, the tenant should have reverted to his pre-employment status and his rent controlled rent, or landlords will use employment as a pretext to rid themselves of unwanted tenants; and the landlord should be bound by the $800 rental amount listed on an invoice that was issued after termination of the employment contract.

          MS: To deny the appeal. (Murphy/Gruber)

    After discussion, it was agreed to continue consideration of this appeal to the October 16th meeting in order for Commissioner Justman to read the case of Chan v. Antepenko (1988 302 Cal.App.3d Supp.21, 25).

    B. 572 San Jose Ave. AT010141

    The landlord’s petition for a rent increase based on increased operating expenses was granted to the tenant in one unit. The tenant appeals the decision on the grounds of financial hardship.

          MSC: To accept the appeal and remand the case for a hearing on the tenant’s claim of financial hardship. (Becker/Marshall: 5-0)

    C. 459 Sanchez St. AL010143

    The tenant’s petition alleging an unlawful increase in rent from $1,166.30 to $1,895.00 was granted, and the landlord was found liable to the tenant in the amount of $3,643.50. The Administrative Law Judge that the increase was not warranted pursuant to Costa-Hawkins because the petitioner resided on the premises prior to January 1, 1996 as a tenant, and not a subtenant or assignee. On appeal, the landlord maintains that: the tenant did not pay rent for the unit until January 1, 1996, and therefore was not a tenant prior to that time; the timing of the market rent increase is contingent on the last original tenant having vacated the unit, which would always make the subtenant a tenant, and disallow all otherwise authorized Costa-Hawkins rent increases; mere acceptance of rent does not waive the landlord’s right to a market rent increase under the explicit language of Costa-Hawkins; since the landlord received no written notice from the original tenant regarding her having vacated the premises, he cannot be held to have knowledge that she had done so; the annual rent increase given to the petitioner does not preclude the imposition of a market increase pursuant to Costa-Hawkins; and the landlord’s right to an unlimited rent increase need not be exercised immediately in order not to be forfeited.

          MSC: To deny the appeal. (Becker/Justman: 5-0)

    D. 1320, 1340, 1360 Lombard Place AT010052 thru -89

    The landlord’s petition sought certification of capital improvement costs totaling $6,465,799.73 for the installation of new bay roofs, new roof safety rails, re-siding, new boiler flue, and the replacement of windows and exterior waterproofing and painting on 9 out of 12 facades of the 3 buildings in the complex. The total amount certified was $4,779,895.36. However, the costs of the waterproofing project were certified unconditionally and retroactively only for those units that received new windows and waterproofing of all facades of the building. For those units which received new windows and waterproofing on only 1 of 2 exterior facades, 1/2 of the costs were certified conditionally (prospectively only), and may not be imposed until after the landlord effectively waterproofs and installs new windows on the unrepaired facades. For those units which received no new windows or waterproofing, the entire cost of the waterproofing work was certified conditionally, and may not be passed through unless and until the landlord effectively waterproofs the 2 unrepaired facades, including the installation of new windows.

    The tenants in 36 units appealed the decision; 33 of those tenants are represented by the same attorney, and filed a joint appeal. The tenants in 8 units filed individual appeals; 3 on the grounds of financial hardship. The tenants jointly appeal on the following grounds: the landlord failed to meet its burden of proof; the decision is contrary to the Ordinance and public policy; the rent increases should not be retroactive, since the petition was not complete when it was filed, and should have been administratively dismissed; the tenants were denied access to $5.7 million in subcontractor invoices that were submitted to the general contractor; the burden of proving deferred maintenance should not have been placed on the tenants; the current owner was responsible for compounding the problems that originated prior to their purchase, and therefore the deferred maintenance objection should apply; the deferred maintenance of the landlord contributed to lead hazard remediation, which should bar the passthrough; the waterproofing project was in the nature of repair, and did not constitute capital improvements; since there are still habitability problems related to inadequate weatherproofing in many of the units, the work did not benefit the tenants; an improper imputed rate of interest was applied; the costs were inflated and some of the work was unnecessary; and there are mathematical errors in the decision.

    As to the individual appeals, the tenants in units #101 and 501 additionally assert that: their units did not receive any new waterproofing or new windows, did not benefit at all from the project, and therefore the costs should not have even been conditionally certified to them; security was provided because of the waterproofing project, from which they did not benefit; the passage of Proposition H should preclude the granting of this petition; the work was done as the result of numerous cited code violations; and the decision not to dismiss the landlord’s petition was made by a Senior Administrative Law Judge, rather than the Administrative Law Judge who heard the case, which constituted a lack of due process. The tenant in unit #601 echoes the arguments in the joint appeal, in addition to raising the due process claim of the tenants in 101 and 501; questions the effective date of the Moratorium legislation prohibiting the processing of capital improvement petitions; and asserts that, since the landlords waited 5 years before commencing the waterproofing project, their costs should be reduced by 20%. The tenants in unit #104 raise the due process issue, including the fact that the Administrative Law Judge did not have subpoena power. The tenants in units number 104, 606 and 604 appeal on the grounds of financial hardship.

          MSC: To accept the appeal for further briefing and oral argument before the Board on whether Civil Code Section 823 preempts Rules and Regulations Section 7.15(a), which precludes the current owner’s liability for deferred maintenance of the prior owner when deferred maintenance is raised as a defense to a capital improvement passthrough under Rules and Regulations Section 7.15(a). (Becker/Marshall: 5-0)

          MSC: To accept the appeal for further briefing and oral argument before the Board on whether the tenants have the burden of proof when asserting deferred maintenance as a defense to a capital improvement passthrough under Rules and Regulations Section 7.15(a). (Becker/Marshall: 3-2; Gruber, Murphy dissenting)

          MSF: To accept the appeal for further briefing and oral argument before the Board on whether, because of the facts of this case, the "some other reason" language in Rules Section 7.15(a) bars the passthrough due to long-term deferred maintenance or disallows the portion of the deferred maintenance that is attributable to the current owner. (Becker/Marshall: 2-3; Gruber, Justman, Murphy dissenting)

          MSF: To accept the appeal for further briefing and oral argument before the Board on whether, based on the facts of this case, the June 29, 2000 amendment to the landlord’s petition should cause the effective date of the capital improvement passthrough to change. (Becker/Marshall: 2-3; Gruber, Justman, Murphy dissenting)

          MSF: To accept the appeal for further briefing and oral argument before the Board on whether the Administrative Law Judge’s decision not to order the landlord to produce copies of the subcontractor documents constitutes an abuse of discretion or error of law. (Becker/Marshall: 2-3; Gruber, Justman, Murphy dissenting)

    The hearing before the Board on the issues that were accepted pursuant to appeal will be held on November 13th at 6:00 p.m. A briefing schedule will be established by the Deputy Director. The individual and hardship appeals filed by eight tenants were also continued to the November 13th meeting.

    E. 1108 Fulton St. AT010135 & AL010137

          (rescheduled from 9/18/01)

    The tenants’ petition alleging substantial decreases in housing services during a period of construction at the property was granted, in part, and the landlords were found liable to the tenants in the amount of $2,979.00. The landlords and the tenants appeal the decision. In their appeal, the tenants claim: that the work took almost six years, rather than six months, and therefore was not done in a timely manner; that there are factual errors in the decision, including the allegation that the tenants refused relocation to another unit in the building; that the shower leak was major, and rendered the shower unusable; that there is currently no emergency exit from the unit; and that an affidavit from a co-tenant who failed to attend the hearing should be included in the case. The landlords appeal on the grounds that: the utility cut-offs were brief, infrequent and did not interfere with occupancy of the premises, and rent reductions are therefore not warranted pursuant to the court’s decision in Golden Gateway; the openings under the kitchen island may have been repaired; the rent reductions granted for the holes in the bathroom wall and defective oven are excessive; the front bathroom window was replaced prior to the issuance of the decision; and the tenants should be held liable in the amount of $100 per month for a three-month period when they had a "guest" residing on the premises.

          MSC: To accept the appeal and remand the case to the Administrative Law Judge to re-open the record to adjust the termination date of the rent reductions for the openings under the kitchen island and replacement of the front bathroom window, if warranted; and to correct any factual errors in the Decision as necessary. (Becker/Murphy: 4-1; Gruber dissenting)

    F. 172 Day St. AL010139

    The landlord’s appeal was filed one week late because the landlord had to go to San Jose to deal with a family emergency.

          MSC : To find good cause for the late filing of the appeal. (Gruber/Becker: 5-0)

    The tenants’ petition alleging unlawful rent increases was granted and the landlord was found liable to the tenants in the amount of $4,200.00. On appeal, the landlord asserts: that he never threatened the tenants with having to move if they failed to pay the requested increases in rent; that the rental increases were based on expenses incurred by the landlord when the building went through probate; that the tenants agreed to pay the rent increases rather than have the landlord sell the building; that allowable increase amounts should have been offset against the amount of the overpayment; and that the landlord was not informed of his right to file a petition based on increased operating expenses when he phoned the Rent Board for information regarding allowable annual increase amounts.

          MSC: To deny the appeal. (Becker/Marshall: 4-1; Gruber dissenting)

    G. 1733 Golden Gate Ave. AT010142

    The tenants’ petition alleging an unlawful rent increase was granted because the Administrative Law Judge found that the landlord had not proved that the subject unit is exempt from the Rent Ordinance as new construction. The landlord’s appeal was accepted and the original decision was reversed on remand because the Administrative Law Judge found that the unit occupied by the tenants constitutes new construction, and that this is not changed by the fact that a preexisting Victorian structure was moved on top of the tenants’ unit from a former location. The tenants appeal the remand decision, asserting that: a Certificate of Final Completion and Occupancy (CCFO) has been issued only for the subject unit, and not for the entire structure, as required by the Ordinance; the Department of Building Inspection had no authority to issue a CCFO for just one unit the building; the documentary evidence does not establish that the subject unit constitutes new construction and a more appropriate conclusion is that the subject unit was moved from the prior location along with the rest of the building; and, although the electric meter was not set until October 22, 1980, the structure was in place prior to the effective date of the Ordinance.

          MSC: To deny the appeal. (Gruber/Murphy: 5-0)

    H. 1945 Pacific Ave. AL010140

    The tenant’s petition alleging an unlawful increase in rent from $1,714.00 to $3,000.00 was granted, and the landlord was found liable to the tenant in the amount of $7,574.69. The Administrative Law Judge that the increase was not warranted pursuant to Costa-Hawkins or Rules Section 6.14 because the petitioner was a tenant who had a direct landlord-tenant relationship with the landlord, and was not a subtenant or assignee; and that a 6.14 notice was not served until four years after the landlord knew of the tenant’s occupancy. On appeal, the landlord claims that: after the last original tenant has vacated, the subtenant has possession of the entire leasehold and is no longer a subtenant, which would moot all otherwise allowable Costa-Hawkins rent increases; the tenant was not an original tenant in the unit and did not have a written rental agreement with the landlord; the tenant resided in the unit pursuant to an agreement with his roommate, and not with the landlord; acceptance of rent from the tenant cannot operate as a waiver of the landlord’s right to an unlimited rent increase under Costa-Hawkins, and the landlord did not receive written notice of the last original tenant’s intent to vacate the unit; service of 3-day notices to pay rent or quit and rent increase notices do not serve to create a tenancy; and, since public policy disfavors forfeiture, the landlord did not need to have acted immediately in order not to lose his right to a market rent increase pursuant to Costa-Hawkins.

          MSC: To deny the appeal. (Becker/Marshall: 5-0)

    VI. Communications

    In addition to correspondence concerning cases on the calendar, the Commissioners received the following communications:

      A. A letter from tenant John Tunui of 2333 Market regarding the denial of his appeal (AT010747), and questioning whether the Master Tenant at his unit is in violation of Ordinance Section 37.3(c).

      B. A Memo from Deputy City Attorney Marie Blits informing the Board that Supervisor Hall has requested that the Rent Ordinance be amended to provide a military service exception to the 36-month OMI residency requirement.

      C. A Memo from Deputy City Attorney Marie Blits informing the Board that the California Supreme Court has refused to take or depublish the Decision in Cwynar et al. V. City and County of San Francisco (July 10, 2001) 90 Cal.App.4th 637 {Proposition G},.

    VII. Old Business

    Rules and Regulations Section 6.10(e)

    Goodwin v. Rent Board (Superior Court Case No. 317339)

    Commissioner Marshall distributed a re-draft of her proposed amendment to Rules and Regulations Section 6.10(e) to address the issue raised in the case

    of Goodwin v. Rent Board (Superior Court Case No. 317339). In that case, the Court found that the landlord was entitled to two operating and maintenance expense increases, one based on his purchase and one based on the increased property taxes incurred by the estate after the death of the prior owner. Commissioner Marshall’s proposed amendment makes it clear that only the owner who incurred the increase in expenses can file a petition for rent increase based on those expenses.

          MSC: To put the proposed amendment to Rules and Regulations Section 6.10(e) out for Public Hearing. (Becker/Murphy: 5-0)

The Public Hearing will be held on October 16th at 6:30 p.m. The proposed amendment reads as follows (new language underlined):

      6.10(e) If a building is refinanced or there is a change in ownership resulting in increased debt service and/or property taxes, only the landlord who incurred such increased expenses may file a petition under this Section, and only one rent increase per unit based upon increases in debt service and/or property taxes shall be allowed for each such refinance or transfer, except in extraordinary circumstances or in the interest of justice.

    VIII. New Business

    Commissioner Marshall suggested that the Board once again consider the idea of allowing hardship appeals to capital improvement passthroughs upon the phase-in of accumulated amounts in successive years.

    IX. Calendar Items

      October 9, 2001 - NO MEETING

      October 16, 2001

      8 appeal considerations (1 cont. from 10/2/01)

6:30 Public Hearing: Amendments to Rules and Regulations Section 6.10(e)

      October 23, 2001 - NO MEETING

      October 30, 2001

      10 appeal considerations

      November 6, 2001 - NO MEETING (Election Day)

      November 13, 2001

6:00 Appeal Hearing: 1320, 1340, 1360 Lombard St. (AT010052 thru -89)

    X. Adjournment

    Vice-President Marshall adjourned the meeting at 9:00 p.m.

Last updated: 12/24/2013 1:36:41 PM