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November 13, 2001

November 13, 2001p>

 

MINUTES OF THE REGULAR MEETING OF
THE SAN FRANCISCO RESIDENTIAL RENT
STABILIZATION & ARBITRATION BOARD,

Tuesday, November 13, 2001 at 6:00 p.m. at
25 Van Ness Avenue, Suite 70, Lower Level

    I. Call to Order

    President Wasserman called the meeting to order at 6:19 p.m.

    II. Roll Call

                  Commissioners Present: Aung; Becker; Hobson; Justman; Lightner; Marshall; Mosser; Wasserman.

                  Commissioners not Present: Gruber.

                  Staff Present: Grubb; Verby; Wolf.

                  Commissioner Murphy appeared on the record at 6:51 p.m.

    III. Approval of the Minutes

          MSC: To approve the Minutes of October 30, 2001 with a correction to reflect the fact that, in addition to Commissioner Lightner, Commissioner Becker was recused from consideration of the appeal concerning 1935 Franklin St. #503 (AT010153). (Marshall/Becker: 4-0; Lightner abstaining)

    IV. Remarks from the Public

Greg Blaine, the landlord involved in the appeal concerning 3330 Pierce St. #103 (AL010145), told the Commissioners that their instructions to the Administrative Law Judge on remand were too vague to address the problem, which he believes is a misinterpretation of the Board’s dry rot policy.

    V. Appeal Hearing

      1320, 1340, 1360 Lombard St. AT010052 thru -89

                      (acpt. 10/2/01)

    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 7 units filed individual appeals; 3 on the grounds of financial hardship. The tenants jointly appealed 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 asserted 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 echoed the arguments in the joint appeal, in addition to raising the due process claim of the tenants in 101 and 501; questioned the effective date of the Moratorium legislation prohibiting the processing of capital improvement petitions; and asserted that, since the landlords waited 5 years before commencing the waterproofing project, their costs should be reduced by 20%. The tenants in unit #104 raised the due process issue, including the fact that the Administrative Law Judge did not have subpoena power. The tenants in unit numbers 104, 606 and 604 appealed on the grounds of financial hardship.

    At the meeting on October 2nd, the Commissioners accepted the tenants’ joint appeal for further briefing and oral argument on two issues only: 1) 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); and 2) 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). The individual and hardship appeals filed by seven tenants were continued to this evening’s meeting.

    The appeal hearing commenced at 6:24 p.m., and concluded at 8:20 p.m. Appearing for the landlord were attorneys Robert Aune and Laura Ball; attorney Jeffrey Belote appeared on behalf of the tenants. Mr. Belote began by arguing as follows: it is undisputed that deferred maintenance was proved as to the former and current owners of the building, since code violations existed as late as 1996 or 1997 showing that weatherproofing was needed. Since Section 823 of the Civil Code holds a new owner liable for breaches of a rental agreement, and the warranty of habitability is implied in every rental agreement, Section 7.15(a) conflicts with State law. Rather, construing Section 7.15(a) with Civil Code Section 823 is in accordance with the public policy of providing safe and sanitary housing, since it would encourage landlords to conduct due diligence and repair properties right away. Otherwise, a landlord who buys a building with a long history of deferred maintenance is rewarded by obtaining a lower purchase price and still being allowed to pass on the cost of the improvements. As to the burden of proof, once tenants have proved the existence of deferred maintenance, the burden should shift to the landlord to prove the portion of the cost that is attributable to the current and former owner, which is too onerous a burden to place on tenants.

    Mr. Aune then made the following arguments: Civil Code Section 823 applies only to remedies for breaches of a rental agreement under State law, to ensure that the transfer of title will not disturb the lease agreement. Section 7.15(a) of the Regulations does not create remedies for breach of a rental agreement but, rather, is a defense to a capital improvement passthrough. Any remedies that tenants have based on breach of the implied warranty of habitability remain undisturbed by Rules Section 7.15(a) and, in fact, the tenants have availed themselves of certain of these remedies. Unless the intention of the State legislature to fully occupy the field is demonstrated, which is not the case here, there is no preemption. The burden of proof being placed on the tenants is supported by Rules Section 11.18 and Evidence Code Section 500, which cannot be changed by Municipal Ordinance. Mr. Aune maintained that the work was not necessitated by deferred maintenance, as these windows were in place for 65 years; said that the decision is correct based on the law that is currently in effect; and asked that the Board not overturn their "well-balanced" regulations.

    After engaging in questioning of the attorneys and discussion, the Board voted as follows regarding the joint appeals:

          MSC: To deny the appeals and uphold the Decision of the Administrative Law Judge, except to remand the case for certain technical corrections. (Lightner/Mosser: 3-2; Becker, Marshall dissenting)

As to the individual appeals, the Board voted as follows below:

          MSC: To accept the appeals of the tenants in unit numbers 104 and 606 at 1340 Lombard and 604 at 1360 Lombard and remand the cases for a hearing on the tenants’ claims of financial hardship. (Mosser/Lightner: 5-0)

          MSC: To deny the appeal of the tenant in unit #601 at 1340 Lombard St. (Lightner/Mosser: 4-1; Becker dissenting)

          MSC: To deny the appeal of the tenants in unit #104 at 1360 Lombard St. (Lightner/Mosser: 4-1; Becker dissenting)

          MSC: To deny the appeals of the tenants in unit numbers 101 and 501 at 1320 Lombard St. (Lightner/Mosser: 3-2; Becker, Marshall dissenting)

    VI. Consideration of Appeals

    A. 532 Linden St. AL010159

            (cont. from 10/30/01)

    The tenant’s petition alleging unlawful rent increases and asking for a determination as to the proper base rent was granted, and the landlords were found liable to the tenant in the amount of $3,645.87. On appeal, the landlords claim that they relied on an estoppel executed by the tenants at the time they purchased the property; that banked increases available to them were in excess of the amount charged; and that a $75 reduction for timely payment of rent had been discontinued. Upon a question from Commissioner Lightner as to whether the landlord should have received credit for a banked increase in 1998, this case was continued in order to receive further information from the Administrative Law Judge.

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

    B. 178-1/2 Clinton Park AT010167

    The tenant’s appeal was filed eleven days late because the tenant was away on family business at the time the decision was mailed.

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

    The landlord’s petition for certification of capital improvement costs to three of three units was granted, in part. One 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/Lightner: 5-0)

    VII. Director’s Report

    Executive Director Grubb informed the Board that the agency’s new web site is up and running, and encouraged the Commissioners to pay it a visit and provide any comments they may have on how to improve it.

    VIII. New Business

      Petition for Rules and Regulations Section 1.21 Determinations

    In response to certain objections raised by Attorney Clifford Fried, Deputy Director Wolf went over the petition form developed by staff for landlords’ use in requesting determinations pursuant to Rules Sections 1.21 and/or 6.14, as well as Costa-Hawkins. Ms. Wolf explained that, while landlords are required to file for a 1.21 determination prior to issuing a rent increase on this basis, they are not required to file for rent increases pursuant to 6.14 or Costa-Hawkins. However, as there are often subtenants on the premises, prevailing on a 1.21 claim does not necessarily result in a landlord being granted a rent increase, unless the subtenants are eligible for rent increases pursuant to 6.14 or Costa-Hawkins. Upon the landlord’s issuance of a 6.14 or Costa-Hawkins increase to the subtenant(s), a petition alleging unlawful rent increase may result. Therefore, staff has provided landlords with the option of requesting determinations on all of their possible claims at the same time. The petition may also be used for 6.14 and/or Costa-Hawkins determinations in the absence of a 1.21 claim. In order to address some of Mr. Fried’s concerns, and to clarify certain ambiguities, Commissioner Lightner volunteered to work on re-drafting the petition form.

    IX. Calendar Items

      November 20 & 27, 2001 - NO MEETINGS

      December 4, 2001

      10 appeal considerations

      Old Business:

      A. Proposed Amendment to Rules Section 6.10(e)

      B. Petition for Rules Section 1.21 Determinations

    X. Adjournment

    President Wasserman adjourned the meeting at 9:20 p.m.

Last updated: 10/9/2009 11:26:12 AM