The landlord's petition for rent increases for 2,702 of 3,456 units based on increased operating expenses was granted, resulting in 7% base rent increases for the majority of the tenants. The tenant at 707 Gonzalez Drive appeals the decision on the grounds of financial hardship. This appeal was continued from the meeting on January 7th, 2003, in order for another voting Tenant Commissioner to be in attendance.
MSC: To accept the appeal and remand the case for a hearing on the tenant's claim of financial hardship. (Marshall/Becker: 3-2; Gruber, Murphy dissenting)
B. 2911 - 16th St. #311 AT020629
The landlord's petition for certification of capital improvement costs to the tenants in 35 of 63 units was granted. 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/Gruber: 3-0)
C. 1121 Masonic #9 AT020565
The tenant's petition alleging decreased housing services was dismissed due to his failure to appear at the properly noticed hearing. On appeal, the tenant claims not to have received the Notice of Hearing, and attaches the requisite Declaration of Non-Receipt of Notice of Hearing.
MSC: To accept the appeal and remand the case for a new hearing. (Becker/Murphy: 4-0)
D. 1830 - 19th Ave. AL020563
The tenant's petition alleging unlawful rent increases was granted and the landlords were found liable to the tenant in the amount of $9,040.00. The Administrative Law Judge found that the premises, a single family dwelling, was significantly expanded in 1996, but not demolished. Since the first Certificate of Occupancy for the structure was issued in 1925, the building was determined to be under the jurisdiction of the Rent Ordinance. On appeal, the landlord asserts that the Administrative Law Judge erred because: the work meets the definition of "demolition" under the Planning Code; the evidence shows that there was no existing structure during construction; the single family dwelling that originally existed was demolished and replaced by a two-unit structure; a demolition permit was not required; and the May, 1999 rent increase included the provision of storage space as an additional housing service.
MSC: To accept the appeal and remand the case to the Administrative Law Judge to vacate the decision and find that the building is exempt from the jurisdiction of the Rent Ordinance. (Murphy/Gruber: 3-2; Becker, Marshall dissenting)
E. 207 Gough St. #41 AT020564
The tenant's petition alleging improper calculation of a PG&E passthrough was granted, and overcharges in the amount of $.26 per month were ordered refunded. On appeal, the tenant claims that the amount charged for May 2000 is in error, because it is a negative value. The tenant maintains that a refund for prior years does not accurately reflect the actual cost of energy for that time period.
MSC: To accept the appeal and remand the case to the Administrative Law Judge to allocate the PG&E costs to the time periods when the costs were actually incurred; a hearing will be held only if necessary. (Murphy/Becker: 4-0)
F. 1935 Franklin #503 AT020566
The landlord's petition for a rent increase based on comparable rents was granted, and a rent increase from $930.00 to $1,650.00 was approved. The landlord was also found liable to the tenants in the amount of $59.52 due to a one-month overpayment in rent. The Administrative Law Judge found that the prior resident manager of the building had approved the tenants' exchanging units in the building at the same rent, but lacked the authority to do so, which constituted fraud or "some other reason" for the tenants' rent having been set low. The tenants' appeal of the portion of the decision allowing the comparables rent increase was accepted at the October 30, 2001 Board meeting and remanded with the sense of the Board that no comparables rent increase was warranted in this case. The landlord's appeal was also remanded on the issue of allowable banking only. In the Decision on Remand, the comparables increase was denied, but banking was allowed back to 1995, which was the commencement date of the assigned tenancy. The landlord's appeal of the remand decision was accepted and the case was remanded on the issue of the rent history; to grant the rent increase based on comparables approved in the first Decision prospectively only; and to waive any retroactive amounts that would be owed by the tenants due to the comparables rent increase having been approved. The tenants appeal the second remand decision, asking that the Board dismiss the case since they have vacated the building; and asserting that the facts in this case do not warrant a rent increase based on comparables, because the conduct of the former manager is legally binding on the landlord.
MSC: To recuse Commissioner Becker from consideration of this appeal. (Becker/Gruber: 5-0)
MSC: To deny the appeal. (Murphy/Gruber: 3-1; Marshall dissenting)
G. 1935 Franklin AL020489
The landlord's petition for rent increases based on increased operating expenses was granted, resulting in 7% base rent increases to the tenants in 33 units. The landlord appeals the decision, arguing that: the operating expense increase should be calculated on the base rent in effect at the time the rent increase is imposed, and not the base rent in effect at the time the petition was filed; annual increases should be included in the base rent when the allowable operating expense increase is calculated, or there is a disparate result between tenants who have already received their annual increase and those who have not; and the rent increase to the tenants in unit #503 should be based on the adjusted base rent that will be authorized in a pending comparables case that is on remand.
MSC: To deny the appeal except to remand the case to the Administrative Law Judge to make any necessary corrections to the rent amounts for unit #503 stated in the decisions in related cases. (Marshall/Wasserman: 4-0)
H. 936 Scott St., Apt. 4 AT020567
The landlords' petition for certification of capital improvement costs to five of six units was granted. One tenant appeals the decision, claiming that: mold and mildew in her unit should have been considered by the Administrative Law Judge; and the landlords had long-term notice of the problem of insufficient heat, and should not be allowed to pass through the costs of the new heating system
MSC: To deny the appeal without prejudice to the tenant filing a petition alleging a substantial decrease in housing services, if warranted. (Murphy/Becker: 5-0)
I. 218 Union St. #3 AT020530
The landlord filed a petition seeking a determination as to whether the tenant is a "Tenant in Occupancy" pursuant to Rules Section 1.21. The tenant's family resides in Sacramento, but the tenant works in San Jose and stays some of the time with friends in the Los Altos Hills. The Administrative Law Judge found that the tenant's San Francisco unit constituted his principal place of residence and the landlord's petition was denied. On appeal from the landlord, the Board reversed the decision, and found that under the facts of this case, the tenant is not a "Tenant in Occupancy" at the San Francisco unit. The tenant appeals the remand decision, arguing that: in the original decision, the Administrative Law Judge correctly decided that he was a "Tenant in Occupancy" at the San Francisco unit; the tenant failed to respond to the landlord's appeal because he did not think it necessary, the Notice of Appeal Consideration stated that there would be another hearing if the landlord's appeal was accepted; and the landlord obtained reimbursement for the retroactive rent increase by deducting from the tenant's security deposit.
MSC: To accept the appeal and remand the case to the Administrative Law Judge only to find that the rent increase was effective as of the date the Board decided the landlord's appeal, or October 1, 2002. (Gruber/Becker: 5-0)
J. 654 So. Van Ness AT020568
The tenant filed two petitions alleging that the landlord failed to perform requested repairs required by law. The Administrative Law Judge denied both petitions because the landlord had abated the defective conditions prior to the effective date of the rent increase. The tenant appeals, maintaining that the dining room and kitchen have not been painted for ten years, and that the paint is peeling in both rooms.
After discussion, it was the consensus of the Board to continue consideration of this appeal to the next meeting in order to obtain additional information from the Administrative Law Judge.
K. 1040 Dolores St. #107 & 206 AT020569 & -70
The landlords' petition for certification of capital improvement costs for nine of twenty-one units was granted, in part. Two tenants appeal the decision. The tenant in unit #107 asserts that: the rebuilding of the balconies was the result of the landlord's deferred maintenance, and not faulty deck design, as evidenced by the fact that not all of the building's decks were replaced; the building was in a state of de facto code violation; the correction of compromised conditions does not constitute an improvement for the tenant; the replacement of the retaining wall, waste and overflow unit work, roof repair, smoke detector panel and garbage chute sprinklers constituted ordinary maintenance, and not capital improvement; the costs of the retaining wall and waste and overflow unit work should only be assessed to patrons of the building's parking facilities; and costs for painting vacant units should be separated out from the ceiling painting costs. The tenant in unit #206 maintains that: the interest rate for the loan taken out to do the work was inordinately high, the funds may have been commingled with funds used to finance work on the landlords' private residence, and it appears that the loan will have been paid off within five years, so the imputed interest rate should apply after that time; the services of an independent estimator should have been utilized; the replacement of the balconies was necessitated by the landlords' deferred maintenance; the tenant derives no benefit from the new retaining wall; and the installation of lights on the decks constitutes a luxury upgrade.
MSC: To accept the appeal of the tenant in unit #206 and remand the case to the Administrative Law Judge to: issue a Technical Correction to the decision deleting the language pertaining to Minute Orders; grant the landlord actual interest at the rate of 10% for the first five years of the loan, and the imputed interest rate in effect at the time of filing of the petition for the second five years of the loan - the landlord can re-open the case at that time to prove an actual interest rate, if higher; and to hold a hearing to determine how to allocate costs of the retaining wall, taking into account non-tenant users. (Becker/Marshall: 3-2; Gruber, Murphy dissenting)
MSC: To accept the appeal of the tenant in unit #107 and remand the case to the Administrative Law Judge to issue a Technical Correction to the decision deleting the language pertaining to Minute Orders; and to hold a hearing to determine how to allocate costs of the retaining wall, taking into account non-tenant users. (Becker/Marshall: 3-2; Gruber, Murphy dissenting)
VI. Public Hearing
Proposed Amendments to Rules and Regulations Section 1.18
The Board commenced a Public Hearing on proposed amendments to Rules and Regulations Section 1.18 at 7:59 p.m., which concluded at 8:10 p.m. Former Commissioner Aung authored the proposed amendment, because the Section as currently written permits evictions for substantial rehabilitation to occur before any hearing is held or the actual costs of the work are certified. Tenants can therefore be evicted and not realize they have the right to reoccupy the unit, although the subsequent petition for exemption may be denied due to the failure of the owner to meet the expenditure requirements. The proposed amendment provides
guidance to landlords and tenants by creating a rebuttable presumption that the costs on the approved construction permits are the estimated cost of the proposed work. The proposal also requires that a landlord who recovers a unit or units pursuant to Section 37.9(a)(12) must file a petition for exemption within a certain period of time after recovery of the unit or be deemed to have wrongfully recovered possession in violation of Section 37.9(f).
Two members of the public testified as follows:
A. Attorney Gen Fujioka of the Asian Law Caucus told the Board about a case he litigated where the whole trial was about how much work was enough to meet the standard for substantial rehabilitation, since the Judge said that Rules Section 1.18 only applied upon the completion of the work. Mr. Fujioka told the Board that a standard is necessary so that everyone knows whether the work constitutes capital improvement with the right to return, or substantial rehabilitation, with the tenant having no right to reoccupy. Mr. Fujioka also urged the Board to use the amount in the permit application, since the landlord designates that amount and pays the permit fee based on that amount.
B. Robert Pender of PRO said that he supported the proposed amendment because it added protections for landlords and tenants, which leads to better relationships.
After discussion resulting in a few amendments to the proposed language, the Board voted as follows:
MSC: To pass the proposed amendments to Rules and Regulations Section 1.18, with minor changes. (Becker/Marshall: 5-0)
The amended regulation reads as follows below:
Section 1.18 Substantial Rehabilitation
(Amended August 29, 1989; September 5, 1989; September 26, 1989; June 18, 1991; renumbered effective February 1, 1995; amended February 4, 2003.)
"Substantial rehabilitation" means the renovation, alteration or remodeling of a building containing essentially uninhabitable residential rental units of 50 or more years of age which require substantial renovation in order to conform to contemporary standards for decent, safe and sanitary housing in place of essentially uninhabitable buildings. Substantial rehabilitation may vary in degree from gutting and extensive reconstruction to extensive improvements that cure substantial deferred maintenance. Cosmetic improvements alone such as painting, decorating and minor repairs, or other work which can be performed safely without having the units vacated, do not qualify as substantial rehabilitation.
Improvements will not be deemed substantial unless the cost of the work for which the landlord has not been compensated by insurance proceeds equals or exceeds seventy-five percent (75%) of the cost of newly constructed residential buildings of the same number of units and type of construction, excluding land costs and architectural/engineering fees. The determination of the cost of newly constructed residential buildings shall be based upon construction cost data reported by Marshall and Swift, Valuation Engineers, as adapted for San Francisco and posted in January and June of each year in the Department of Building Inspection for purposes of determining permit fees. The schedule in effect on the date of the Notice of Completion of the improvements shall apply. Where the landlord is seeking to recover possession of a rental unit under Section37.9 (a)(12) of the Rent Ordinance, improvements will not be deemed substantial unless the estimated cost of the proposed work for which the landlord will not be compensated by insurance proceeds equals or exceeds seventy-five percent (75%) of the cost of newly constructed residential buildings of the same number of units and type of construction, excluding land costs and architectural/engineering fees, based upon construction cost data reported by Marshall and Swift. For purposes of such evictions under 37.9(a)(12) of the Rent Ordinance, there shall be a rebuttable presumption that the cost stated for the work in the applicable approved construction permits is the estimated cost of the proposed work. For purposes of determining whether improvements are substantial under Section 37.9(a)(12), the determination of the cost of newly constructed residential buildings shall be based upon construction cost data reported by Marshall and Swift, Valuation Engineers, as adopted for San Francisco. The schedule in effect on the date the notice to quit is served shall apply. Where the landlord is seeking to recover possession of several units in the same building under Section 37.9(a)(12) of the Rent Ordinance for one proposed substantial rehabilitation project, the schedule posted and in effect on the date of service of the first notice of termination shall apply. A landlord who recovers possession of a rental unit under Section 37.9(a)(12) must file a petition with the Rent Board for exemption based on substantial rehabilitation within the earlier of: (i) two years following recovery of possession of the rental unit; or (ii) one year following completion of the work. A landlord who fails to file a petition within such time and thereafter obtain a determination of exempt status from the Board shall be rebuttably presumed to have wrongfully recovered possession of the tenant's rental unit in violation of Section 37.9(f).
VII. Communications
In addition to correspondence concerning cases on the calendar, and comments submitted for the Public Hearing, the Commissioners received the following communications:
A. A log of all petitions for substantial rehabilitation exemption from the Ordinance filed at the Board.
B. Proposed Rules and Regulations to implement the Ammiano legislation, which will take effect on February 21, 2003, along with explanatory Memoranda from staff.
VIII. Director's Report
Executive Director Grubb went over the proposed departmental budget for the next fiscal year. Mr. Grubb informed the Board that the budget would stay about the same as last year's, since salary increases are not anticipated. The Department will be operating with a surplus due to several one-time costs in last year's budget, and reductions in the City's overhead charges.
IX. Old Business
The Commissioners continued discussion of a proposal by Commissioner Marshall that would allow Alternate Board members to be "Floaters," which would enable them to vote in the stead of either of the voting Commissioners should one be absent. Deputy Director Wolf conveyed Staff's opinion that this would require an Ordinance change, and could not be accomplished by amending the Rules and Regulations. Commissioner Murphy expressed some concerns regarding Brown Act and Sunshine Ordinance issues. Executive Director Grubb reported that he has asked Deputy City Attorney Marie Blits to examine these issues. If there are not insurmountable difficulties, Ms. Blits will be asked to draft an amendment to the Ordinance and Mr. Grubb will seek a sponsor for the legislation on the Board of Supervisors.
IV. Remarks from the Public (cont.)
B. Robert Pender of PRO told the Board that he would be going before the Board of Supervisors to express his opinion that every Commissioner should have an Alternate.
X. New Business
The Board members were given a set of proposed regulations to implement the Ammiano legislation, which will take effect on February 21, 2003, drafted by Senior Administrative Law Judge Tim Lee. The proposed regulations track the Ammiano amendments to the Rent Ordinance except for the provisions regarding interest on capital improvement work.
MSC: To put the proposed amendments to the Rules and Regulations to implement the Ammiano legislation out for Public Hearing on March 4, 2003. (Gruber/Marshall: 5-0)
XI. Calendar Items
February 11, 2003 - NO MEETING
February 18, 2003
11 appeal considerations
XII. Adjournment
President Wasserman adjourned the meeting at 8:52 p.m.