March 06, 2001
THE SAN FRANCISCO RESIDENTIAL RENT
STABILIZATION & ARBITRATION BOARD
PROPOSED AMENDMENTS TO NEW RENT BOARD
RULES AND REGULATIONS ยง7.22 PURSUANT TO NOVEMBER 2000 PROPOSITION H, TO BE EFFECTIVE
ONLY IF THE STAY OF IMPLEMENTATION OF PROPOSITION H ORDERED ON DECEMBER 20,
2000 IN QUIGG VS. CITY AND COUNTY OF SAN FRANCISCO, ET AL., SUPERIOR
COURT CASE NUMBER 316928, IS NO LONGER IN EFFECT.
Section 7.22 Determination of Net
Operating Income
(a) To
determine the Net Operating Income during the Base Year, the actual Operating
Expenses for the Base Year shall be deducted from the Gross Income for the Base
Year. To determine the Net Operating Income during the Current Year, the actual
Operating Expenses for the Current Year shall be deducted from the Gross Income
for the Current Year.
(b) Operating expenses and/or
Gross Income in the Base year may be adjusted as follows:
(1) If a landlord's Operating
Expenses in the Base Year were unusually high or low in comparison to other
years, adjustments may be made in calculating such expenses so the Base Year
Operating Expenses reflect average expenses for the property over a reasonable
period of time. In determining whether to adjust Operating Expenses in the Base
Year, the Administrative Law Judge shall consider the following factors:
(i) Whether the landlord made
substantial capital improvements in the Base Year, which were not reflected
in the rent levels;
(ii) Whether substantial repairs
were made in the Base Year due to damage caused by natural disaster or vandalism;
(iii) Whether maintenance and
repairs in the Base Year were below accepted standards so as to cause significant
deterioration in the qualify of housing services; and
(iv) Whether other expenses
were unreasonably high or low in the Base Year notwithstanding the following
of prudent business practice.
(2) If the Base Year rent
for any unit was significantly below the rents of comparable units in the same
general area due to extraordinary circumstances such as a special relationship
between the landlord and tenant, fraud, mental incompetency, or some other reason,
adjustments may be made in calculating the Gross Income to reflect rents for
comparable units. The length of occupancy of the current tenant, size and physical
condition of the unit and building, and services paid for by the tenant are
important factors (though not the exclusive ones) in determining whether or
not a unit is comparable. Evidence of reasonably comparable units is required,
but perfect comparability is not required.
(3) Where Net Operating Income
is less than 50% of Gross Income in the Base Year, after making adjustments
as permitted by subsections (1) and (2) of this Section, Gross Income shall
be adjusted upward to twice the amount of adjusted Base Year Operating Expenses
for purposes of determining Base Year Net Operating Income.