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
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.
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.
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.
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
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.
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.
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.
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.
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.