A. SB 1745: 60 Day Notice of Rent
Increase
Senior Administrative Law Judge Tim Lee
went over the provisions of SB 1745, which will take effect on January 1,
2001. The new law allows landlords to serve rent increases notices by mail;
however, 5 additional days must be added to the required notice period.
Additionally, a 60 day notice will now be required for any increase which
alone or cumulatively within a year results in a tenant's rent being increased
by more than 10%. Currently, if a notice of rent increase of less than 30
days is challenged later by a tenant, the Administrative Law Judge will
make the increase effective thirty days after receipt of the notice. This
can have the effect of voiding an otherwise allowable annual increase given
the next year, because it will have taken effect less than one year after
the prior increase. For example, if a increase was given the following year,
effective December 1, 2000, it would be null tenant received a notice of
rent increase on November 7, 1999 to take effect on December 1, 1999, the
Administrative Law Judge would determine that the increase took effect December
7, 1999 and order any necessary refund of amounts overpaid. If an and void
because 12 months would not have passed since the effective date of the
prior increase. The Landlord Commissioners on the Board suggested that,
to avoid any problems, the safest course of action would be for landlords
to give 60 days notice of all rent increases after January 1, 2001.
B. Fair Return
At their meeting on August 22nd,
the Commissioners had discussed the presence of Proposition H on the November
ballot, which would prohibit certification of most capital improvement costs
unless the landlord can prove that they are necessary in order to receive
a constitutionally required fair return. It was suggested that the Board
consider promulgating Rules and Regulations addressing this issue. At that
time, President Wasserman asked that staff prepare a packet for the Commissioners,
including a summary of important court cases in this area, copies of any
such cases, and an outline of how other rent controlled jurisdictions handle
this issue. Senior Administrative Law Judges Sandy Gartzman and Tim Lee
prepared a Memorandum for the Board, along with relevant cases and articles.
Their Memorandum discussed the historical use of the NOI (maintenance of
net operating income) standard of fair return, the wide acceptance of that
standard, and the fact that the NOI standard is mandated by Proposition
H. They also discussed problems with using that standard in San Francisco,
which has never had vacancy control nor registration of rents, especially
in the area of obtaining income and expense records back to 1978.
By telephone, Commissioner Justman conveyed
his feeling that, if Proposition H passes, the Board should have something
ready for the public expressing the Board's interpretation. Commissioner
Murphy responded that this is a complicated issue, and he feels a long way
from understanding it; he would feel more comfortable having testimony from
economic experts. Commissioner Lightner said that she thought the property
owner community would rather have well thought-out regulations than something
right away; Commissioner Gruber was concerned that, even if a landlord had
the records, all buildings are run differently. Commissioner Marshall pointed
out that, in the case of the Costa-Hawkins legislation, the law could be
applied on a case-by-case basis. Proposition H is different in that it constitutes
a whole new change in the rent law and, the Commissioners should not delay
implementing regulations. President Wasserman stated that she is only interested
in defining fair return for purposes of capital improvement petitions in
the event Proposition H passes; there have not been enough fair return petitions
filed exclusive of capital improvements to warrant enactment of Regulations.
Discussion then focused on problems associated
with obtaining income and expense records over 20 years old, especially
for landlords who didn't own the building at that time. Additionally, in
buildings where there have been any vacancies since 1979, it may be difficult
for landlords to justify an increase under Proposition H. Commissioner Lightner
asked if it would be possible for the Board to go beyond the explicit requirements
of the Proposition if the standard is impossible to meet on its face. For
example, could the Board extrapolate base year income and expenses for those
landlords who cannot provide the documentary evidence? There was a feeling
among some Landlord Commissioners that it may not be the Board's job to
craft regulations to legitimize what they believe to be an unconstitutional
provision. Some Tenant Commissioners expressed the view that, should Proposition
H pass and become part of the Rent Ordinance, it is incumbent upon the Board
to effectuate procedures that make it work for the public.
After discussion, it was the consensus
of the Board that, even if Proposition H passes on November 7th,
the Rent Board will continue to process capital improvement petitions as
usual until the effective date of the legislation. Commissioner Murphy informed
the Commissioners and staff that the landlord community will be filing a
legal challenge right away, including seeking injunctive relief. President
Wasserman felt that the Board should wait to see what happens before adopting
regulations, unless it takes too long. Discussion of this issue will continue,
if necessary, at the November 14th Board meeting.
III. Remarks from the Public
(cont.)
- Andy Braden said that he knows lots of owners
who've owned their buildings since 1978, and some have retained their records.
Since he would like to force the Board to take action, he's tempted to file
a petition for fair return based on tax returns, in order to "make
them deal with it."
- Robyn Dorius informed the Board that she
bought a building in 1993 through bankruptcy court, and that there were
no records. She and her husband have spent in excess of $250,000 on capital
improvements; they do all the labor themselves; and have not made a profit
in 7 years. She asked how the Board was going to help someone in her situation
should Proposition H pass.