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October 19, 2000

October 19, 2000p> 

 

 

MINUTES OF THE SPECIAL MEETING OF

THE SAN FRANCISCO RESIDENTIAL RENT

STABILIZATION & ARBITRATION BOARD,

Tuesday, October 19, 2000 at 6:00 p.m. at

25 Van Ness Avenue, Suite 320

 

I. Call to Order

President Wasserman called the meeting to order at 6:13 p.m.

II. Roll Call

Commissioners Present: Becker; Gruber; Lightner; Wasserman.

Commissioners not Present: Hobson; Justman; Mosser.

Staff Present: Gartzman; Lee; Wolf.

Commissioner Murphy appeared on the record at 6:15 p.m.; Commissioner Marshall arrived at 6:20 p.m. Commissioner Gruber went off the record at 7:35 p.m. Commissioner Justman participated in the meeting by telephone for approximately 10 minutes at the commencement of the discussion of Fair Return, under the Old Business portion of the Agenda.

III. Remarks from the Public

  1. Nancy Tucker, of the Small Property Owners of San Francisco, said that small owners are scared because of the presence of several pro-tenant Initiatives on the ballot. She stated that, according to SPUR, 25,000 units have been taken off the rental market; most of these are in small buildings.
  2. Andy Braden, who represents landlords at Rent Board hearings, asked what "fair return" means and how one calculates it.
  3. Landlord Robyn Dorius inquired about the 5 fair return cases that have been filed at the Rent Board.

IV. Old Business

      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.)

    1. 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."
    2. 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.

V. Calendar Items

October 24, 31 & November 7, 2000 - NO MEETINGS

November 14, 2000

10 appeal considerations (1 cont. from 10/3/00; 2 cont. from 10/17/00)

Old Business: Fair Return

VI. Adjournment

President Wasserman adjourned the meeting at 7:45 p.m.

 

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