Section 1.18 New Construction and Substantial Rehabilitation
(Amended August 29, 1989; September 5, 1989; September 26, 1989; June 18, 1991; renumbered effective February 1, 1995; amended February 4, 2003; amended April 14, 2015; retitled and amended June 16, 2020)
For the purpose of determining whether or not a rental unit is exempt from rent regulations pursuant to Rent Ordinance Section 37.3(g), the following definitions shall apply:
(a) “New Construction” refers to a newly constructed rental unit for which a Certificate of Occupancy was first issued after June 13, 1979, provided there was no residential use of the unit prior to the issuance of the Certificate of Occupancy; or a live/work unit in a building where all of the following conditions have been met:
(1) a lawful conversion to commercial/dwelling use occupancy has occurred;
(2) a Certificate of Occupancy has been issued by the San Francisco Department of Building Inspection after June 13, 1979; and
(3) there has been no residential tenancy in the building of any kind between June 13, 1979 and the date of issuance of the Certificate of Occupancy.
(b) “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 the cost schedule of the Department of Building Inspection required by Section 107A.2 of the San Francisco Building Code (the "DBI Cost Schedule") 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 Section 37.9(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 the DBI Cost Schedule. 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 the DBI Cost Schedule. 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 that the property has undergone a substantial rehabilitation 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).