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Fact Sheet 5 - Landlord Petitions and Passthroughs

Fact Sheet 5 - Landlord Petitions and Passthroughs

Overview of Landlord Petitions

 

For certain types of rent increases, landlords must file a petition at the Rent Board before serving the tenants with a notice of the increase. The tenants are not required to pay the increase until the Rent Board approves it, but if approved, the rent increase will be retroactive to the effective date specified in a valid notice of increase.

 

There are six types of rent increases that require the filing of a landlord petition. These are:

  • Capital Improvement Passthrough;
  • Operating and Maintenance Expense Increase;
  • Special Circumstances Increase Based on Rents for Comparable Units;
  • Rent Increase Based on the Past Rent History of a Proposition I Affected Unit;
  • Utility Passthrough (requires the filing of either a petition or a worksheet); and

·       Rules and Regulations Section 1.21 Increase where there is no Tenant in Occupancy.

 

A landlord is also required to file a petition for a Rent Board determination of:

·       Substantial Rehabilitation Exemption; and

·       Extension of Time to Complete Capital Improvement Work.

 

A landlord may elect to file a petition requesting the Rent Board to determine:

  • whether a rent increase under Ordinance Section 37.3(d) (the Costa-Hawkins Rental Housing Act) and/or Rules and Regulations Section 6.14 is justified;
  • whether a property or rental unit is exempt from the Rent Ordinance;
  • whether a tenant is entitled to protected status from an owner/relative move-in eviction under Ordinance Section 37.9(i)(4) or 37.9(j)(3); or
  • whether to approve a supplemental hotel visitor policy for an SRO.

 

In addition, a landlord may elect to file a petition for a Rent Board determination of the tenant’s current lawful rent, provided that the landlord has evidence of the complete rent history for the tenancy. A landlord may also file a petition for a Rent Board determination of the amount of the rent reduction to which the tenant is entitled when the landlord severs, reduces or removes certain housing services supplied in connection with the use or occupancy of a unit, such as parking, storage or specified common areas.

 

Landlords are not required to file petitions for Rent Board approval of rent increases based on general obligation bond measure passthroughs or water revenue bond passthroughs or certain utility passthroughs. However, the landlord must use the worksheet forms provided by the Rent Board to calculate these rent increases and must file completed Utility Passthrough Calculation Worksheets with the Rent Board before serving the tenants with a notice of rent increase for the utility passthrough.

 

There is no charge for filing a petition or worksheet. Landlord petition and worksheet forms are available at the Rent Board’s office or on our website at www.sfrb.org or through our Fax Back service by calling 252.4660.

 

 


Capital Improvement Petitions

 

A landlord may petition the Rent Board to pass through to tenants the cost of capital improvement work performed at the property. A capital improvement is one that materially adds to the value of the property, appreciably prolongs its useful life, or adapts it to new uses, and which may be amortized over the useful life of the improvement of the building. Examples of capital improvements include new windows, a roof replacement and exterior painting. Repair and maintenance work, such as replacing a broken windowpane, patching a roof or clearing a clogged pipe, are not capital improvements.

 

Capital Improvement Petitions must be filed within five years of the completion of the capital improvement work. A petition cannot be filed until the work is entirely completed and paid for. Proof of cost and proof of payment must be submitted for each capital improvement listed in the petition. Proof of cost can be documented by a bill, invoice, contract, receipt, statement, etc. Proof of payment is best documented with a copy of a cancelled check.

 

For each petition totaling more than $25,000.00 (exclusive of interest), the landlord must provide for each capital improvement item included in the petition either copies of competitive bids received for work or materials OR copies of time and materials billing for work performed by all contractors and subcontractors OR payment for the cost of an estimator to be hired by the Rent Board. It is permissible to have competitive bids and/or time and materials billings for only some of the items in a petition and to pay an estimator fee for the remaining items. The amount of the estimator fee is based on the cost of the items needing an estimate, which may be less than the total amount claimed in the petition.

 

There are different rules for properties with 1-5 residential units than for properties with 6 or more residential units. To determine the number of units, all residential units on the same property must be counted, even if they are in different buildings. Commercial units do not count for purposes of this rule, although a portion of the cost must be allocated to commercial units that benefit from the capital improvement work.

 

Properties with 1-5 Residential Units:  100% of the certified capital improvement costs may be passed through to the tenants of properties with one to five residential units. The amount of the passthrough may not exceed the greater of $30.00 or 5% of a tenant’s petition base rent in any 12-month period. Where certified costs exceed this limit, the landlord must impose the passthrough in phases. For large passthroughs, it may take the landlord several years before the passthrough is fully imposed.

 

Properties with 6 or More Residential Units:  In general, only 50% of the certified capital improvement costs may be passed through to the tenants of properties with six of more residential units. The amount of the passthrough may not exceed the greater of $30.00 or 10% of a tenant’s petition base rent in any 12-month period. However, the landlord should be aware that a majority of the tenants in any unit may elect an alternative passthrough method based on 100% of the certified capital improvements costs, to be imposed at the rate of 5% of the tenant’s base rent per year, with the total passthrough limited to 15% of the tenant’s base rent.

 

For properties with six or more residential units, if the cost of a project is reasonably expected to exceed $25,000.00 multiplied by the number of units on the parcel or in the building, the landlord must inform each tenant and the Rent Board in writing of the anticipated costs of the work. The landlord’s notice must occur within 30 days after such determination is made by the landlord.

 

100% of the cost of the following types of capital improvement work may be passed through to the tenants without regard to the number of residential units on the property:

 

Seismic Work Required by Law and Other Work Required by Laws Enacted After 11/14/02: 100% of the cost of seismic work that is required by law may be passed through to the tenants, regardless of the number of units in the property. The same is true for other non-seismic work required by laws enacted after 11/14/02. The amount of the passthrough may not exceed the greater of $30.00 or 10% of a tenant’s petition base rent in any 12-month period.

 

Energy Conservation Work: For particular energy conservation work approved by the Commission on the Environment, 100% of the certified costs may be passed through to tenants of any property, regardless of the number of units. There is no annual limit on the amount of the passthrough.

 

Imposing a Capital Improvement Passthrough: To impose a capital improvement passthrough, the landlord must first file a Capital Improvement Petition at the Rent Board, and then issue a written notice of increase to the affected tenants. The notice of rent increase can be served at any time after the petition is filed, even after the Rent Board issues a decision. However, if served before the petition is filed, the notice is void and cannot be the basis for a lawful rent increase.

 

A capital improvement passthrough can be imposed at any time and does not have to coincide with the tenant’s rent increase anniversary date. Tenants are not required to pay the passthrough until a final decision or order is issued by an Administrative Law Judge after a hearing. However, the passthrough, if approved, will be retroactive to the effective date of a valid notice of increase.

 

A capital improvement passthrough does not become part of the tenant’s base rent and should not be included in the base rent when calculating an annual or banked rent increase. The capital improvement passthrough should be listed separately from the base rent in every notice of rent increase. Once the passthrough is fully amortized, or paid back to the landlord, it must be discontinued. If the landlord fails to discontinue the passthrough at the proper time, the landlord is liable to the tenant for the overpayments.

 

Some Tenants Are Not Eligible for Passthrough: A new tenant cannot be charged for a capital improvement completed before the tenancy began since the owner was free to set a new market rent at the time the unit was vacant. In addition, capital improvement costs cannot be passed through to units that are first rented during the construction period or rented within six months of the commencement of work, unless ownership has changed in that period and the change of ownership occurred after the new tenancy commenced.

 

Interest Allowed on Capital Improvement Costs: When calculating a capital improvement passthrough, landlords are entitled to add a reasonable rate of interest to capital improvement costs. Interest is computed by one of two methods. If the money to do the work was borrowed with a fixed rate loan, the actual interest cost up to 10% can be used. If the interest rate on a loan is variable, or if no funds were borrowed to pay for the work, then the imputed interest rate posted by the Rent Board each year must be used. Please note that credit card charges are subject to the imputed interest rate, since they have variable rates of interest. Also, no interest is allowed for uncompensated labor costs.

 

Uncompensated Labor: Landlords may include the cost of uncompensated labor in a Capital Improvement Petition. Uncompensated labor is labor performed for no remuneration of any kind. In order to make a claim for uncompensated labor costs, the petition must include a log of dates on which the work was performed. The log should also include the number of hours worked each day and the nature and location of the work performed.

 

If the uncompensated worker is licensed in the particular craft for which costs are being claimed, the landlord must provide a copy of the worker’s current license and evidence of the prevailing wage rate for that particular craft. If the uncompensated worker is not licensed, the landlord must use the uncompensated labor rate posted by the Rent Board, which is based on prevailing labor rates as established by the California Department of Industrial Relations.

 

 

Operating and Maintenance Expense Petitions

 

When the annual allowable increase does not completely cover the landlord’s yearly increase in operating and maintenance expenses for a property, a landlord may petition for an additional base rent increase of up to 7%. This is known as an Operating and Maintenance or O&M increase. In determining whether an O&M increase is justified, all operating expenses must be considered, including: property taxes, debt service or mortgage, repairs, maintenance, insurance, pest control, garbage, water, etc. Electric and gas costs are not included in the calculation since an increase in utility costs may be passed through to the tenant by a separate petition.

 

In order to qualify for an O&M increase, the landlord must demonstrate that total O&M expenses increased from one twelve month period to the next by more than the amount of the annual allowable increase. Two consecutive calendar years or a 24-month period prior to filing the petition must be used for the comparison of O&M expenses. For example, if filing a petition in 2010, a landlord could compare the total O&M expenses for 2009 to the total for 2008. Alternatively, the landlord could use a recent 24-month period, such as July 2008 through June 2009 compared to July 2009 through June 2010. Please note that selection of a particular 24-month period in order to create exaggerated results is disfavored by the Board.

 

To determine the per unit O&M increase, the total cost increase is calculated and then divided by 12 months. That amount is then divided by the number of units in the building. Costs are allocated to the total number of units in the building, including commercial units, not just to the residential units.

 

If the per unit increase is not more than the annual allowable increase at the time the petition was filed, no additional increase based on O&M expenses will be granted. If the increase is more than the annual allowable increase, then an additional increase of up to 7% may be granted. The same landlord is limited to a total O&M increase of 7% in any five-year period for any unit in a property with six or more residential units.

 

If an O&M increase is justified, it becomes part of the tenant’s base rent. The O&M increase can only be imposed on the tenant’s anniversary date and only after serving the tenant with a proper written notice of rent increase. The landlord must file the O&M petition before serving the notice of increase. The notice can be served at any time after the petition is filed, even after the Rent Board issues a decision. If the notice is issued before the petition is filed, the notice is void and cannot be the basis for a lawful O&M increase.

 

Tenants who lived in the building during any part of Year 1, the first comparison year, may be given an O&M increase. Tenants who moved into the building during Year 2, the second comparison year, may not be given an O&M increase unless ownership changed during Year 2 after the tenant moved in. Only one O&M increase based on costs related to the transfer of ownership of a property is allowed.

 

 

 

Helpful Hints for Landlords Planning to File a

Capital Improvement Petition or Operating & Maintenance Petition

 

·  For owners or managers of more than one property, get separate bills, invoices, contracts, receipts, statements, etc. for each expense at each property. Alternatively, make sure that the costs attributable to separate properties are kept separate and can be identified as pertaining to a particular property. Likewise, make payments for each property separately so that cancelled checks pertain to one property only.

 

·  Ask the contractor or service provider to clearly describe the exact nature of the work performed and to clearly identify the location of the property where the work is performed. In addition, where multiple improvements and/or repairs are listed on a single invoice, an itemization of costs should be provided. This is particularly helpful if the expenses are challenged.

 

·  At the time that checks are prepared, make a notation on the memo line to identify the expense. For example, write “exterior painting – 25 Van Ness Ave.” Or, identify the invoice number that corresponds with the payment.

 

·  Make all payments by check or credit card.  Cash payments are difficult to document.

 

·  At the time of purchase of a property, if you anticipate filing a petition, you should require documentation of capital improvement and O&M costs as a condition of closing escrow. It is often difficult to obtain these records from the prior owner after the transaction is completed.

 

·  Abate code violations promptly. The Rent Board cannot certify capital improvement costs if the work was required to correct a code violation for which a notice of violation was issued and remained unabated for 90 days unless the landlord made timely good faith efforts within the 90-day period to commence and complete the work but was not successful in doing so because of the nature of the work or circumstances beyond the control of the landlord. In addition, tenants may object to imposition of an O&M increase if the landlord has failed to perform requested repair and maintenance that is required by law.

 

 

 


 

A rent increase that exceeds allowable annual and banked amounts may be justified, even in the absence of an increase in operating and maintenance expenses, if it is established that the rent for a unit is significantly below those of comparable units in the same general area due to extraordinary circumstances. A Special Circumstances rent increase will be approved where the landlord proves that (a) there were extraordinary circumstances such as a special relationship between the landlord and tenant, fraud, mental incompetency or other extraordinary circumstances unrelated to market conditions AND (b) that the initial rent on a unit was set very low or the rent was not increased or was increased only negligible amounts during the tenancy as a result of the extraordinary circumstances AND (c) that the current rent for the unit is significantly below those of comparable units in the same general area with similar lengths of tenancy. The mere fact that a long-standing tenant is paying significantly less than market rent is not considered an extraordinary circumstance.

 

Before imposing a rent increase based on rents for comparable units, the landlord must first file a Special Circumstances Petition at the Rent Board and then issue a notice of rent increase to the affected tenants. The notice of rent increase can be served at any time after the petition is filed, even after the Rent Board issues a decision. However, if served before the petition is filed, the notice is void and cannot be the basis for a lawful rent increase.

 

Tenants may object to imposition of a Special Circumstances rent increase based on the landlord’s failure to perform requested repair and maintenance that is required by applicable state and local law. Tenants can also defend the petition by proving that the initial base rent was not set low and/or was not set low due to special circumstances, as claimed by the landlord. If a tenant disagrees with the amount of the landlord’s proposed rent increase, the tenant can provide his or her own evidence of rents for reasonably comparable units.

 

If a petition based on special circumstances is granted, the base rent will be reset to an amount determined by the Administrative Law Judge. Such a rent increase may be granted only one time during the tenancy and precludes the imposition of all annual rent increases, banked increases and operating and maintenance increases that the landlord could have imposed prior to filing the Special Circumstances Petition.

 

 

 

Helpful Hints for Landlords Planning to File

a Special Circumstances (Comparable Rents) Petition

 

  Extraordinary circumstances can be established through reliable written evidence and/or oral testimony of witnesses with personal knowledge surrounding the creation and/or circumstances of the tenancy. All written evidence must be attached to the petition.

 

To show that the tenant’s rent was set low, it may be necessary to present evidence of market rents for reasonably “comparable” units in the same building and/or general neighborhood at the time the subject unit was initially rented. Sometimes, evidence of current rents for reasonably “comparable” units can be used to show that the initial rent had to have been set low. This evidence must be attached to the petition.

 

  To show that the tenant’s rent was kept low, it will be necessary to provide documentary evidence of the tenant’s full rent history such as leases, notices of rent increase, rent ledgers, rent receipts, etc. This evidence must be attached to the petition.

 

  A reasonably “comparable” unit includes one where the length of occupancy of the current tenant is similar to the length of occupancy of the tenant subject to the petition and where the size and physical condition of the “comparable” unit and building and the services/amenities enjoyed by the tenant of the “comparable” unit are substantially similar to those of the tenant subject to the petition. Although perfect comparability is not required, if the length of occupancy is not substantially similar, then the units do NOT provide a fair comparison.

 

  There are various ways to gather evidence of rents for reasonably “comparable” units which have a similar length of occupancy including, but not limited to: examining other similar units in the same building as the subject unit; canvassing the neighborhood and inquiring at buildings which are similar in size and condition to the subject building; contacting other landlords or tenants you know who rent units you believe to be reasonably “comparable” to the subject unit; contacting trade organizations and/or rental agencies and/or management companies which may have old leases or other historical records of rents charged for reasonably “comparable” units in the same neighborhood as the subject unit; reviewing classified ads in San Francisco newspapers from the same time period that the subject tenancy began and calling the phone number listed to see if the relevant information is currently available. The Rent Board staff is not permitted to complete or fill in your petition for you, nor do we maintain records of rents for reasonably comparable units.

 

 

 

 

Proposition I was passed by the voters of San Francisco on November 8, 1994, and took effect on December 22, 1994. Proposition I repealed the exemption from rent control for owner-occupied buildings containing 4 units or less, and established the base rent for Newly Covered Units as the rent that was in effect as of May 1, 1994.

 

Landlords of Proposition I Affected Units may petition the Rent Board for a rent increase in excess of the annual allowable increase where the landlord did not increase the tenant’s rent between 5/2/89 and 5/1/94. Where there was no increase between 5/2/91 and 5/1/94, the landlord may be entitled to an increase of 7.2%. Where there was no increase between 5/2/90 and 5/1/94, the landlord may be entitled to an increase of 11.2%. Where there was no increase between 5/2/89 and 5/1/94, the landlord may be entitled to an increase of 15.2%.

 

If a rent increase based on the past rent history of a Proposition I Affected Unit is justified, it becomes part of the tenant’s base rent and can only be imposed on the tenant’s anniversary date after serving the tenant with a proper written notice of rent increase. The landlord must file the Proposition I petition before serving the notice of increase. The notice can be served at any time after the petition is filed, even after the Rent Board issues a decision. If the notice is served before the petition is filed, the notice is void and cannot be the basis for a lawful rent increase.

 

 


Petition for Approval of Utility Passthrough

and Utility Passthrough Worksheets

 

Where a landlord pays for gas, electricity and/or steam provided to the tenant’s unit and/or to the common areas of the property, the landlord may recover the increase in the cost of these utilities from the tenants in the form of a utility passthrough. A utility passthrough is a dollar for dollar passthrough to the tenants of any increase in the landlord’s costs for utilities based on a comparison of utility costs from one calendar year, known as the “base year”, to another calendar year, known as the “comparison year.” There is a specific method for calculating a utility passthrough that must be followed in order for the passthrough to be valid.

 

The landlord must file either a Rent Board Petition for Approval of Utility Passthrough or a Utility Passthrough Calculation Worksheet form, depending on the tenant’s base year. The method for determining whether to file a petition or a worksheet is explained in the instructions for completing each form.

 

The petition or worksheet must be filed before giving a legal notice of rent increase for the utility passthrough. The utility passthrough does not become part of the tenant’s base rent and must not be included in the rent when calculating an annual or banked rent increase. A utility passthrough can only be imposed at the same time as the annual allowable increase and applies only for the 12-month period after it is imposed. After 12 months, the utility passthrough must be discontinued. If the utility passthrough is not discontinued after 12 months, the tenant can file a petition at the Rent Board alleging an improper utility passthrough and seeking a refund of overpayments.

 

For more specific details on utility passthroughs, see Rent Board Fact Sheet 9. Fact Sheet 9 is available at the Rent Board’s office or on our website at www.sfrb.org or through our Fax Back service by calling 252.4660.

 

 

1.21 Tenant In Occupancy Petitions

 

A landlord is permitted to impose an unlimited rent increase pursuant to Rules and Regulations Section 1.21 when there is no tenant in occupancy of the rental unit. The landlord must first file a petition at the Rent Board seeking a determination that there is no tenant in occupancy prior to issuing a notice of rent increase on such grounds. The notice of rent increase can be served only after the petition is filed, or the landlord can wait until after the Rent Board issues a decision. If the notice is served before the petition is filed, the notice is void and cannot be the basis for a lawful rent increase. If the notice is properly served after the petition is filed, the rent increase will be inoperative until the Rent Board issues a decision determining that there is no tenant in occupancy. However, if the petition is granted, any sums owing will be retroactive to the effective date of a valid notice of increase.

 

A tenant in occupancy is a person who actually resides in the rental unit as his or her “principal place of residence” and who is entitled by written or oral agreement, subtenancy approved by the landlord, or by sufferance, to occupy the unit to the exclusion of others. Occupancy does not require that the individual be physically present in the unit at all times or continuously, but the unit must be the tenant’s usual place of return.

 

The landlord will have to make a threshold showing that the tenant does not reside in the unit as his/her principal place of residence, and then the burden will shift to the tenant to show that the unit is his/her principal place of residence and “usual place of return.” When considering whether a tenant occupies a rental unit as his or her “principal place of residence,” the Rent Board considers the totality of the circumstances, including, but not limited to the following elements:

 

·  whether the subject premises are listed as the individual’s place of residence on any motor vehicle registration, driver’s license, voter registration, or with any other public agency, including Federal, State and local taxing authorities;

 

·  whether utilities are billed to and paid by the individual at the subject premises;

 

·  whether all of the individual’s personal possessions have been moved into the subject premises;

 

·  whether a homeowner’s tax exemption for the individual has been filed for a different property;

 

·  whether the subject premises are the place the individual normally returns to as his/her home, exclusive of military service, hospitalization, vacation, family emergency, travel necessitated by employment or education, or other reasonable temporary periods of absence; and/or

 

·  whether there is credible testimony from individuals with personal knowledge, or other credible evidence, that the tenant actually occupies the rental unit as his or her principal place of residence.

 

A compilation of these elements lends greater credibility to the finding of “principal place of residence” whereas the presence of only one element may not support such a finding. Reasonable, temporary absences from the unit, such as for work, travel or education, will not warrant a determination that the unit is not the tenant’s principal place of residence. A tenant can occupy two or more reasonably proximate rental units in the same building as his or her principal place of residence.

 

Section 1.21 is not applicable if any co-tenant or lawful subtenant meets the definition of “tenant” in the Rent Ordinance and resides in the unit as his/her principal place of residence. In such situations an unlimited rent increase will not be approved even if the unit is not the original tenant’s principal place of residence. In such instances, the landlord may be able to increase the rent under the Costa-Hawkins Rental Housing Act and/or Rules and Regulations Section 6.14.

 

 

 

Landlords may petition for exemption from the Rent Ordinance because of substantial rehabilitation of a building. Due to the stringent requirements to qualify for substantial rehabilitation exemption, very few landlords have filed substantial rehabilitation petitions with the Rent Board. On average, about two substantial rehabilitation petitions are filed annually.

 

“Substantial rehabilitation” means the renovation, alteration or remodeling of a building containing essentially uninhabitable residential rental units of 50 or more years of age that require substantial renovation in order to conform to contemporary standards for decent, safe and sanitary housing. 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 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 construction cost data reported by Marshall and Swift, Valuation Engineers, as adapted for San Francisco and posted by the Department of Building Inspection for purposes of determining permit fees. The schedule in effect on the date the Building Inspector gives final approval of the completed improvements shall apply.

 

The landlord must provide specific evidence with the Substantial Rehabilitation Petition, including: tenant histories and copies of eviction notices to prior tenants; a detailed description of the work performed and itemization of costs; proof that the building is over 50 years old; a determination of condemnation and/or a determination by the Department of Building Inspection that the building was ineligible for a permit of occupancy and/or other evidence that the building was essentially uninhabitable; an abstract of title; a complete inspection report issued by the Department of Building Inspection prior to the commencement of the rehabilitation work; proof of purchase price; a final notice of completion from the Department of Building Inspection or other evidence of the date the Building Inspector gave final approval of the completed improvements; copies of invoices, bids and cancelled checks substantiating the costs for which the landlord has not been compensated by insurance proceeds; a copy of the current assessment; and a work log for any claims for uncompensated labor.

 

In general, a petition for exemption based on substantial rehabilitation can be filed at any time after the work has been completed. However, a landlord who recovers possession of a rental unit under Ordinance Section 37.9(a)(12) in order to carry out substantial rehabilitation must file the petition within the earlier of two years following recovery of possession of the rental unit or one year following completion of the work. A landlord who fails to file a petition within such time and thereafter obtain a determination of exempt status from the Rent Board shall be rebuttably presumed to have wrongfully recovered possession of the tenant’s rental unit in violation of the Ordinance.

 

Tenants may raise objections to the Substantial Rehabilitation Petition based upon any of the following: that the work was not done; that the work was necessitated by the current landlord’s deferred maintenance resulting in a code violation; that the costs are unreasonable; and/or that the work was not principally directed to code compliance.

 

 

Petition for Extension of Time to Complete Capital Improvements

 

Under the just cause eviction provisions of the Rent Ordinance, a landlord may recover possession of a rental unit if the landlord seeks in good faith and without ulterior motive to temporarily remove the unit from housing use in order to carry out capital improvements or rehabilitation work, and the premises will be hazardous, unhealthy and/or uninhabitable while the work is in progress. The tenants are required to vacate the unit only for the minimum time required to do the work as stated in the eviction notice, which shall not exceed three months, unless the time is extended by the Rent Board upon petition by the landlord.

 

If, prior to commencement of the work, the landlord knows or should know that the work will require the removal of the tenants for more than three months, the landlord must file a Petition for Extension of Time at the Rent Board before giving the notice to vacate to the tenants. If, after the notice has been given or the work has commenced, it becomes apparent that the work will take longer than three months (or longer than the time approved by the Rent Board in a prior Petition for Extension of Time), the landlord must immediately file a Petition for Extension of Time along with a statement explaining why the work will take more time. A hearing will be scheduled to determine the reasonableness of the landlord’s time estimate.

 

The Petition for Extension of Time must be accompanied by copies of all necessary approved building permits, a written breakdown of the work to be performed and the location and cost of the work, an estimate of the time needed to complete the work, and the approximate day and month when each tenant may reoccupy.

 

Where a tenant has vacated a unit to allow a landlord to carry out capital improvement work, the landlord must advise the tenant, in writing, immediately upon completion of the improvements, that the tenant is allowed to reoccupy the unit. The tenant shall have 30 days from receipt of the landlord’s offer of reoccupancy to notify the landlord of acceptance or rejection of the offer and, if accepted, shall reoccupy the unit within 45 days of receipt of the landlord’s offer.

 

 

Petition for a Determination Pursuant to

Section 6.14 and/or Costa-Hawkins Rental Housing Act

 

San Francisco’s Rent Ordinance does not regulate the initial rent for a new tenancy, so landlords are permitted to set rents for new tenancies at market rate. The landlord may also be entitled to increase the rent to market rate in certain roommate situations when the original tenants no longer live in the unit. Rules and Regulations Section 6.14 or Civil Code Section 1954.53(d) of the Costa-Hawkins Rental Housing Act are the provisions that may apply in this situation.

 

Section 6.14 and Costa-Hawkins can be very complicated. For that reason, landlords and tenants are strongly encouraged to seek legal advice concerning whether a “6.14 rent increase” and/or a “Costa-Hawkins rent increase” is available in particular situations. The following description gives only a very general overview of the scope of the two provisions.

 

Rules and Regulations Section 6.14 provides for an unlimited rent increase on remaining occupants when the last original occupant vacates the unit, as long as the landlord timely served all remaining occupants with a written “6.14 notice.” A proper 6.14 notice must inform each subsequent occupant that the landlord can impose a rent increase without limitation when the last original tenant vacates the unit. The 6.14 notice must be served on each subsequent occupant within a reasonable time after the landlord knows or should have known of the occupancy. Generally, sixty days is considered reasonable. A 6.14 notice can be served on any subsequent occupant, whether the subsequent occupant is a subtenant or a co-tenant.

 

Costa-Hawkins provides that when the last original occupant no longer permanently resides in the unit, the landlord may increase the rent by any amount to a lawful subtenant or assignee who did not reside in the unit prior to January 1, 1996. Thus, a subtenant who resided in the unit before January 1, 1996 is not subject to such a rent increase. In addition, any co-tenant who moved in after the original occupant is not subject to such a rent increase, regardless of when the co-tenant moved in. A co-tenant is someone who has an oral or written agreement with the landlord, or who the landlord has treated as a tenant by the acceptance of rent or other conduct.

 

There are several clear distinctions between Section 6.14 and Costa-Hawkins. For example, Section 6.14 provides that an unlimited rent increase may be imposed on subsequent occupants who are co-tenants or sublessees or assignees, regardless of when they moved in. Costa-Hawkins rent increases are limited to sublessees or assignees who moved in after January 1, 1996. In addition, Section 6.14 requires the service of a written notice upon the subsequent occupant when he or she first moves into the unit. Such notices are not a prerequisite to a Costa-Hawkins rent increase. Finally, Section 6.14 requires the last original occupant to “vacate” the unit, while Costa-Hawkins only requires the last original occupant to no longer “permanently reside” in the unit. Reasonable, temporary absences from the unit, such as for work, travel or education, will not warrant a determination that the original occupant has vacated or no longer permanently resides in the unit.

 

A landlord is not required to file a petition with the Rent Board for approval of a rent increase pursuant to Section 6.14 or Costa-Hawkins Section 1954.53(d). However, if a landlord is unsure whether a rent increase is justified, the landlord may file a petition at the Rent Board to seek a determination that either or both sections authorize a rent increase. The petition can be filed before or after the notice of rent increase is served and any rent increase imposed pursuant to Section 6.14 or Costa-Hawkins is effective on the date stated in the notice of increase, regardless of whether the landlord filed a petition.

 

 

Petition for a Determination of Exempt Status

 

Residential units in structures for which a certificate of occupancy was first issued after June 13, 1979 are exempt from the Rent Ordinance. Ordinance Section 37.2(r) and Rules and Regulations Section 1.17 list other types of dwelling units that are also exempt from the Rent Ordinance, regardless of when the building was constructed. For example, dwelling units whose rents are controlled or regulated by another government agency or authority are exempt from the Rent Ordinance. In addition, single-family homes and condominiums are generally exempt from the rent increase limitations of the Rent Ordinance (but not the just cause eviction provisions) as of January 1, 1999, unless the tenancy commenced before January 1, 1996, pursuant to the Costa-Hawkins Rental Housing Act.

 

If there is a question about whether or not a unit is exempt from the Rent Ordinance, either a landlord or a tenant may file a petition at the Rent Board for a determination of exempt status.

 

 

Petition for a Determination of Tenant’s Protected Status from

Owner/Relative Move-In Eviction Under Ordinance Sections 37.9(i) and 37.9(j)

 

Tenants who are at least 60 years old or who meet the disability guidelines for Supplemental Security Income and who have lived in the unit at least 10 years, or tenants who are catastrophically ill and who have lived in the unit for at least 5 years, have a protected status and generally cannot be evicted for either the owner or the owner's relative to move into a building. Such protected status does not apply, however, where there is only one rental unit owned by the landlord in the building, or where the landlord’s qualified relative who intends to move in is 60 years of age or older and each rental unit owned by the landlord in the same building (except the unit occupied by the landlord) is occupied by a tenant with protected status.

 

A tenant who has resided in the unit for at least one year and has a child under the age of 18 who is also residing in the unit, has protected status and may not be evicted during the school year for an owner or relative move-in eviction. However, there are two exceptions: an owner move-in eviction may proceed if there is only one unit owned by the landlord in the building; or, if there are multiple units in the building, an owner move-in eviction may proceed if the owner will move into the unit with a minor child. These exceptions do not apply to relative move-in evictions.

 

The eviction notice for owner/relative move-in must inform the tenant of these restrictions. Any tenant who claims to have a protected status must notify the owner of the tenant’s protected status within 30 days of receiving either a notice to vacate or a written request from the owner to declare the tenant’s status. The tenant must also include evidence supporting the claim. Owners who seek to recover possession of the rental unit for owner/relative move-in may file a petition at the Rent Board to contest a tenant’s claim of protected status.

 

 

Bond Measure Passthroughs

 

A landlord may pass through to tenants 100% of the increase in the landlord’s property tax bill resulting from the repayment of general obligation bonds approved by the voters between November 1, 1996 and November 30, 1998. For general obligation bonds of the City and County of San Francisco approved by the voters after November 14, 2002, the landlord may pass through 50% of the property tax increase resulting from repayment of these bonds, provided that the rent increase is disclosed and approved by the voters. For general obligation bonds of the San Francisco Unified School District or San Francisco Community College District approved by the voters after November 1, 2006, including the Prop A 2006 Bond, the landlord may pass through 50% of the property tax increase resulting from repayment of these bonds.

 

The landlord is not required to file a petition with the Rent Board for approval of the Bond Measure Passthrough. However, the landlord must use the Bond Measure Passthrough Worksheet in order to calculate the passthrough. To impose the passthrough, a copy of the completed Worksheet must be provided to the tenant in addition to a written notice of rent increase.

 

Only tenants in residence as of November 1st of the applicable tax year are eligible for the Bond Measure Passthrough. The passthrough must be imposed at the time of the annual rent increase, on the tenant’s rent increase anniversary date. It shall not become part of the tenant’s base rent, and it must be discontinued after 12 months.

 

A landlord may elect to pass through the property tax increase attributable to the repayment of bonds as part of an Operating and Maintenance Expense Petition instead of calculating a separate Bond Measure Passthrough. In such cases, the landlord must elect one or the other method, but may not choose both.

 

Bond Measure Passthroughs may be “banked” and imposed in future years, provided that the applicable Bond Measure Worksheet is completed for each banked passthrough and attached to the notice of rent increase. There is a different Worksheet for each tax year, since the percentage of the property tax rate attributable to repayment of general obligation bonds varies from year to year. All of the prior Worksheets are available on our website at www.sfrb.org.

 

A tenant may file a petition for an arbitration hearing at the Rent Board to challenge an improper Bond Measure Passthrough. In such a hearing, the landlord shall have the burden of proving the accuracy of the Bond Measure Passthrough calculation. Such petitions must be filed within one year of the effective date of the passthrough.

 

 

Water Revenue Bond Passthroughs

 

A landlord may pass through to tenants 50% of the water bill charges attributable to water rate increases resulting from the issuance of Water System Improvement Revenue Bonds authorized at the November 2002 election. Water bills prepared by the S.F. Public Utilities Commission commencing July 1, 2005 specify the water bill charges that are eligible for the passthrough.

 

The landlord is not required to file a petition with the Rent Board for approval of the Water Revenue Bond Passthrough. However, the landlord must use the Water Revenue Bond Passthrough Worksheet in order to calculate the passthrough.

 

The landlord may base the calculation of the Water Revenue Bond Passthrough on a single water bill OR, in the alternative, on all the water bills for any calendar year. Where the landlord elects to calculate the Water Revenue Bond Passthrough based on a calendar year, the passthrough must be imposed at the time of the annual rent increase, on the tenant’s rent increase anniversary date. Where the landlord elects to calculate the passthrough on a single water bill, the passthrough need not be imposed on the tenant’s anniversary date; however, the landlord must serve notice of such passthrough within 60 days of receipt of the water bill. In any event, the passthrough shall not become part of the tenant’s base rent.

 

There are several specific requirements for the notice of rent increase for a Water Revenue Bond Passthrough, including the following:

 

·  The notice shall specify the dollar amount of the monthly passthrough, the period of time covered by the water bills that are used to calculate the passthrough and the number of months that the tenant is required to pay the passthrough.

 

·  The notice must include a copy of a completed Water Revenue Bond Passthrough Worksheet.

 

·  The notice shall explain that the passthrough is based on the issuance of Water System Improvement Revenue Bonds.

 

·  The notice must state that the tenant can receive a copy of the applicable water bills from the landlord upon request.

 

·  The notice must also state that the unit is in compliance with any applicable laws requiring water conservation devices such as the Residential Water Conservation Ordinance which is found in Chapter 12A of the San Francisco Housing Code. You can fax yourself a copy of Chapter 12A through our Fax Back system or find it on our website.

 

In addition to these specific notice requirements, the landlord must comply with state law requirements governing service of a rent increase notice.

 

A tenant may file a hardship application with the Rent Board requesting relief from payment of all or part of the Water Revenue Bond Passthrough. Once a hardship application is filed, the tenant need not pay the passthrough until a decision is made by an Administrative Law Judge after a hearing on the tenant’s hardship application. The hardship application must be filed within one year of the effective date of a Water Revenue Bond Passthrough. A tenant may also file a petition for arbitration at the Rent Board to challenge an improper Water Revenue Bond Passthrough. Such petitions must also be filed within one year of the effective date of the passthrough.

 

 

Civil Code Section 827 Requirements for Notice of Rent Increase

 

A thirty-day notice is required if the increase, either by itself or combined with any other rent increase in the one year period before the effective date, is no more than 10%. A sixty-day notice is required if the increase, either by itself or combined with any other rent increase in the one year period before the effective date, is more than 10%. If the rent increase notice is served by mail, the required notice period must be extended by an additional five days.

 

 

April 2010

Last updated: 3/24/2011 1:44:50 PM