Legal Corner
by Clifford E. Fried
Tenants who no longer occupy them, rent out thousands of rental units in San Francisco. Sometimes tenants sublease their units to make money or pass their low rent on to relatives or friends. Other times, out of spite, they rent them so that possession is withheld from the owner.
The abuses of subleasing are so great in rent-control jurisdictions that our State Legislature has adopted the Costa-Hawkins Rental Housing Act, a remedy for landlords ripped off by their tenants. This act permits landlords to increase the rent to market when the last original tenant no longer resides permanently in the unit.
EventheSanFranciscoResidentialRent Stabilization and Arbitration Board has enacted Section 5.10 of the Rent Board Rules and Regulations to help aggrieved landlords. This regulation permits landlords to petition for a rent increase when the premises are no longer the tenant’s principal place of residence.
The following steps set forth the landlord’s options when he/she suspects the original occupant has moved out and is living elsewhere.
Step One: Preserve Your Eviction Option.
The Rent Ordinance permits eviction by a landlord when the tenant, in possession of a unit at the end of the month, is a subtenant not approved by the landlord. Or, the landlord may decide to simply increase the rent to market pursuant to state or local law. However, the decision must be made quickly. A landlord’s acceptance of rent, with knowledge of an unauthorized sublease, may constitute a waiver of the right to declare a forfeiture of the lease and to evict. If you are interested in the eviction option, consult an attorney before accepting the next rent payment.
Step Two: Investigate the Current Residences of Your Original and Subsequent Occupants.
Before disclosing to your tenant that you know he/she has a new home, do some detective work. Once your tenant knows you are on the trail, he/she will still pretend to live in the unit, creating evidence of residency in your building. Quickly investigate the current and true residence of your tenant as well as the prior residence of your new occupant.
There are private investigators who can assist you with obtaining the necessary residency information. Your attorney or SFAA can help you locate a competent investigator. By reviewing public records, you and your investigator will discover a wealth of information about who lives on your property and who has vacated.
If you are still not certain about who occupies your property or where your tenant really lives, you might want to write your tenant. In your letter request information about: (1) who lives in the unit, (2) where else does the tenant reside and 3) why is the tenant away from your property so often? If you are satisfied with the answers, skip the rent increase. Otherwise, move on to the next step.
Step Three: File a Regulation Sections 1.21/5.10 Petition with the Rent Board.
Before serving a rent increase notice and assuming you have decided against an eviction, petition the Rent Board for a rent increase on the basis that your original occupant is no longer a “tenant in occupancy.” The Rent Ordinance always intended to protect tenants in occupancy only. However, it was not until June 2001 that the Rent Board came up with a definition for “tenant in occupancy” (Section 1.21) and a procedure for petitioning for a rent increase (Section 5.10). Under the new regulations, the landlord must file the petition before serving the rent increase notice. The new regulations provide for an expedited hearing on the petition. This means you should have a decision before the rent increase goes into effect.
At the hearing, the landlord must provide the initial burden of proof that the unit is no longer the tenant’s principal place of residence. Present all the evidence you discovered during your investigation. Section 1.21 provides a list of factors, illustrative only, that the Rent Board may consider. Other facts should be presented as well. The burden then shifts to the tenant.
If you know the tenant purchased a home elsewhere, there is an excellent chance the tenant is taking advantage of the homeowner’s tax exemption. To receive such an exemption from the taxing authorities, your tenant has represented his new house as his principal residence. Obviously, having more than one principal residence is impossible.
Bring witnesses or declarations to the hearing. Old landlords, new landlords and neighboring tenants can provide valuable information pertaining to where your tenant principally resides.
Step Four: Serve a Rent Increase Notice.
Immediately after filing your Rent Board Petition, serve a rent increase notice. Your notice should state the basis for the rent increase. If you know your tenant has permanently vacated the premises, you should specify that the Costa-Hawkins Act applies in this case. If you believe your tenant still uses the apartment, but has a principal place of residence elsewhere, you should specify that the Rent Board’s Section 1.21 applies. Sometimes you don’t really know what is going on—state both cases.
Remember that state law, effective January 1, 2001, requires a 60-Day Notice of rent increase when the increase equals or exceeds 10 percent. You must serve the notice on all original and subsequent occupants. The Rent Board staff is interpreting Section 1.21 so that subtenants may not receive a rent increase. However, this is not what the new regulations say. Besides, who pays the increased rent does not matter, so long as it is paid. A tenant is no longer in residency does not have any incentive to pay the increased rent and will give up possession to the subtenants. At this point, the landlord can give a Costa-Hawkins rent increase without interference from the Rent Board.
In some cases, the landlord must serve the rent increase notice within 90 days of either receiving a written notice that the last original occupant is going to vacate, or having, actual knowledge that the last original occupant no longer permanently resides at the unit, whichever occurs later. Or, within the same time frame of 90 days, the landlord must serve a written reservation of the right to increase the rent at a later date. At the present time, the Rent Board is not strictly enforcing the 90-day deadline, probably because it is aware of the preemption effect of Costa-Hawkins.
Step Five: Collect the New Rent You Deserve.
If you petitioned the Rent Board pursuant to Sections 1.21 and 5.10 and win, congratulations. If you lost, consult with an attorney to help you decide if an appeal is in order. You may have an argument that Costa-Hawkins preempts the Rent Ordinance and the Rent Board Regulations. Also, if you skipped the petition process, and relied on Costa- Hawkins, you are ready to collect your new rent.
Some tenants will not pay the increased rent out of protest. You can either negotiate a new rent acceptable to both you and the tenant or you can play hardball and serve a non-payment of rent notice.
The opinions expressed in this article are those of the author and do not necessarily reßect the viewpoint of the SFAA or the SF Apartment Magazine. Clifford E. Fried is with Wiegel & Fried, LLP (415) 552-8230 x11. © Copyright 2002.