Feature
by David Wasserman
Some of you may not know that in June 2001 the landlord commissioners at the San Francisco Rent Board sponsored a regulation that would end rent-controlled protection for tenants who did not use apartment units as their principal places of residence. This rule, termed Section 1.21 (after its numerical designation in the Rent Board’s Rules and Regulations), requires that in order for the rent to remain at the rent-controlled price, the premises “must be the tenant’s usual place of return.” If it is not, the owner can raise the rent to fair market value. This rule was prompted by mounting evidence of people holding onto valuable rent-controlled units even though they lived elsewhere, thus further decimating the city’s already short supply of affordable housing.
The Rent Board requires the landlord to receive a Section 1.21 determination by a Rent Board Administrative Law Judge (ALJ) before serving the rent increase notice. This requires the landlord to file a Section 1.21 petition with the Rent Board, which will result in scheduling an expedited hearing within the following three to four weeks. Landlords should gather all their evidence before filing the petition because, as explained below, tenants will often change their occupancy when they get word of the Section 1.21 hearing.
The Rent Board has a list of criteria that it uses to determine if a 1.21 petition should be granted. The judge will look at such things like the tenant’s motor vehicle registration, driver’s license, voter registration, utility bills, address on state and federal tax returns, whether a homeowner’s exemption has been filed for a different property, and credible evidence from people with personal knowledge pertaining to whether or not the tenant uses the unit as a home or simply as an occasional lodging in San Francisco.
Many of you know that in a Rent Board proceeding, you cannot force the tenant to bring in documents or even to testify. Therefore, you better use an effective private investigator to retrieve credit headers and other information about where the tenant really lives. You also should persuade other residents in the building to validate that the tenant is never around. My favorite is the use of surveillance videotapes that reveal the tenant coming and going from the home he purchased ten years ago in Mill Valley. Another tactic is to send a letter requesting the tenant to bring various documents, like tax returns, DMV registrations and the like to the Rent Board in order to assist the judge in making a determination. Nine out of ten times, this request will be ignored or refused, but such stealthy conduct will be to your benefit because the tenant looks like he or she is hiding something.
Before pursuing a 1.21 petition, make sure that the tenant has really moved and is living somewhere else. The following examples illustrate this point. One of my recent cases involved a man who resides with his wife and two children in Portland, Oregon; yet he had the audacity to claim that his apartment on Pacific Avenue was his principal place of residence because he still had furnishings in the unit and PG&E in his name. In another case, I had a videotape of a woman coming and going each day from a home she owned in Martinez. She tried to tell the Rent Board that this home belonged to her husband, claiming she actually slept on the floor of her Mission District rental unit. Then I had another situation in which this guy, who owns his home in Marin, told the Rent Board that he used his San Francisco rental unit as his principal place of residence because it was closer to the airport and the opera. In yet another fun petition, the tenant actually purchased a three-unit apartment building across the street, but claimed he needed his rental unit to store cars and motorcycles that would not fit in his new building. Recently, a woman who lives on a multi-million dollar estate in Woodside tried to keep her apartment on Russian Hill, because she asserted she had rented it for years. Before the passage of Section 1.21, all of these people could keep their empty units at rent-controlled prices, even though none of them needed affordable housing in the city.
On the other hand, these cases are easy to lose. In fact, rumor has it that the Rent Board executive staff disdains the 1.21 process, and many in the tenant community view this rule as unlawful legislation. The owner has the burden of proof, which means you must possess solid evidence before appearing at the Rent Board. A simple hunch or suspicion will not do. In addition, many states have no homeowner’s exemptions. For example, if your tenant moved to Nevada, a place with no statewide taxes, his home will not be registered as his primary residence. Also, good luck when you try to obtain tax returns, DMV information and voter registrations. These documents are private and cannot be obtained unless the tenant brings them in. Also, proving that the rental unit is not a place where the tenant normally returns at the end of the day can be very difficult to establish, unless the tenant now lives outside of the Bay Area.
Another problem can occur if someone else is living in the unit. For example, if you rented the place to John twenty years ago, and you know he now lives in Utah, the 1.21 petition might be a monumental waste of time because Greg has been living in the unit since 1994, and you have never served a 6.14 notice. John will probably concede to the 1.21 determination, but the Rent Board will tell you that you cannot raise his rent because Greg is an original occupant. The 1.21 process is obviously only effective if the unit is empty, or the people now living there have been designated as 6.14 occupants and/or are not original tenants under the Costa-Hawkins Act. Also, remember that a favorable 1.21 determination does not mean that you can terminate the tenancy; rather, it only allows for a rent increase to fair market value.
As with most Rent Board proceedings, pay to have a court reporter transcribe the hearing so that you have a clear record. The tape recordings made by the Rent Board are usually of poor quality. You need to preserve a clear record of the evidence in order for you to appeal the decision if you feel the judge was incorrect, unfair or overly biased. Also, as mentioned above, have your ducks in order before you file. I cannot tell you how many times I have seen a tenant change his DMV and voter registration once the petition is filed but before the hearing takes place. This way, a tenant can appear at the hearing with current documents that show the San Francisco address as the primary home. Also, you can expect a tenant to start living at the premises, once he or she knows you are watching the activity at this address.
Another good tactic is to find out where the tenant is really living and then contact neighbors to get credible evidence of relocation. US Search (www.ussearch.com) is an online research tool that will give you the tenant’s address and the contact information of his/her neighbors. Get statements from these people who, in many cases, are happy to confirm that John Smith has been living next to them for the past five years. Also, hire a private investigator to follow the tenant home from work. You can legally watch someone in public areas, and good private investigators will know what proper means are available for spying.
In summation, I recommend that you review your units to ascertain whether any of them are being used as vacation getaways. If you have a suspicion about that empty and dark apartment, hire an investigator to track down evidence that shows your tenant is in fact living happily with his family somewhere else. Build up the file before you send in the 1.21 petition and make sure you have good witnesses, videotapes and supporting documents before everyone shows up at the Rent Board. Not surprisingly, my experience has shown that even the most egregious offenders will appear and fight you on these cases, because it is cheaper to keep a $400 per month Telegraph Hill three-bedroom pied-à-terre that can be used once in a while than to give it up and pay for expensive hotels. At the hearing, make a clear and compelling record. If you win, serve the rent increase notice immediately. If you lose with the ALJ, consider appealing to the Rent Board Commission. Last, feel free to call my office if you want to hear about another example of why someone who rented an apartment in 1976 while in college and now lives in Piedmont with his wife and kids still feels the entitled to benefit from rent control.
The opinions expressed in this article are those of
the author and do not necessarily reflect the viewpoint
of SFAA or the San Francisco Apartment Magazine. Consult
the advice of an attorney for any specific
problem. David Wasserman is with Wasserman-Taxman, 415-567-9600. Copyright ;© 2004 by
the San Francisco Apartment Magazine. All rights reserved.