legal corner Q&A
When Does Rent Control Apply?
By Various Authors
Q. I supply a washer and dryer for my building. They are old and need to be replaced. I am hoping to replace them with new coin-operated machines. Can I do that without being subject to a petition for a decrease in housing services?
A. “Housing Services” are defined in Rent Ordinance Section 37.2(g) as, “services provided by the landlord connected with the use or occupancy of a rental unit including, but not limited to: ... laundry facilities and privileges...” [Emphasis added]. Subsection (q) of the same section defines rent increases as, among other things, “any reduction in housing services without a corresponding reduction in the monies demanded or paid for rent.”
Until now, you have been supplying your tenants with a washer and dryer free of charge. Provision of those facilities is clearly a housing service, and replacing them with machines that are coin operated shifts the cost of doing laundry from you to your tenants. That is a reduction in service, and something for which the tenants can petition for a rent reduction at the San Francisco Rent Board. Most likely, the reduction in rent and the new cost of doing laundry for the tenant would be, if you’ll pardon the expression, a wash. Whatever the tenants are now forced to pay should be the value of the service withdrawn, and therefore the reduction in rent. Of course, one could argue that merely losing the convenience of being able to do your laundry without first securing a pocket full of change is another benefit that should be compensated. Moreover, at the Rent Board you may take an additional hit if the tenants exaggerate their typical monthly laundry expenses.
In the long run, it may be cheaper for you simply to replace the washer and dryer rather than suffer rent reductions. Of course, one consideration might be the number of vacant units you’re anticipating in the future. For the new tenant yet to arrive, a coin-operated washer and dryer would be part of his/her rental agreement and there would be no need to supply that tenant with those appliances free of charge. Perhaps with tenant turnover, it would work to your benefit to have coin-operated machines. There is also the simple lifestyle consideration that with the coin-operated machines you are not responsible for repairs, maintenance, replacement, etc. Just be careful about signing one of those laundry machine contracts that automatically renews and holds you hostage into the next millennium, and then some.
- Saul M. Ferster
Q. I own a single-family home, which I use as an office, but live elsewhere. I rent out the bedrooms, but there is no master tenant. Does my building fall under rent control?
A. Many owners mistakenly believe that single-family homes are exempt from rent control. In most instances, if the home was built before June 13, 1979, some form of rent control applies. The rent law consists of two parts: eviction control, which restricts the reasons for terminating a tenancy to one of the 15 “just cause” grounds contained in the San Francisco Rent Ordinance, and price control, which limits the amount of rent increases to the annual allowable (and banked) percentages and approved passthrough sums pursuant to landlord petitions. Under the state’s Costa-Hawkins Rental Housing Act, single-family homes and condominiums may be exempt from price control if the tenancy began on or after January 1, 1996, but eviction control would still apply.
However, owners who choose to subdivide their single-family home by renting out rooms under separate tenancy agreements give up their exemption from price control, as the home now consists of multiple rental units. Costa-Hawkins excuses single rental dwellings that are contained within a home or condominium, but the exemption fails when the unit has been converted through use into more than one dwelling. It makes no difference if the neighborhood is zoned for single-family occupancy, or if the landlord’s subdivision violates the San Francisco Planning Code. Rather, the rent law considers what the owner is actually doing with the property and disregards whether or not this use has been sanctified by the local government.
The Rent Board’s regulations allow an owner who resides in a rental unit with his or her tenant to evict the tenant without just cause. Yet in order to enjoy this privilege, the owner needs to reside with the tenant as a roommate. In this instance, the owner concedes that the home is used as an office. Therefore, the benefit of this regulation does not apply. Similarly, a nonowner master tenant may evict his or her subtenant without just cause, provided that the subtenant was given a written disclosure of this rule at the inception of the tenancy. Without such a written notification, full eviction control applies.
In sum, this home is subject to both prongs of the rent control law because the owner resides elsewhere and has separately rented out rooms to multiple tenants. Landlords, when deciding to lease a condominium or home that is otherwise subject to rent control, should always rent it as a single tenancy so as to preserve the ability to raise rents beyond the law’s limitations. You can be generous with roommate allowances, but never subdivide the property. Finally, if you are going to live with your tenants, make sure that your renters are roommates, meaning they share the common areas with you, so that their occupancy can be terminated without just cause.
-David Wasserman
Q. I have a duplex with a cottage in back and a small patch of grass in between the buildings. The tenant in the cottage is saying that the previous owner gave her verbal use of this area and refuses to allow the tenants in the duplex to use it. There is nothing in anyone’s lease regarding the use of this area. What should I do?
A. Since any attempt to resolve this issue will most likely involve a certain amount of effort and cost, the first question the landlord should ask is, why do anything at all? If the units in the duplex are rented out and none of the tenants in those units claim use of the patch of grass, why not let the cottage tenant have exclusive use of it? Having only one tenant in the yard minimizes the risk of friction between tenants and the risk of people cluttering the area with personal property.
If the landlord does decide to attempt to challenge the cottage tenant’s claim, the objective will be to locate evidence that tends to refute the cottage tenant’s claim of exclusivity. The first step would be to review the disclosure documents from the purchase of the property, in order to ascertain whether there are any documents, such as an estoppel certificate or a seller’s statement, that address this issue. If the tenant signed an estoppel certificate in which she does not claim exclusive use of the lawn, she could be prevented from now claiming such exclusivity.
The next step will be to contact other tenants on the property whose occupancy dates back to the prior ownership. If any tenant in the duplex claims a right to at least a shared use of the lawn, that can be used by the landlord in asserting that the patch of grass is for shared use.
A more certain witness, but one that may be more difficult to locate, is the prior owner. If the prior owner can be located and does deny having given exclusive use to the cottage tenant, the landlord is still left with conflicting evidence (cottage tenant’s word against prior landlord’s word). But, the tenant’s claim would be greatly weakened in the face of a denial from the person who supposedly gave her the exclusive use.
If the seller cannot be located, the cottage tenant has the upper hand because the landlord, without any evidence to the contrary, would be unable to disprove the tenant’s contention that exclusive use of the lawn was verbally included in her lease. If that is the case, a landlord historically could always change the terms of the tenancy, and make the use of the lawn non-exclusive, in exchange for a rent reduction. However, in light of the recent amendment to the San Francisco Rent Ordinance requiring just cause to remove a housing service, such as use of a back yard, it is now questionable whether this could be done.
-Fredrik Emilson
The opinions expressed in this article are those of the author and do not necessarily reflect the viewpoint of SFAA or SF Apartment Magazine. The information contained in this article is general in nature. Consult the advice of an attorney for any specific problem. Saul M. Ferster can be reached at 415-863-2678. David Wasserman is with Wasserman-Stern and can be reached at 415-567-9600. Fredrik Emilson is a principal with Cornerstone Law Group and can be reached at 415-357-2099. Copyright © 2008 SF Apartment Magazine. All rights reserved.