SF Apartment : January 2018

RENT BOARD REDUX

Passthrough Gone Askew

by The San Francisco Rent Board

Editor’s Note: The following San Francisco Rent Board cases are real, though they have been edited for space and clarity. They have been selected to highlight some of the more interesting cases that the board reviewed at its September 2017 through October 2017 commission meetings. For full rent board agendas and minutes, please visit sfrb.org.

00 Block of 14th Avenue

The landlord’s petition for certification of the costs of exterior painting of the light well stairway, installation of smoke detectors and carbon monoxide detectors, replacement of the unit’s water heater, rear exterior siding replacement, and replacement of a fixed access ladder to one of two units on the property was granted in part and denied in part. The ALJ found that the tenancy in the unit began on September 2, 2013, which was within six months of the October 14, 2013 commencement date of the replacement of the rear exterior siding and replacement of the fixed access ladder, and that those costs may not be passed through to the subject unit.

The landlord appeals, arguing that an exception should be made to the application of the six-month rule under the facts of this case due to the “groundless” objections of the tenant, and that work did not ultimately commence until November 10, 2015.

The landlord told the Board that work did not actually commence on the disputed projects until November 2015, a full 26 months after the start of the initial tenancy. She said that the appeal firmly established that the 2013 costs were in preparation for the work that began in 2015, and these costs did not constitute commencement for the purposes of the six-month rule. The landlord stated that the permit obtained in 2013 could not have marked the start of the construction period since work was only allowed to begin pursuant to the second permit extension in 2015 after yielding to the tenant’s demands for relocation-based compensation, and that the sworn testimony at hearing supports the position stated in the appeal.

A representative for the landlord stated that the hearing recording was focused on why she believed that the 2013 costs should be certified, not why the six-month rule wouldn’t apply. The representative said that the work did not commence until the second permit extension in 2015, and asked that the Board grant the appeal for the siding and safety ladder.

The landlord stated that at the time the property was rented, no one could have expected the two-year delay, which increased her cost over the base rate by 20%, and that change orders amounted to 40% of the original estimate. She said that the fact that they pulled a permit does not evidence that the work commenced, because they had to pull another permit two years later.

Decision: To deny the appeal, 5-0.

3400 Block of Cesar Chavez Street

The tenants of four units at the subject property filed petitions alleging unlawful rent increases, and requested a determination of whether the Rent Board had jurisdiction over the subject tenancies. The request was granted, and on July 1, 2016 it was determined that all four units are subject to the jurisdiction of the Rent Ordinance. The ALJ found that the landlord did not establish that there had been no residential tenancy in the building of any kind between June 13, 1979 and the date of issuance of the Certificate of Occupancy (CFCO) and therefore did not meet their burden of proving that the subject units were exempt from the Rent Ordinance.

The landlord appealed, and at the October 11, 2016 commission meeting, the Board voted to deny the landlord’s appeal on the issue of jurisdiction and to remand the tenants’ unlawful rent increase claims to the ALJ to determine the tenants’ lawful rents and the amount of any overpayments, and to consider the landlord’s financial hardship claim. Remand hearings were held for consideration of the unlawful rent increase claim for the four units. In the remand decisions, the ALJ determined the lawful rent and amount of overpayments for each unit. On appeal of the remand decisions, the landlord does not dispute that certain rent increases exceeded the allowable limits under the Rent Ordinance, but argues that it is not fair or just to find these increases to be null and void under the circumstances, and asks the Board to find that those unlawful rent increases imposed prior to the issuance of the first decision on July 1, 2016 be allowed or to be limited to the amount of allowable annual and banked increases that were available and could have been lawfully imposed. The landlord also argues that, for one of the units only, the ALJ erred in determining that the tenant petitioners, the owners of CyberBears LLC, are entitled to receive a rent refund for amounts paid by the LLC, since it may subject the landlord to a substantial risk of incurring double liability.

The landlord’s attorney told the Board that he was there regarding the fundamental fairness of essentially reversing the prior decision. He stated that the tenant petitioners took occupancy believing that the building was not subject to rent control, and the owners operated as such. He asked the Board to either apply rent control prospectively and not retroactively penalize the owners simply because there has been a change of policy, or, to permit those increases that could have legally been imposed had the landlords known they were subject to rent control.

The tenants’ attorney told the Board that even though the parties are not arguing jurisdiction, the majority of the landlord’s brief was an attack on jurisdiction, to which he objected. He said that the prior decisions cannot be applied to other tenants, and each case has to be adjudged on the law at the time the decision was made. He stated that the prior decision ignored the precedent that was found in the DaVinci case, and a mistake of law was made, but this administrative body must follow DaVinci.

The landlord representative stated that the property was a small family partnership that ran one of the first live-work buildings in San Francisco, and they are now being told that property is rent controlled. He said that the owners should be rewarded as they were able to keep many artists and their families in the property for many years, and now there are only four tenants bringing this case. He said that they have been very fair landlords, and they are not in a position to pay back over $96,875.48 in back rent going back three years. He asked the Board to consider eliminating the amount going back three years, as this way the owners won’t have to consider kicking out tenants, like dance studios, and can continue to own the building.

Decision: To deny the appeal, 3-2.

To learn more about the San Francisco Rent Board, call 415-252-4602 or go to sfrb.org.