SF Apartment : May 2016


Born into the Building

by Various Authors

Q. We rent to a couple with a 16-year-old daughter. The child has lived in the unit since birth. What happens when she turns 18? Will she have legal right to the unit at its rent controlled rate even if her parents move out?

A. Under the current law, your tenants’ daughter will not have the legal right to remain in the unit at the rent controlled rate after her parents vacate, because she was born after her parents’ tenancy began. Even when she turns 18, she will not be protected by the rent increase limitations set forth in Section 37.3 of the San Francisco Rent Ordinance, limitations that her parents enjoy. If the daughter had been born before the family moved into your unit, she would be an “original occupant” and thus entitled to continue to enjoy the protection of the rent ordinance even after the parties to the lease have vacated.

The different standards applied to the child born before a tenancy begins and to the child born during the tenancy arise from the wording of California Civil Code section 1954.53. This section is in the Costa-Hawkins Rental Housing Act, which is intended in part to give rental property owners in rent control jurisdictions the right to set new rental rates for new tenancies. The statute has not always had the intended result. One recent appellate decision, Mosser Companies v. San Francisco Rent Stabilization & Arbitration Board, interpreted Civil Code section 1954.43 to mean that a child who moved into a unit with his parents is protected by the rent ordinance rent increase limitations even after his parents vacate.

California Civil Code section 1954.53(d)(2) permits owners to raise the rent beyond the rent ordinance rent increase limitations if the “original occupants or occupants who took possession of the dwelling or unit pursuant to the rental agreement with the owner no longer permanently reside there.” The use of the term “occupant” instead of “tenant” is key.

In January 2015, the Court of Appeal for the First Appellate District, which hears San Francisco cases, published the Mosser decision. Mosser involved a family with two parents and three children who moved into a Fell Street apartment owned by Mosser Companies in 2003. One of their sons, Brian, was 13 at the time. Only the parents, as usual, signed the lease.

In 2012, after two of the children had left home, the parents moved out. Brian, then age 23, stayed behind and continued occupying the unit. After learning the parents had vacated, the owner served notice it was raising the rent above the rent ordinance rent increase limitation based on Costa-Hawkins. The parents and Brian filed a petition with the rent board alleging the rent increase was unlawful, and the rent board judge, trial court judge and appellate panel agreed.

Because Brian moved into the unit with the family when his parents signed the lease, he was an original occupant and the owner was prohibited from raising the rent above the rent ordinance rent increase limitations. You, however, should prevail if you raise the rent and the daughter protests.

—David Semel

Q. My apartment building has restricted high-security front door keys that tenants are unable to duplicate on their own. One of my tenants, who rents a studio apartment with her name only on the lease, is asking for an additional key for her boyfriend. Are we obligated to make the extra key? If we gave the boyfriend a key, would he have any basis to claim tenancy rights?

A. You are obligated to make a duplicate key. The “Keys” section of the local rent ordinance, often referred to as the Key Law, states that a landlord must provide additional key sets to the tenant within fourteen days of the tenant’s request. A tenant may, for example, request additional key sets for service providers, delivery persons, houseguests or relatives. You may only charge the tenant for the actual duplication costs that you incurred. This law has been on the books since early 2004. If you fail to respond to a request for key duplication, your tenant may file a decrease in services petition with the rent board and expect the rent to be lowered as a result.

Now what if the tenant is subletting to her boyfriend in violation of the terms of the lease? The Key Law permits you to deny a duplication request for unlawful subletting. However, as we know, the rent law was amended last November to essentially permit tenants to bring in additional roommates (up to certain amounts depending on the number of bedrooms) regardless of what the lease allows. In this instance, the tenant may have an additional person occupy the studio with her, so at the end of the day you most likely could not deny this request, although you are permitted to screen the boyfriend as an applicant.

However, what you should not do is deal directly with the boyfriend during this process. The extra key is to be given directly to your tenant. She is then instructed to reimburse you for its cost and under no circumstance should you engage in a dialogue, written or otherwise, with the guest or subtenant. Otherwise, as the question references, you risk making the boyfriend a co-tenant, and doing so will potentially ruin the ability to impose a market rate rent increase should your tenant move out and leave someone else behind. Secondly, this author does not recommend that you bother to screen the boyfriend and otherwise take steps to formally approve him as a subtenant. The new amendment to the rent law really gives you no room to deny your tenant’s desire to move him into the studio apartment, and engaging in an interactive approval process again permits him to argue years later that he was made a co-tenant and therefore is entitled to your original tenant’s rental rate should she move out.

In sum, please acquaint yourself with the Key Law. Tenants are generally entitled to duplicate key sets if they reimburse you for duplication costs. A legitimate reason to request an additional key set is for a house guest or a lawful subtenant. While this may be a painful reality to accept, it is nevertheless our new reality, and the best position you can take is to entirely distance yourself from any direct interaction with the guest or subtenant.

—Dave Wasserman

Q. I rented a two-bedroom apartment to a couple a few years ago. This year, the wife became pregnant and supposedly moved in with her parents. The husband says he is staying in the apartment on weekdays and visiting his wife on weekends, and he wants to get a roommate for the apartment. But I suspect the couple has bought a house that they are living in together, but want to keep the apartment. Do I need to accept the roommate? What are my rights here?

A. You’ve got a couple of things going on here, much based on speculation. Let’s take the non-speculative part first. The recent Kim amendments to the rent ordinance have essentially eviscerated any lease prohibition on subletting. Without some objective basis for denying an individual roommate, such as a history of evictions, your tenants can have up to four people in a two-bedroom apartment, regardless of what your lease says. Moreover, there is no requirement in the rent ordinance, which discusses “occupants” rather than “roommates,” that the master tenants actually reside in the apartment. Indeed, someone can occupy an apartment without living there full time. You do have a right to notice of the person to be added, and to do screening within defined time periods, but whether you should or not is a matter of much debate. The main goal for most landlords is to assure that nothing occurs which could create a direct relationship between the landlord and the new occupants, rendering them tenants as opposed to subtenants. If the new occupants remain subtenants, when the original tenants no longer permanently reside in the unit you will be able to raise the rent to market rate under the Costa Hawkins Rental Housing Act—an ability which will be lost if the new occupants become your tenants (unless you have served them with a Section 6.14 Notice within 60 days of entering the premises). This is a potentially lengthy and controversial discussion which expands beyond the scope of a Legal Q&A answer; you may wish to contact an expert housing attorney for further advice.

All this brings us to the speculative part of your question: the actual residence of the master tenants. You think they’ve bought a house and want to sublet the apartment, presumably for a profit. Suspicions, however, are worthless. You need proof. You should decide if you are willing to take the necessary steps to nail the door shut. Such steps might include hiring a private investigator to generate evidence that the couple does not actually live in your building. If you are correct about them purchasing a house, it may be possible to locate it and see if a homeowner’s exemption has been filed. Security cameras could be placed in your building to determine if the husband actually does go in and out of the apartment as he says he does. If they are living elsewhere, it may be possible to go to that neighborhood, interview neighbors, and get further evidence.

Keep in mind that sometimes it’s best to wait and let things develop before actually taking action. Like a tree, people grow roots slowly. Driver license, vehicle registration and voter registration changes don’t occur instantly with a move. Sometimes it’s best to wait to let the master tenants make those moves that will help prove your case and enable you to give a market rate rent increase. But be quiet: don’t confront them, because if they know you are suspicious, they will be careful not to make changes they otherwise would, or reverse changes already made.

—Saul M. Ferster

Q. My tenant has been residing in an illegal unit for 10+ years; the kitchenette and bathroom were also done without permits. What are the pros and cons of making the space a legal unit? If it becomes a legal unit, can the tenant file for a decrease in housing services?

A. The term “illegal unit” is a misnomer. The unit or space itself may not actually be illegal. Instead, it is the use of the unit that may be illegal because it does not comply with occupancy laws.

There are thousands of in-law rooms/units in San Francisco properties. It is not uncommon for an owner to install a kitchen or stove or bathroom in an in-law room in an attempt to create an additional dwelling unit at the property. But when this is done without permits, as is often the case, then the use and rental of the space as a separate dwelling unit may be illegal.

Even though illegal units are a valuable source of housing in San Francisco, renting these units is not without risk. For example, the landlord may be cited by the city for code violations. And in some cases, a tenant may sue a landlord for claims such as fraud, breach of habitability, and wrongful eviction. Illegal units are generally subject to rent and eviction control and the landlord should always treat them as such.

Because of the need for housing in San Francisco, legislators are attempting to make it easier for property owners to legalize these units. For instance, in 2014, the city announced a voluntary program that allows owners of certain illegal units to pursue legalization with the Department of Building Inspection (DBI) and Planning Department. Then in 2015, the city waived plan review fees with DBI and the Planning Department for owners applying to legalize certain illegal units.

Legalizing an illegal unit may greatly benefit a property owner. The property will have another legal dwelling unit, which may increase the value of the property. The owner may legally rent the unit and minimize the risk of certain tenant claims. And the legalization of a unit by itself does not give rise to a tenant decrease in housing services petition. In fact, in the end, the landlord may actually be enhancing the livability of the unit.

However, there are also some costs to consider. There may be significant construction costs needed to legalize the unit and ensure it meets all life-safety requirements. This may require hiring engineers, architects, or contractors. And if construction work is needed that will disrupt or temporarily displace the tenant, then the tenant may file a decrease in housing services petition and may be entitled to receive mandatory relocation payments. Additionally, the costs for legalization generally cannot be passed through to the tenant.

To obtain more information regarding unit legalization, you may visit DBI’s Legalization Counter at 1660 Mission St., 1st Floor, in San Francisco, or call 415-558-6117.

—Steven Williams

The information within this article is general in nature. Consult an attorney for any specific problem. David Semel is with Fried & Williams, LLP and can be reached at 415-421-0100. David Wasserman is with Wasserman-Stern Law Offices and can be reached at 415-567-9600. Saul M. Ferster can be reached at 415-863-2678. Steven Williams is with Fried & Williams, LLP and can be reached at 415-421-0100.