SF Apartment : December 2016
A House Divided
by Various Authors
Q. We rented a single-family home in 2009 to a married couple, and have since made only modest rent increases. We recently discovered they are subleasing the first floor of the house at market rate, which consists of one bedroom, a family room, and a bathroom; the house has only one kitchen. After learning this, we’d like to increase their rent to market value. Can the tenants claim rent control, based on the house being two units?
A. No, the tenants cannot successfully claim the property is two units for purposes of the rent increase limitations established by the Rent Board and governed by the San Francisco Residential Rent Stabilization and Arbitration Ordinance. Your concern is understandable, since single-family homes with in-law units are usually considered two units when rented out separately, and thus protected by the annual rent increase limitations.
The Rent Board’s general policy is that single-family homes with in-law units, even if the in-laws are not legal, are considered two-unit buildings and thus not exempt from rent control. (Single-family homes that share a parcel with another residential structure are also subject to rent control.) However, if the landlord rents out a single-family and its in-law unit as a single tenancy to multiple people under one rent agreement, the property is not subject to the rent increase limitations.
In your case, the tenants are the ones who split the property into two dwelling units. They might claim there are thus two tenancies, but your claim that you only agreed to one tenancy should prevail. The Rent Board has agreed with our clients who have encountered this issue. Tenants are not permitted to create two units or two tenancies when the owner only rented out one unit and agreed to one tenancy.
The state Costa-Hawkins Rental Housing Act permits owners to raise the rent on single-family homes and other properties that are separate from the title to any other dwelling unit, such as a condominium. Please note that you cannot raise the rent under Costa-Hawkins if the property contains serious health, safety, fire, or building code violations (excluding those caused by disasters) when a citation has been issued and not corrected for six months or longer preceding the vacancy.
You should not raise the rent indiscriminately. It is important to raise the rent to an amount that reflects your good faith estimate of the market rental value of the property. Although single-family homes are not subject to rent increase limitations, they are subject to the eviction control provisions of the Rent Ordinance. If you raise the rent with the intention of forcing the tenants out, you will be exposed to potential liability for wrongful eviction. There have been a number of lawsuits filed in San Francisco in which the tenants alleged the rent increase was so large that it constituted a wrongful endeavor to recover possession without just cause in violation of the Rent Ordinance. There is, as of now, no binding precedent establishing a Costa-Hawkins rent increase that can or cannot violate the Rent Ordinance, so these lawsuits have settled before trial for substantial sums. You should be safe from liability if you serve your tenants with a valid written notice of a rent increase to the market rate.
Q. What are my rights as a landlord to request information from a master tenant about who else is occupying the unit?
A. You may request anything you want. Compelling a response is a different story. There is no law that requires a tenant to divulge personal information to the landlord. Management often asks, “Can’t we require all occupants to give us their personal information in case of an emergency?” The short answer is no; you may not require them to make this disclosure, but you may ask.
The local rent laws do allow you to screen additional or replacement roommates by requiring the procurement of information that would allow you to run credit and to verify employment prior to move-in. This author strongly advises against utilizing those tools to screen subsequent occupants. First, there are really no legitimate grounds to deny the application of an authorized subtenant, especially if the master tenant represents that the new occupant will not be rent-responsible.
Secondly, and more importantly, interacting with subtenants in this manner creates risk that, when the last original occupant vacates, the landlord may be viewed as having created a co-tenancy relationship with the subtenants and, if a co-tenancy is deemed to exist, no unlimited rent increase will be allowed. As such, this author firmly believes that all non-emergency contact, interaction, and communication with subtenants should be avoided at all times until the last original occupant vacates, at which point the landlord should immediately notice everyone that rent is being increased.
This question specifically asks if the landlord should inquire about the identity of subtenants. This author has no problem with the landlord making such an inquiry to the master tenant. As stated above, the master tenant may decline to provide this information and, if the subtenants are already lawfully living there, the landlord has no real recourse. The landlord should not, however, query the subtenants directly, as doing so invites a later argument by the subtenants that a co-tenancy was created.
Lastly, landlords should note that tenants (and their subtenants) are not required by law to fill out and return “tenant estoppels.” Estoppels are questionnaires that typically get distributed when the building is being sold. Most estoppels ask for the identity of each occupant, when the tenancy began, the amount of the security deposit, the current rental rate, and, most importantly for many buyers, whether a tenant is protected by age or disability and therefore not eligible to be evicted for owner/relative occupancy. The Tenants Union and other tenant advocacy groups urge their constituency to ignore these forms. Polite tenants will truthfully complete and return them. Some landlords will point to the clause in the SFAA Lease and other good lease forms that require that a tenant fill out an estoppel, but enforcement through eviction should a tenant decline to do so is highly doubtful, as this would not likely be deemed a material enough lease rule to justify a termination of the tenancy for its breach.
In sum, feel free to ask the master tenant about the identity of those also living in the unit. Unless the master tenant is preparing to move someone in, there is little if anything you can do to compel a response. The same holds true for estoppel forms: good tenants will fill them out truthfully and promptly return them, whereas bad tenants may not. Regardless, your recourse to compel action is virtually nonexistent, so oftentimes we just have to accept the reality that we may not know the identities of everyone who lives in our buildings.
Q. My property is undergoing seismic retrofit work. During the permitting process, the SFFD required that I add a new fire escape path, which will mean the removal of one parking space and a small storage space. The tenant pays separately for the unit and the parking/storage space. How should I notify the tenant? In addition to canceling the parking fee she pays, will I have to compensate her in another way?
A. Under the SF Rent Ordinance, rental units are defined to include “all housing services, privileges, furnishings and facilities supplied in connection with the use or occupancy thereof, including garage and parking facilities.” In other words, if a landlord rents a residential rental unit, then any parking and storage provided with the tenancy are part of the rental unit and protected under the Rent Ordinance.
In order to permanently remove a housing service, such as parking or storage, a landlord must have “just cause” under the Rent Ordinance. Accordingly, the landlord would need to serve a termination notice stating a just cause ground to terminate the parking or storage and complying with all state and local laws, similar to terminating a tenancy. And once the right to park or use storage is terminated by the landlord, the tenant is entitled to a corresponding rent reduction.
However, effective August 20, 2014, the Rent Ordinance was amended to allow a landlord to temporarily sever housing services from the tenancy, including parking and storage, without “just case” in order to perform the mandatory soft-story seismic retrofit work. In such circumstances, the tenant is entitled to compensation or to a substitute housing service and is entitled to restoration of the parking or storage when the work is completed.
When seeking to temporarily sever parking or storage, the landlord must first obtain all necessary permits to perform the mandatory seismic retrofit work. Thereafter, the landlord must provide the tenant with 30 days written notice temporarily severing the parking or storage and specifying the length of time the parking or storage will be severed. In addition, the tenant is entitled to the following compensation:
If the rental agreement states a rate for the parking or storage, then that rate shall be used to calculate the amount due to the tenant on a daily basis.
If there is no rate stated in the rental agreement, then the rate shall be equal to the current replacement value of the parking and storage.
If the landlord provides other comparable parking or storage, then no compensation is due.
Half of any compensation is due when the notice is served, and half is due when the parking or storage is severed.
In no event shall the compensation due to the tenant for each housing service exceed 15% of the monthly base rent for the rental unit. And if the parking or storage was provided to the tenant after the inception of the tenancy and the tenant does not pay any additional rent for the parking or storage, then no compensation is due.
The information contained in this article is general in nature. Consult the advice of an attorney for any specific problem. David Wasserman is with Wasserman-Stern Law Offices and can be reached at 415-567-9600. Steven Williams and David Semel are with Fried & Williams, LLP and can be reached at 415-421-0100.