written by Justin Goodman & Shoshana Raphael
The legal and ethical steps landlords should take when rebuilding—and tenants are displaced—after a building fire.
It seems large-scale fires capture headlines all too often these days. As of this writing, the 2019 Kincade Fire in Sonoma has grown larger than Manhattan, causing thousands of residents to evacuate, destroying buildings, and disrupting lives. While all such fires share a theme of tragedy, the aftermath depends on location and scale. What happens when a fire originates in an apartment and burns a single building in a city with some of the most onerous land use and landlord-tenant regulations on the planet? What should you do if a fire strikes your building?
The First Few Months
Whether you are an owner or a property manager, there is a good chance this story starts with an unexpected phone call from a tenant, neighbor, or fire official informing you that your building is on fire. If you can, get to the scene immediately to participate in real time decisions. Bring any information you have about the identity of the occupants to assist first responders. If you can, help your tenants find temporary accommodations. (The Red Cross may be a resource for this as well.) Hopefully, everyone promptly evacuated, and the only losses were property.
Once the fire dies down, physically secure the building to prevent unauthorized access. Next, hire a structural engineer to evaluate whether any emergency shoring is needed and to perform any necessary shoring. Once the building is secure, the Fire Department will perform an investigation about the cause of the fire. You should notify your insurance company and provide it with the Fire Department’s report when you get it. (Encourage your displaced tenants to notify their renters’ insurance as well, as this may be a resource for housing costs and the supply of other essentials.) Once the building is structurally sound, you can make arrangements with your tenants to retrieve personal property. You should collect information about forwarding addresses, not only from your tenants but from all other occupants of their units.
The Department of Building Inspection will pay a visit to the building to issue a Notice of Violation noting that the building is uninhabitable. This determination will result not only from fire-related physical damage to the structure, but also from ancillary damage from both the fire itself and the means used to extinguish it, such as debris, water damage, and smoke damage, as well as toxins expelled from lead paint and asbestos. The building is going to be a shell of its former self for a while. (For a step-by-step guide on how to clean up and rebuild after a fire, turn to “Standup Cleanup” on page 26.)
You’ve got a long road ahead, but before you settle in, you should consider relocating displaced tenants to other available rental units in your inventory under the Good Samaritan Program—a provision of the Rent Ordinance that permits landlords to offer a rental unit to a tenant displaced by a fire or other disaster, at their former rent, for up to 24 months. (The lease must specifically identify the Good Samaritan status; that the lease is temporary in nature; and that their previous unit was rendered uninhabitable.) Of course, no rational landlord would charge less than market rate for a vacant apartment. But you can be proud that you’re doing a good thing… and you’ll want to mitigate any potential liability to your tenant, while generating good will for what comes next.
The Next Few Years
After a destructive fire, expect to receive notice or notices of violation (NOVs) from DBI. Likely, you will not be able to complete the necessary repairs to abate the notices of violation within the time frame specified in the notices. Unabated NOVs can lead to Director’s Hearings, which can lead to the issuance and ultimately the recording of orders of abatement on your property. The key is to remain engaged with DBI. As you apply for permits and move through the Planning process (if necessary), continue to communicate with DBI regarding your progress. (If you hire a licensed contractor, your contractor should keep the DBI inspector in charge of your case in the loop.) If you are notified of a Director’s Hearing, be sure to attend the hearing and report on the status of applications or construction, or else have your contractor attend. DBI is far more likely to issue an order of abatement if you or your representative does not attend the Director’s Hearing. Should DBI issue an order of abatement, it is not final (or recorded) until an appeal is denied or else the time for appeal has run without an appeal filed. Carefully read the order of abatement itself to determine the deadline for filing an appeal with the Abatement Appeals Board and consider filing an appeal at DBI.
Once the immediate life-safety and tenant relocation concerns are addressed, the focus shifts to rebuilding the destroyed buildings or portions of buildings. To many landlords, a destructive fire would appear to provide an opportunity to redevelop a property without the constraints of older construction and layouts. Sometimes this is not the case. The next few years of rebuilding—and the corresponding administrative process through the Planning Department and DBI—will likely be shaped by what existed on the property prior to the fire, and what your goals are in rebuilding.
For example, if the existing building contained fewer units than the maximum density allowed, you could rebuild a structure with more units than the previous structure up to the density limit without seeking any special approvals from the Planning Commission, provided the proposed structure met height restrictions as well as applicable other planning and zoning restrictions. The Planning Commission would likely look favorably on a project that increased density to the maximum allowed, though neighbors may not share the same positive perspective if the height or unit size is increased. Instead, or in addition, you could construct one or more accessory dwelling units (ADUs). These ADUs would be subject to the same rules governing ADUs (i.e. state program or local program). For example, the size and layout of the proposed ADUs would be dependent on the previous building layout, in that no more than 25% of existing habitable space may be used to create ADUs. These ADUs are administratively simpler to approve, and less likely to provoke backlash from neighbors. Adding units may add value to the building as a whole- and over-time help offset losses resulting from costly construction.
This is also a good opportunity to embark on a pending seismic retrofit project, not least because work is simpler without tenants in possession, but also because tenants will not need to be displaced to begin the work or otherwise separately compensated for any displacement. Similarly, a destructive fire presents an opportunity to perform deferred maintenance, possibly with contribution or assistance from your insurer. On the flip side, reconstruction may trigger upgrades otherwise not required due to the age or historic status of your building. For example, code requires the installation of sprinkler systems in new and renovated apartment buildings and specific locations in existing apartment buildings. Your building may have been grandfathered and not required sprinklers prior to the fire but may require sprinklers when the structure is rebuilt. This can require an upgrade of lines from PG&E that often come with a hefty price tag.
Also during this time, you may be involved in any number of lawsuits in the following scenarios: your tenant caused the fire, your insurance denied coverage for the damage or the loss of income, fire in your neighbor’s building ignited yours (or vice versa), and—perhaps the most murky among them—your tenants sue you because you haven’t rebuilt and restored their tenancy yet. This last one may seem surprising (especially if your tenant caused the fire), but Rent Board Regulation 12.19 provides that, “if a tenant is forced to vacate her/his unit due to fire or other disaster, the landlord shall, within 30 days of completion of repairs to the unit, offer the same unit to that tenant under the same terms and conditions as existed prior to her/his displacement.”
You may note that there is no deadline to complete repairs, only that completion triggers the obligation to re-offer the unit. However, you are also an experienced property owner/manager who understands that your long-term tenant is now paying thousands more per month for comparable accommodations and is anxious to recover their under-market rental (that is, unless you gave them Good Samaritan status elsewhere). Sometimes, the difference between “slow and steady” and a wrongful eviction lawsuit is your displaced tenant’s patience.
Changing Your Building
In the best-case scenario, your insurance pays for everything, your tenants are happy and patient in their temporary accommodations, and you sail smoothly through the permitting process to restore the building. But what if you want to change the configuration of the units or add units and you want to do something else with the building than offer it back to your former tenants? It’s complicated.
A nonconforming use is a use that existed lawfully at the effective date of the Planning Code, but which fails to conform to the density or use limitations that later became applicable. A noncomplying structure is a structure that existed lawfully at the effective date of the Planning Code that fails to comply with one or more of the regulations for structures that later became applicable to the property on which the structure is located. An example is a cottage within a rear yard setback that raises the unit count above the density maximum. Generally, such uses, and structures may be continued, and may even be reconstructed following a fire as long as a building permit is filed with DBI within 18 months of the fire.
You may only get through your lofty plans at Planning with representations that you’ll restore the former tenants. State law considers tenancies terminated if the rental unit is “destroyed.” But whether or not the units (or even the entire property) has been destroyed, Regulation 12.19 still requires you to re-offer the units to your displaced (former) tenants upon completion of repairs. “Destruction” may be in the eye of the beholder, as Planning is reluctant to deem anything “new construction” (i.e., exempt from rent control).
More likely, you’ll be encouraged to rebuild the units as they were, and you’ll forfeit the opportunity for modifications if you don’t. And, with your former tenants back in place at their former rents, Regulation 12.19 prevents landlords from passing through the costs of repairs, renovations, and upgrades so long as insurance proceeds reimburse the costs. For this reason, landlords may choose to invoke the Ellis Act to withdraw the property from the rental market instead of offering it back to the former tenants. (The procedure is complicated, because there may not be “tenancies” to terminate. This is a good reason to get a headcount and forwarding addresses on day one.)
This article is not an exhaustive description of what to do after a fire. There is a lot to do, and there may be surprises along the way. Address problems before they happen. Make sure your tenants have functioning smoke detectors; clear egress paths; and adequate notifications about exits, escapes and extinguishers.
Justin Goodman and Shoshana Raphael are with Zacks, Freedman & Patterson, PC and can be reached at 415-956-8100.