February 26, Honorable Eric Garcetti Mayor, City of Los Angeles 200 North Spring Street, Room 303 Los Angeles, California 90012

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1 February 26, 2015 Honorable Eric Garcetti Mayor, City of Los Angeles 200 North Spring Street, Room 303 Los Angeles, California CF No.: New Council District: Citywide Contact Persons: Marcella DeShurley (213) Anna Ortega (213) Roberto Aldape (213) Attention: Mandy Morales, Legislative Coordinator REQUEST MAYOR AND CITY COUNCIL APPROVAL OF PROPOSED TECHNICAL AMENDMENTS TO THE RENT STABILIZATION ORDINANCE (RSO) AND THE LOS ANGELES HOUSING CODE AND AUTHORIZATION FOR THE CITY ATTORNEY TO WORK WITH THE HCIDLA TO DRAFT AMENDMENTS TO THE RSO AND HOUSING CODE SUMMARY The City Council adopted the Rent Stabilization Ordinance (RSO) in May 1979 to safeguard tenants from excessive rent increases while providing landlords with just and reasonable returns from their rental units. The Council adopted the Housing Code in July 1998, which created the Systematic Code Enforcement Program (SCEP) in order to eliminate dangerous, substandard or unsanitary residential buildings. The City charged the Los Angeles Housing and Community investment Department (HCIDLA) with the implementation of both ordinances to achieve the purposes for which these laws were enacted. Since the inception of the RSO, the City Council has amended the RSO from time to time to clarity and improve the provisions of the Ordinance. The HCIDLA is recommending additional technical amendments at this time in order to improve the enforcement of the RSO, provide clarity for both tenants and landlords on the administration of the City s rent stabilization and housing code enforcement programs, and bring the RSO into conformance with the Housing Code and State law. An Equal Opportunity / Affirmative Action Employer

2 Page 2 RECOMMENDATIONS The General Manager of the HCIDLA respectfully requests that: Your office schedule this report back at the next available meeting(s) of the appropriate City Council committee(s) and forward it to City Council for review and approval immediately thereafter. II. The City Council instruct the HCIDLA to work with the City Attorney to amend the Los Angeles Municipal Code pursuant to the recommendations summarized in the attached table and discussed in this report: Standardization of the RSO registration pass through surcharge fee Clarification of required notice for RSO just cause evictions Clarification of allowable evictions due to use of a rental unit for an illegal purpose Conformance with state law on restriction on rents due to landlord s termination of Section 8 rental assistance contract with the Housing Authority of the City of Los Angeles (HACLA) Clarification of the applicability of the RSO to rental units located on the same parcel Clarification of the obligation to provide relocation assistance in evictions for conversion of RSO rental units to affordable housing projects Obligation to provide relocation assistance for evictions based on a governmental order for illegally subdivided single family dwellings Obligation to provide relocation assistance upon a tenant s intention to terminate tenancy under governmental order eviction Conformance with Housing Code on requirement to pay relocation assistance due to events beyond the control of the landlord Clarification of the applicability of the RSO to properties first issued a Temporary Certificate of Occupancy on or before October 1, 1978 and replacement units as set forth in Subsection A. of Section Clarification of evictions for owner, family and resident manager occupancy Correct punctuation in Section of the RSO Revision and deletion of references to obsolete code sections in the RSO and Housing Code. III. IV. That the ordinance amendment include language, which instructs the Rent Adjustment Commission (RAC) to adopt rules and/or amend existing RAC regulations to effectuate the RSO changes adopted by the City Council. The Mayor concur with the action of the City Council. BACKGROUND Since the adoption of the RSO in 1979, both the RSO and Housing Code ordinances have been amended by City Council to add, amend and repeal various sections of both ordinances. The HCIDLA is recommending additional technical amendments at this time in order to: harmonize provisions in prior

3 Page 3 amendments of the RSO; conform with the resolution of related litigation; provide clarity to both landlords and tenants on the administration and enforcement of the RSO; correct references to obsolete code sections; and to conform the provisions of both ordinances to be consistent to other Chapters of the LAMC and State law. In preparing this report, HCIDLA staff met with landlord and tenant representatives to provide background information and obtain their input on the recommended changes. Standardization of the RSO Registration Passthrough Surcharge Fee The HCIDLA annually bills owners of multi-unit rental properties for RSO registration fees. Fifty percent (50%) of the per unit fee, may be passed through to the tenant. Current language indicates an outdated dollar amount. Current language also indicates that the landlord must use a form prescribed by the Department to collect the pass through rental surcharge. The form prescribed by the Department is unnecessary as any change to the terms of tenancy is covered under Civil Code Section 827 and must be given in the manner prescribed by Section 1162 of the California Code of Civil Procedure. The HCIDLA, therefore, recommends the amendment of the first paragraph of subsection F. of LAMC Section to allow recovery of 50% of the annual rental unit registration fee. Recommended language of LAMC Section F.: For a rental unit for which the registration or annual registration renewal fee has been paid pursuant to Subdivision 5. of Subsection B. of this section, the landlord may demand and collect a rental surcharge of 50% of the annual registration fee from the tenant of the rental unit after serving the tenant with a notice as described in Civil Code Section 827 and given in the manner prescribed by Code of Civil Procedure Section Clarification of Required Notice for RSO Just Cause Evictions The RSO requires a just cause for eviction of tenants. Current statutory language indicates that all notices to terminate a tenancy and three day notices must include a date, place and witness. While this is necessary for all three day notices and eight of the fourteen just cause reasons for eviction, the requirement to state a date, place and witness is not appropriate for the remaining six legal reasons for eviction. In addition, there is no statutory language requiring that notices to terminate a tenancy provide a ground for eviction. The HCIDLA, therefore, recommends amendment of LAMC C. and LAMC C.l to state that any written notice of termination must comply with Civil Code Section 1946, Code of Civil Procedure Sections 1161 or 1161a, and must set forth the reason(s) for termination under A. Recommended language of LAMC Section C.: Any written notice of termination described in Civil Code Section 1946 or the three days notice must comply with Code of Civil Procedure Section 1161, Code of Civil Procedure Section 1161a and must set forth the reason(s) for termination under A. of this Code. The notice shall be given in the manner prescribed by Code of Civil Procedure Section 1162 and must also comply with the following:

4 Page 4 Recommended language of LAMC Section C.I.: When the termination of tenancy is based on the grounds set forth in Subdivision 2, 3, 4, 5, 6 or 7 of Subsection A. of this Section, the termination notice must set forth specific facts to permit a determination of the date, place, witnesses and circumstances concerning the reason. Clarification of Allowable Evictions Due to Use of a Rental Unit for an Illegal Purpose The RSO provides that landlords may bring an action to recover possession of a rental unit when the tenant is using the unit for an illegal purpose. This is intended to allow evictions for tenant at-fault situations, such as drug or gang activity. However, some owners attempt to evict tenants based on the illegal use of an unpermitted rental unit, which the landlord himself has created and offered for rent. In order to circumvent the RSO requirements for payment of relocation assistance for no-fault evictions, some property owners attempt to evict tenants by claiming the tenant is in violation of zoning laws. It is not correct to evict tenants under A.4 for an illegal use, which landlords themselves have caused. If a landlord must evict a tenant in order to correct an unpermitted unit, the correct legal reason for eviction is A. 11 ( the landlord seeks in good faith to recover possession of the rental unit in order to comply with a governmental agency s order to vacate, order to comply, order to abate, or other order that necessitates the vacating of the building housing the rental unit as a result of a violation of the LAMC or any other provision of law ). This type of eviction requires the payment of relocation assistance. The HCIDLA, therefore, recommends amendment of the second paragraph of LAMC Section A.4 regarding the definition of illegal purpose to state that this term includes violations of any of the provisions of Chapter 6 of Division 10 of the California Health and Safety Code, but does not include tenants residing in housing accommodations lacking approved use or which have been cited for related housing accommodation code violations. Recommended language of LAMC Section A.4: The term illegal purpose as used in this subdivision includes, but is not limited to, violations of any of the provisions of Division 10, Chapter 6 (commencing with Section 11350) or Chapter 6.5 (commencing with section 11400) of the Health and Safety Code. This term does not include use of housing accommodations lacking a legal approved use or which have been cited for related housing accommodation code violations. Conformance with State Law on Restriction on Rents Due to Landlord s Termination of Section 8 Rental Assistance Contract with the Housing Authority of City of Los Angeles (T1ACLA1 Section B. of the RSO prohibits landlords from terminating Section 8 rental assistance payments and demanding that the tenant pay the rent in excess of the tenant s portion as a means of forcing a tenant, who could not otherwise be evicted, to voluntarily vacate the rental unit or then evicting the tenant for nonpayment of rent. The California Court of Appeal in Apartment Association of Los Angeles County Inc. vs. Los Angeles City has ruled that Section conflicts with the California Civil Code Section and is preempted. However, under State law, tenants of Section 8 housing must be given 90 days notice of the termination of the Section 8 contract; the RSO does not currently include a notice requirement. In order to be consistent with the decision of the Court of Appeal while ensuring the protections of the California Civil Code, the HCIDLA recommends amendment of LAMC Section

5 Page B. to allow the termination of the Section 8 contract provided that a 90-day notice is provided to the tenant. Recommended language of LAMC Section B.: It shall be unlawful for any landlord to terminate or fail to renew a rental assistance contract with the Housing Authority of the City of Los Angeles (HACLA), and then demand that the tenant pay rent in excess of the tenant s portion of the rent under the rental assistance contract without first sen ing the tenant a copy of the 90- day notice of the landlord s termination of the rental assistance contract with HACLA. The tenant shall not be obligated to pay more than the tenant s portion of the rent, as calculated under the contract or recorded agreement to be terminated, for 90 days following receipt of the notice of termination of renewal of contract. Clarification of the Applicability of the RSO to Rental Units Located on the Same Parcel Section of the RSO exempts dwellings, one family, except where two or more dwelling units are located on the same lot. However, lots can legally be split into multiple parcels owned by different property owners. Under the current statutory language, these units would be subject to the RSO since they are all located on the same lot despite located on separate parcels. The Los Angeles County Assessor defines a parcel as a contiguous area of land described in a single description by a deed or other instrument. The County Assessor s Parcel Number (APN) is imperative to the determination of whether a rental unit is subject to the RSO. The HCIDLA, therefore, recommends the amendment of the definition of Rental Units under LAMC Section to replace the word lot with parcel, which is consistent with the Los Angeles County Assessor. Recommended language of LAMC Section : The term shall not include: 1. Dwellings, one family, except where two or more dwelling units are located on the same parcel. This exception shall not apply to duplexes or condominiums. Clarification of the Obligation to Provide Relocation Assistance in Evictions for Conversion of RSO Rental Units to Affordable Housing Projects The RSO requires relocation assistance in no-fault evictions to mitigate the economic impact of displacement on tenants deprived of their rent-stabilized units. The conversion of RSO rental property to an affordable housing project rental property is an allowable basis for eviction that requires the payment of relocation assistance to tenants displaced in the development of affordable housing projects. Although relocation assistance is mandated by the Federal Uniform Relocation Act, and significantly higher than the relocation amounts set forth in the RSO, the requirement to pay relocation assistance for this just cause reason should also be included in Subsection G. of Section Currently, the requirement to pay relocation assistance for this reason is stated only in the definition of affordable housing accommodations in Section The HCIDLA, therefore, recommends adding 14 to the enumerated list of eviction reasons in LAMC G. to provide clarity that relocation assistance is required for evictions carried out in order to convert units to affordable housing accommodations.

6 Page 6 Recommended language of LAMC Section G.: Except for relocation fees owed pursuant to the provisions of Subsection E. of Section of this Code, if the termination of tenancy is based on the grounds set forth in Subdivisions 8., 10., 11., 12., er-13., or 14. of Subsection A. of this Section, then the landlord shall pay a relocation fee of: $15,500 to qualified tenants and a $7,300 fee to all other tenants who have lived in their rental unit for fewer than three years, or $18,300 to qualified tenants and a $9,650fee to all other tenants who have lived in their rental unit for three years or longer, or $18,300 to qualified tenants and $9,650 to all other tenants whose household income is 80 percent or below Area Median Income (AMI), as adjusted for household size, as defined by the U.S. Department of Housing and Urban Development, regardless of length of tenancy. Relocation fees owed for the termination of tenancy set forth in Subdivision 14. shall be based on the applicable provisions of the Uniform Relocation Act, California Relocation Assistance Act; or the amount set forth in this section... Obligation to Provide Relocation Assistance for Evictions Based on a Governmental Order for Illegally Subdivided Single Family Dwellings Landlords cited for unapproved units may comply with a government order by returning the structure to its approved use or by obtaining a permit and legalizing the current use of the rental unit. If the single family dwelling is illegally subdivided to contain two dwellings, the landlord must comply with the eviction provisions of the RSO, including payment of relocation assistance. Tenants who reside in illegally subdivided single family dwellings are protected by the RSO pursuant to LAMC Section based on the definition of housing accommodations in Government Code Section The current statutory language applies when a single family dwelling contains two rental units. However, when a landlord has illegally converted a single family dwelling into two dwellings and the owner resides in one of the two dwelling units, the owner-occupied unit is not considered a rental unit. When ordered to return the single family dwelling to its legal use, property owners claim that the requirement to pay relocation assistance is not applicable since there is only one rental unit. The HCIDLA, therefore, recommends revision of the third line of the third paragraph of LAMC Section G. to delete the word rental and simply refer to two dwellings. Recommended language of LAMC Section G.: If a termination of tenancy is required due to a governmental agency s order to vacate or comply, and the subject property has an approved use as a single family dwelling and the structure containing the single family dwelling contains two dwellinss. the landlord shall pay a relocation fee in accordance with Section G. of this Code to the tenant(s) of the affected rental unit(s) within 15 days of receiving notice from the tenant(s) of their intention to terminate the tenancy. Obligation to Provide Relocation Assistance upon a Tenant s Intention to Terminate Tenancy under Governmental Order Eviction When the Los Angeles Department of Building and Safety (LADBS) or the HCIDLA issues an Order to Comply to the property owner for rental units that have been converted from garages or the like (attics, basements, etc.), landlords may comply by returning the structure to its approved use or by obtaining a permit and legalizing the current use of the rental unit. In most cases, the owner cannot legalize the

7 Page 7 current use due to building code and zoning restrictions or cost. As a result, the only other option is for the landlord to evict the tenant by issuing a notice to terminate tenancy and compliance with the RSO relocation assistance provisions. However, some owners force out tenants through constructive eviction (utility shut-off, harassment), while other landlords use a sit and wait tactic where they do nothing. During this phase, tenants continue to live in the unapproved unit due to the inability to afford moving costs. This prolongs the time tenants reside in unsafe structures and causes undue delays in obtaining compliance with the Housing Code. Other tenants eventually abandon their tenancy as they cannot tolerate the living conditions thereby absolving the owner of their obligation to pay relocation assistance under the RSO. To address this situation, the HCIDLA, recommends amendment of LAMC Section G. to allow tenants to request the payment of relocation assistance once a unit has been cited as unapproved construction. Recommended language of LAMC Section G.: Any tenant subject to displacement due to an unapproved dwelling unit as a result of a notice to vacate or any order requiring the vacation of the dwelling unit in violation of the LAMC or any other provision of law, where the landlord has been provided a reasonable opportunity to correct the violation, shall be entitled to a relocation fee payable by the landlord to the tenant of the affected rental unit within 15 days of receiving notice from the tenant of their intention to terminate the tenancy in accordance with Section G. of this Code. Conformance with Housing Code on Requirement to Pay Relocation Assistance Due to Events beyond the Control of the Landlord The RSO Section G.4.e. does not require relocation assistance if a rental unit must be vacated due to damage from a natural disaster. The Housing Code and State law provide additional reasons that waive the requirement to pay relocation assistance if a rental unit becomes uninhabitable due to an Act of God or natural disaster and the landlord did not contribute to the hazardous condition of the unit. In order to be consistent with the Housing Code and State law, the HCIDLA recommends that LAMC Section G.4.e. be amended as follows: Recommended language of LAMC Section G.4.e: The Department determines that the unit or structure became unsafe or hazardous as the result of a fire, flood, earthquake, or other event beyond the control of the owner or the designated agent and the owner or designated agent did not cause or contribute to the condition. Clarification of the Applicability of the RSO to Properties First Issued a Temporary Certificate of Occupancy on or Before October and Replacement Units as Set Forth in Subsection A. of Section The RSO provides that dwelling units, where the first Certificate of Occupancy for the structure containing the dwelling units was issued prior to October 1, 1978, are subject to the RSO. The current language in (exemption number six) in the definition of rental unit states Housing accommodations, located in a structure for which the first Certificate of Occupancy is issued after October 1, 1978 are exempt from the provisions of this Chapter. In instances where a Temporary

8 Page S Certificate of Occupancy was first issued on or before October 1, 1978, owners often state that the Temporary Certificate of Occupancy should not be used to determine the application of the RSO because there is a subsequent permanent certificate of occupancy. For purposes of determining whether a rental unit is subject to the RSO, Temporary Certificates of Occupancy are a subcategory within the broader definition of Certificates of Occupancy, which allow the legal habitation of a building and permit the occupancy of the units. Temporary Certificates of Occupancy are not automatically issued; rather, an owner must take an affirmative action and request a Temporary Certificate of Occupancy and pay a fee before the certificate is issued. A Temporary Certificate of Occupancy is typically granted when the building owner desires to rent out a portion of a building. Moreover, if a rental unit is vacated and demolished as a result of a removal of the rental unit from rental housing use pursuant to Section A. 10, and replaced with newly constructed units on the same property, the provisions of the RSO apply if they are offered for rent or lease within five years of the date of withdrawal. The units are subject to the RSO although the Certificate of Occupancy is issued after October 1, The HCIDLA, therefore, recommends amending the sixth exemption in the definition of Rental Unit in Section of the RSO to affirm that a Temporary Certificate of Occupancy, when issued, is the first Certificate of Occupancy and replacement units with a Certificate of Occupancy issued after October 1, 1978, are subject to the RSO. Recommended language of LAMC Section : Housing accommodations, located in a structure for which the first Certificate of Occupancy was issued after October 1, 1978, are exempt from the provisions of this Chapter. If the structure was issued a Certificate of Occupancy, including a Temporary Certificate of Occupancy, on or before October 1, 1978, the housing accommodation(s) shall be subject to the provisions of this Chapter.... This exception shall not apply to individual mobile home coaches, mobile home parks, individual recreational vehicles, recreational vehicle parks or replacement units as set forth in Subsection A. of Clarification of the Applicability of the RSO to Properties Issued a Building Permit for Residential Purposes Prior to October The RSO provides an exemption for units for which the first Certificate of Occupancy was issued after October 1, The current language in (exemption number 6) in the definition of rental unit references the housing accommodation shall be subject to the provisions of this Chapter if relevant documentation, such as a building permit, establishes that the building was first occupied for residential purposes... However, Certificates of Occupancy do not establish when a rental unit is occupied, but when a housing accommodation is approved for residential occupancy. The application of the RSO is not based on the physical occupancy of a structure but on when a building may be legally occupied for residential purposes. The HCIDLA, therefore, recommends a further amendment rephrasing the second part of the sixth exemption in the definition of Rental Unit in Section of the RSO to: Recommended additional language of LAMC Section : If the property was issued a building permit for residential purposes at any time on or before October 1, 1978 and a Certificate of Occupancy for the subject building was never issued or was not issued until after

9 Page 9 October 1, 1978, the housing accommodation shall be subject to the provisions of this Chapter.-if relevant documentation, such as a building permit, establishes that the building was first occupied for residential purposes prior to October 1, Clarification of Evictions for Owner. Family and Resident Manager Occupancy The intended purpose of the no-fault eviction grounds for landlords is to afford landlords the ability to occupy a rental unit for their own use or for that of their eligible family member or a resident manager. It is not intended to allow the eviction of tenants from occupied rental units when there are vacant units available on the property. The current language in Section causes confusion by referring to a unit which is vacant and available. The term can be construed in many ways to circumvent the requirement to occupy a vacant unit by contending that while a unit is vacant, it is not available. Often times, the evicted tenants of occupied rental units are the lowest rent paying tenants. The elimination of the term available will compel landlords to occupy a vacant unit rather than evict an occupied rental unit. The HCIDLA, therefore, recommends amendment to delete the reference to an available unit. Recommended language of LAMC Section C.: A landlord may not recover possession of a rental unit pursuant to the provisions of Subdivision 8 of Subsection A. of Section if there is a comparable rental unit in the building that is vacant and available, except that where a building has an existing resident manager, the landlord may evict the existing resident manager in order to replace the existing resident manager with a new resident manager. Correct Punctuation in Section of the RSO The fourth sentence of LAMC D. should be corrected to add a closing parenthesis. Revision and Deletion of References to Obsolete Code Sections in the RSO and Housing Code Definition of Housing Accommodations The definition of Housing Accommodations in limited equity housing cooperatives, in Section of the RSO (exception # 11 for limited equity housing cooperatives) cites Health and Safety Code Section , which is obsolete. The HCIDLA, therefore, recommends amendment of this section to cite Civil Code Sections 817 and which now defines Housing Accommodations in limited equity housing cooperatives. Unsafe Building or Structure Section of the RSO Unsafe Building or Structure references an obsolete Building Code section, Title 24, Part 2 California Code of Regulations, Section 203, which should be deleted from the RSO, as this term is utilized in the Housing Code and not necessary in the RSO. Delete definition of Unsafe Building or Structure in LAMC

10 Page 10 Tenant Relocation Assistance Program The Tenant Relocation Assistance Program Ordinance, LAMC Section et seq., references California Health and Safety Code Sections 50657(a) and 50657(b), obsolete sections. The HCIDLA, therefore, recommends amendment of this section to cite California Health and Safety Code Sections (a) and (b). These provisions allow the HCIDLA to place a lien against a property in order to collect penalty fees and relocation payments that have been advanced by the City. Recommended language of LAMC B.: If the landlord fails to comply with an order to pay relocation assistance, the landlord shall be liable to the City for any relocation payments advanced, other than any payments made pursuant to Section D in the amount of the payments plus a penalty in the amount set forth in California Health and Safety Code Section (a). The Enforcement Agency may place a lien against the property as set forth in California Health and Safety Code Section (b). FISCAL IMPACT These technical changes to the RSO have no impact on the General Fund.

11 Page 11 Prepared By: Reviewed By: Reviewed By: Reviewed By: Approved By: Attachment

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13 Issue The RSO allows owners to evict a tenant for using a unit for an illegal purpose (i.e.. drug or gang activity). This will prevent eviction of tenants based on the illegal use of an unpermitted rental unit by claiming the tenant is in violation of zoning laws. In this situation, landlords may evict in order to comply with a government order, which requires filing a "Landlord Dedaraton of Intent to Evict" with the HCIDLA and relocation Illegal Purpose Clarification Amend to conform to Civil Code Section , in which a landlord cannot demand more than the portion of rent they previously paid until the landlord has provided a 90 days notice of termination of the HAP contract. Conformance with State Law

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18 LAMC HCIDLA Description Remove Obsolete Definition of "Unsafe Building or Structure" Current Language Proposed Language Comment For the purposes of this chapter, the Remove definition term "Unsafe building or structure" shall be defined in the California Building Code (Title 24, Part 2 California Code of Regulations, Section 203). It is defined as follows: "Sec " This Code is obsolete and is referenced in LAMC, Chapter IX, Article 1, Division 89 (ABATEMENT OF BUILDINGS, STRUCTURES, PREMISES AND PORTIONS THEREOF WHICH CONSTITUTE A NUISANCE OR ARE HAZARDOUS, OR SUBSTANDARD) Issue Obsolete Code