SANTA MONICA RENT CONTROL BOARD MEMORANDUM

SANTA MONICA RENT CONTROL BOARD MEMORANDUM TO: FROM: Santa Monica Rent Control Board J. Stephen Lewis, General Counsel FOR MEETING OF: February 9, 2017 RE: Amendment to Regulation 13002, respecting registration of controlled units, by adding a new subdivision (g) requiring landlords to provide information about the rent control law as mandated by Charter Section 1803(g) and a new subdivision (h) specifying that landlords who fail to comply with registration requirements cannot impose annual general adjustments; and amendment to Regulation 3035, subdivision (b), by adding a new paragraph 8 specifying that landlords may not impose annual general adjustments until they have complied with the requirement to provide tenants information about the rent control law, as specified. Subject Matter The Santa Monica Rent Control Board will hold a public hearing to consider amending Regulation 13002, respecting registration of controlled units, and Regulation 3035, respecting imposition of annual general adjustments. The proposed amendments to Regulation 13002 would be a new subdivision (g), which would require landlords to provide tenants with information about the rent-control law in conformity with Charter Section 1803(g) and a new subdivision (h), which would specify that a landlord who fails to comply with registration requirements cannot impose annual general adjustments. The proposed amendment to Regulation 3035 would specify that a landlord who has failed to provide tenants information about the rent control law, as specified, cannot impose annual general adjustments until the information is provided. How this Item was Initiated This item was initiated at the Board s October meeting, when Commissioner Foster directed staff to schedule a Board discussion item on the subject. That discussion occurred at the Board s January meeting, at which the Board voted unanimously to hold a public hearing on the subject. Discussion Under Charter Section 1803(g), the Board must prepare a brochure which fully 1

describes the legal rights and duties under Rent Control in Santa Monica. The subdivision also requires that landlords give this brochure to their tenants. The Board currently satisfies its requirement to prepare a brochure with its website, which, while more economical to produce and maintain than a printed brochure, has left landlords with nothing to give their tenants. With landlords no longer providing tenants with information about the rent control law or the rent-control status of their units, the Board has learned, anecdotally, that some tenants in rent-controlled units are unaware of their rights and responsibilities under the law. These proposed amendments, which include a requirement that the Board will publish a single-sheet document for landlords to give to their tenants, which landlords may either print out from the Board s website or pick up in hardcopy from the Board s office, are intended to remedy this informational gap, and to ensure that tenants are provided information as contemplated by the City Charter. A draft of the proposed document is included as an attachment to this report. In addition to requiring landlords to give tenants the information specified by the City Charter, these proposed regulations would include an enforcement mechanism: landlords who fail to provide the required information may not impose annual general adjustments. Rent increases imposed during a period of noncompliance would be excess rent, and could be recovered by affected tenants through the excess-rent complaint process. But the loss of general adjustments would not be permanent. Once a landlord comes into compliance, he or she may prospectively impose any otherwiselawful increases that could not lawfully have been imposed due to the landlord s noncompliance. At the Board s January meeting, lawyer Thomas Nitti asserted that requiring landlords to provide information as required by the City Charter would constitute compelled speech in violation of landlords free-speech rights. While it might be permissible to require a business owner to convey health or safety information, the speaker asserted, a disclosure requirement not relating to health or safety is unconstitutional. The speaker offered no authority for these assertions, and no such authority exists. Indeed, these assertions have already been rejected by the California Supreme Court. In Beeman v. Anthem Prescription Management, Inc., the Court considered a state statute that required a class of businesses to transmit purely economic information to their customers. While this did constitute a requirement that the businesses engage in speech conveying factual economic information to their private customers the requirement did not offend the constitutional free-speech guarantee because it did not require the companies to adopt, endorse, accommodate, or subsidize a moral, political, or economic viewpoint. 1 Similarly, the summary of the rent control law 1 Beeman v. Anthem Prescription Management, Inc. (2013) 59 Cal.4 th 329, at p. 349. 2

at issue here would not require landlords to assert, or refrain from asserting, any viewpoint about the rent control law; it would merely require the conveyance of factual information. Another speaker, J. L. Jacobson, suggested that, in Lyles v San Diego-Patel, the Court of Appeal has struck down as absurd a notification requirement of the kind at issue here. In fact, the Court did no such thing. In Lyles, the Court considered a Los Angeles ordinance that allowed tenants to withhold rent until the landlord served the tenant with a registration or renewal statement. 2 A landlord failed to serve its tenant with the required notice, but the tenant paid her rent. Years later, the tenant sued the landlord for restitution of all the rent that she had paid, plus treble damages. Construing the Los Angeles Rent Stabilization Ordinance, the Court held that, by its plain language, it did not give a tenant the right to sue for otherwise-lawful rent merely because she forwent her rent withholding remedy. Thus, Lyle was a simple case of statutory construction, in which the Court presumed the ordinance at issue to be perfectly valid. In a communication forwarded to Board staff by Action Apartment Association board member Michael Millman, attorney Rosario Perry suggested the Board should be held liable for not having prepared a physical brochure in recent years and for not having enforced the requirement that landlords give it to their tenants. There is no basis on which to sue the Board for past conduct, or nonconduct, by which landlords were unaffected. Even if there were such a basis in theory, the issue will have been made moot by the enactment of the proposed regulatory amendments, which would result in the publication of a physical brochure. Mr. Perry also suggested that the Board should not be permitted to collect registration fees until it produces the informational document contemplated by the proposed regulations. Again, the proposed regulations would moot such a lawsuit, and there is, in any event, no basis on which to forbid a government agency from collecting regulatory fees as punishment for failing to publish a document in hard copy. In the same communication, J. L. Jacobson complained that, by enacting the contemplated regulations, the Board would be unfairly or unlawfully dictating what landlords include in leases. But the proposed regulations include no requirement that anything be included in leases. Also in that communication, Michael Millman suggested that, notwithstanding any requirement stated in the City Charter, the Board should not require landlords to give information to tenants, but should instead give the information to other organizations and allow those organizations to distribute the information, or not, as they see fit. But the Board cannot enact a regulation abrogating a specific provision of the City Charter. 2 Lyles v. San Diego-Patel (2014) 255 Cal.App.4 th 759. 3

At the Board s January meeting, Mr. Millman, Jacobson, and Nitti all suggested that the Board require that information be posted at rental properties, rather than given to tenants individually. First, the Charter already requires landlords to post each unit s controlled rent in or about the affected unit, 3 and there is little evidence that landlords currently comply with this existing requirement. The same Charter provision also says that the Board may require that other information be posted at controlled properties. So it is undoubtedly true that the Board could enact a regulation requiring landlords to post information about the rent control law if it wished to do so. In addition to saying that the Board may require that information be posted, it says that it shall require that information be given to tenants directly by their landlords. Any posting requirement would supplement, but could not supplant, the requirement at issue in these proposed regulatory amendments. Recommendation Staff recommends that the Board hold a public hearing on the proposed amendments and, after hearing from the public, deliberate about whether to adopt the regulatory amendments as proposed, or as amended in accordance with Board consensus. Alternative Recommendation (to be considered only if the Board adopts the proposed regulations) As with any regulations, these will have prospective effect only. A landlord s failure to provide tenants with information about the rent control law before the enactment of the proposed regulations does not forego the right to impose annual general adjustments under the currently-proposed regulations. The blocking of general adjustments will occur only with respect to tenancies beginning after the proposed regulations are adopted. In order to ensure full compliance, and in order to avoid excess-rent complaints against landlords who are unaware of the newly-enacted regulations, the Board may consider postponing the regulations effective date until a date shortly before the noticing period for the 2017 annual general adjustment, and consider directing staff to engage in an education campaign about the new regulations during the intervening months. (The proposed regulations are included in the following pages. New regulatory language is indicated by underlining, and any excisions are indicated by strikethrough. These proposed amendments include no excisions). 3 City Charter Section 1804(c). 4

13002. Proper Registration of Rent and Amenities; notification to tenants; consequences for failure to comply. (a) A property shall be deemed to be properly registered with regard to April 10, 1978 rent and amenities, so long as the following information is completely and accurately provided on the registration form: (1) Name and address of current owners; (2) Address of rental property; (3) April 10, 1978 rents or, in the event that no rent was charged on that date, the amount and date of the first rent charged thereafter for a particular unit and the rental status or use of that unit on April 10, 1978; (i) Rent, as defined under 1801(f) of the Charter Amendment, includes non-monetary consideration rendered to or for the benefit of the landlord. Where the April 10, 1978 base rent included non-monetary consideration, the base rent shall be calculated according to Regulation 7001. (ii) In those instances where the Santa Monica Rent Control Board has accepted and filed a registration form for the rental unit where the base rent includes nonmonetary consideration, the unit shall be deemed properly registered until the Board provides written notice that the registration for such unit must be corrected to include a monetary rental rate calculated in accordance with Regulation 7001. (4) The date of purchase; (5) The letter or number identifying each and every unit on the property and the number of bedrooms and baths in each rental unit; (6) Apartment and building amenities provided to each unit on April 10, 1978 or, in the event that no rent was charged for a particular unit on that date, the amenities provided on the date that rent was first charged for the particular unit; (7) Signature under penalty of perjury of an owner or authorized agent of the owner. (b) If an owner is unable to obtain April 10, 1978 rents and/or amenities, the Board will accept a registration form listing the first rents and amenities available to the owner, together with the date such rents were first charged, provided that the owner submits a declaration signed under penalty of perjury enumerating the steps taken to ascertain the April 10, 1978 rents and amenities with the registration form. If earlier rents and amenities are subsequently discovered for a unit registered under this subsection, a new registration form must be filed with the earlier information. Such a new registration shall have no retroactive effect on the maximum allowable rents or amenities, unless a finding is made in a final Board decision that the first registration was the result of fraud or misrepresentation. (c) If a landlord is required to register units at a property pursuant to a removal permit agreement with the Board, the landlord shall provide the following information: (1) Names and business or residence street addresses of all owners and name and address of property manager of property; (2) If the owner of the property is a corporation, the registration form shall provide the street address of its principal place of business and the name and business or residence street address of its chief executive officer. If the owner of the property is a partnership, the registration form shall provide the street address of its principal place 5

of business and the names and business or residence street addresses of each partner; (3) The date of initial rental and amount of initial rent pursuant to the removal permit agreement of the rent-controlled replacement units, and a specification of which unit(s) are deed restricted; (4) Apartment and building amenities provided to each rent-controlled replacement unit and number of bedrooms in each replacement unit. (5) A declaration under penalty of perjury that the information on the form is true and correct, and the signature of an owner or authorized agent of the owner. (d) Base rents and parking amenities after vacancy for qualifying tenancies commenced on or after January 1, 1999 shall be registered on a form provided by the Board. The landlord shall provide the following information and documentation: (1) The name and business or residence street address of the owner primarily responsible for administering the apartment building rental business and the name and address of the property manager of the apartment building. (2) If the owner of the property is a corporation, the registration form shall provide the street address of its principal place of business and the name of its chief executive officer. If the owner of the property is a partnership, the registration form shall provide the street address of its principal place of business and the name of its managing partner; (3) The date the unit became vacant; (4) The reason the unit became vacant (i.e. notice of termination of tenancy by previous tenants, abandonment by previous tenants, eviction pursuant to Code of Civil Procedure section 1161 for cause under Rent Control Law section 1806(a)(1) through (a)(7), notice by landlord pursuant to Civil Code section 1946.1 or Civil Code section 827); (5) The date the unit was re-rented; (6) The new rental rate in effect for the new tenancy; (7) Whether one or more parking spaces or garages are provided as a base amenity after vacancy of the unit and a description of the parking provided; (8) A declaration under penalty of perjury that the information on the form is true and correct, and the signature of an owner or authorized agent of the owner; (e) The landlord shall register the base rent of unsold condominium units as defined by regulation 3302(a) on the Condominium Rent Level Unit Registration form provided by the Board. The landlord shall provide the following information on the registration form: (1) The date the prior tenant vacated the unit; (2) The reason the unit became vacant (i.e. notice of termination of tenancy by previous tenants, eviction for cause under the Rent Control Law section 1806(a)(1) through (a)(7), notice by landlord pursuant to Civil Code section 1946.1 or Civil Code section 827). (3) The base rent of the current tenancy pursuant to regulation 3301(b). (4) Whether one or more parking spaces or garages are provided as a base amenity of the unit. (5) The date the current tenancy began. 6

(6) The name and street address of the business or residence of the owner primarily responsible for administering the rental business, if owned by individuals. (7) If the owner of the property is a corporation, the name of the chief executive officer of the corporation and street address of its principal place of business; if the owner of the property is a partnership, the name of the managing partner and the street address of its principal place of business; if the owner of the property is a limited liability company, the name of the manager and the street address of its principal place of business. (8) A declaration under penalty of perjury that the information is true and correct. (f) In the event that the landlord fails to timely file a registration form or fails to register any of the information required on the landlord s registration form filed for tenancies commencing on or after October 1, 1995 or for unsold condominium units as defined in regulation 3302(a), or in the event that the tenant disagrees with the information on the vacancy registration form filed by the landlord, the tenant may file a tenant s registration form setting forth the required information. The tenant may attach copies of all written rental agreements under which the tenant rents the unit and other documents showing the correct rent of the unit. (g) At the commencement of every tenancy, the landlord shall give the tenant a single-page summary of rights and responsibilities under the rent control law. This single-page summary shall be prepared by the Administrator, and shall be available for download on the Board s website as well as in hard copy at the rent control office. The landlord shall state on the tenancy s registration form, which the landlord must sign under penalty of perjury, that the landlord has complied with this requirement. (h) A landlord who fails to comply with this section may not impose any annual general adjustment until this section is fully complied with. 7

3035. Annual General Adjustment (a) By June 30 each year, the Board shall: (1) Announce, by resolution, the percentage by which the maximum allowable rents for controlled units may be adjusted in accordance with Charter Section 1805(a). (2) Decide, by resolution, whether to impose a dollar-amount ceiling on the increase of maximum allowable rents in accordance with Charter Section 1805(b) and state in the resolution the amount of any such ceiling. Should the Board elect to impose a dollar amount ceiling, it shall do so by the same resolution by which it announces the general adjustment percentage. (b) A landlord may impose a rent adjustment permitted under paragraph (a) of this Regulation effective September 1 of the year for which the adjustment is authorized, unless: (1) The landlord lawfully established a new base rent after vacancy after August 31 of the preceding year; (2) The unit s maximum allowable rent was increased by the Board s approval of a Tenant Not In Occupancy petition that became final after August 31 of the preceding year; Ch. 3 51 Effective 6/20/13 (3) The unit first base rent ceiling since the adoption of Article XVIII of the City Charter was established after August 31 of the preceding year; (4) The landlord is not in compliance with any provision of Article XVIII of the City Charter or regulations promulgated thereunder; (5) The landlord has not properly registered the unit for which the rent increase is sought; (6) The landlord has failed to pay in full all outstanding registration fees and penalties which are not otherwise barred by the statute of limitations; or (7) The landlord has failed to correct cited violations of health, safety, or housing laws in any unit or common area. Violations that affect only an individual unit or units will bar imposition of general adjustments as to the affected unit or units only. (8) The landlord has failed to provide the tenant with the informational form specified by Regulation 13002, subdivision (g). A landlord who comes into compliance with this requirement may, upon proper notice as specified by state law, prospectively impose any general adjustments that could not lawfully have been imposed during any period of noncompliance. (c) A landlord may not collect the general adjustment unless the landlord has provided the affected tenant with written notice as required by California Civil Code Section 827. The notice must include the following certification: The undersigned (landlord) certifies that this unit and the common areas are not subject to any uncorrected citation or notices of violation of any state or local housing, health, or safety laws issued by any government official or agency. If the landlord fails to comply with this subsection, the tenant may refuse to pay the improperly-noticed rent increase, and may raise the landlord s noncompliance as an affirmative defense in any resulting unlawful detainer action. (d) A rent-increase notice that does not conform with this Regulation or any other provision of this Chapter is ineffective to increase rent. 8

Santa Monica Rent Control Board www.smgov.net/rentcontrol 310-458-8751 This residential unit is subject to Santa Monica s Rent Control Law. This document provides a summary of rights and responsibilities under the law and is for informational purposes. For additional information, or if you have questions, please contact the Rent Control Agency at 310-458-8751. RENT CONTROL BASICS Rent Levels and Rent Increases For most tenancies starting on or after January 1, 1999, the initial rent agreed to at the beginning of the tenancy establishes the base rent for that tenancy. All rent increases during the tenancy are limited and the owner must provide proper written notice to the tenant to increase the rent. The annual rent increase (general adjustment) authorized by the Rent Control Board may be implemented on September 1st of each year. There are three components to the rent: o the Maximum Allowable Rent, known as the MAR, which is the bulk of the rent; o the Rent Control registration fee pass-through (currently $7.29 per month); and o surcharges which are from certain items on the owner s property tax bill that the Rent Control Board has authorized for pass-through to tenants). These include: Community College Bond, Unified School Bond, Storm Water Management User Fee, Clean Beaches & Ocean Parcel Tax, and the School District Parcel Tax. These amounts vary from property to property and are divided equally by the number of units on the property. A landlord who wants to pass these surcharges through to the tenant must provide a copy of their tax bill so the tenant may verify the pass-through amount. Waivers of the registration fee pass-through are available to low-income tenants who are either 62 years or older or disabled. Contact Rent Control for a fee-waiver application form. If an owner collects more rent than is allowed, a tenant may file a complaint with Rent Control for collection of excess rent to get the overcharges reimbursed. Properties with three or fewer units may be exempt from rent level controls if the owner lives in or moves into in one of the units. A tenant may check with the Rent Control Agency to learn how the Rent Control Law applies to a particular unit. Eviction Protections A tenant in a rent control apartment has eviction protections which means they cannot simply be asked to move out (even at the end of the lease term). The landlord may only evict a tenant for good cause, or justcause. The reasons for eviction are listed in Section 1806 of the Rent Control Law. Some of the just-causes include: not paying rent on time, creating a nuisance, violating a lawful provision of a rental agreement, and using a unit for an illegal purpose. For most of the reasons that involve tenant fault (other than not paying the rent), the landlord must give the tenant a warning letter and a reasonable amount of time to correct the problem before giving the tenant an eviction notice. The owner must file a copy of the eviction notice with the Rent Control Agency within three days of serving the tenant with the notice. There are also no-fault evictions that are beyond a tenant s control such as an owner going out of the rental business under the State Ellis Act or if the landlord wants to move into the unit. (There are rules affecting which unit the landlord may select. Contact Rent Control for more information.) A tenant evicted under the Ellis Act or because an owner wants to live on the property is entitled to receive a relocation payment and a reasonable period of time to relocate. The amount of the relocation payment is determined by the City. Low income tenants evicted for these reasons will receive priority for the City s affordable housing opportunities. 2/1/17

To evict a tenant, the landlord must follow certain procedures including providing proper written notice to the tenant. Buy-out offers from a landlord are legal and must be accompanied by a Rent Control-prepared disclosure form of the tenants rights. A tenant is NOT obligated to accept a buy-out offer. A low-income tenant who voluntarily agrees to move out in exchange for a monetary payment is NOT eligible for a City-priority for affordable housing in Santa Monica. Maintenance and Repairs and Amenities Generally, maintenance and repairs are a landlord s responsibility. Landlords must maintain apartments and common areas in a safe and habitable condition. Tenants are required to take care of their apartment and they may be liable for the costs of repairs if the damage is beyond normal wear and tear. The landlord s obligation to maintain a rent-controlled unit in habitable condition cannot be waived by the tenant. A tenant who believes that a landlord has failed to perform required maintenance, or has reduced housing services (i.e. parking, storage, or the right to have pets), may petition the Board for a rent decrease. Before filing a petition, the tenant must notify the landlord about the alleged problem in writing. If the problem isn t fixed within 30 days, the tenant may file a petition for a rent reduction with the Rent Control Agency. State law requires that a landlord give a tenant at least 24-hours written notice to enter their apartment for necessary or agreed upon repairs, unless there is an emergency. OTHER ISSUES AFFECTING TENANTS AND LANDLORDS Short-Term Rentals and Home Sharing Home sharing is legal in the City of Santa Monica, even in rent-controlled units, when certain requirements are met. Short-term rentals (less than thirty days) are not legal. For additional information about homesharing contact the City s Code Enforcement Department at (310) 458-4984. Smoking Restrictions Smoking is prohibited in residential common areas as well as in all apartments in which the tenant moved in since November 22, 2012. If you have questions about the smoke-free law, contact the City Attorney s Office at (310) 458-8336. Harassment Although the Rent Control Law refers to tenant harassment, it specifies that the City Council, not the Board, will enact and administer the City s anti-harassment ordinance. The City Attorney s Office enforces the ordinance. If a tenant feels they are being harassed with actions that are intended to get them to move out, they may contact the City Attorney s Office at (310) 458-8336 and file a Housing Complaint. Once the complaint is received, the City Attorney s Office will investigate and take action that they deem necessary to enforce the law. Construction If construction at a rent-controlled property is performed in an unreasonable manner or at an unreasonable pace and if it substantially interferes with a tenant s right to occupy the premises, the affected tenants may apply to the Rent Control Board for a rent decrease based on the impacts caused by the construction. All other construction-related inquiries should be directed to the Building & Safety Department at (310) 458-8355. Acknowledgement of Receipt The following parties certify that this document was provided to the tenant at the time of lease signing. Lessor Lessee Date Date 2/1/17