Rent Increases, Utility Passthroughs, Banking, Capital Improvements
The San Francisco rent ordinance limits rent increases for apartments covered under the ordinance, basically those built before June 13, 1979 in a building with more than one unit. Apartments exempt from the ordinance include those subsidized by the government, those in non-profit buildings, and those in institutional properties. Tenants who reside in residential hotels are covered by the rent ordinance after residing in the same unit for 32 days. Tenants in single-family homes lost rent control on January 1, 1999. Condos lose rent control when they are sold. For more information, call us at 703-8644, Monday through Thursday, 1-5pm. Persons renting TICs (tenancies in common) should also call us for info on whether they are covered by rent control. Generally, they should be since they have not been subdivided.
If you do not live in a rent-controlled apartment, there are no restrictions on rent increases other than those imposed by your lease or rental agreement. If you have a month-to-month lease, the landlord could raise the rent every month, though if it’s an increase of 10% of more he would have to give a 60-day notice to raise it.
Some increases in rent controlled apartments (i.e., pass-throughs that are not the normal allowable yearly rent increase) require Rent Board approval, others do not. It is a good idea to check with us or with the Rent Board to determine if your passthrough is legal.
Landlords of a rent controlled building are allowed annual rent increases set by the Rent Board. On March 1st of every year, the Rent Board publishes the allowable rent increase for the following twelve months. Annual rent increases do not require Rent Board approval. However, a tenant must be given a written 30-day notice of a rent increase (unless it’s 10% or more, then it’s a 60-day notice).
Banking is when a landlord chooses not to impose a rent increase at the time it becomes due (on the tenant’s anniversary date), but instead imposes it at a later time, which could be years later. Increases can be banked back to the beginning of someone’s tenancy. A new landlord can charge banked increases that the previous landlord didn’t take. If the increase is 10% or more, then the landlord must give a 60-day notice, as per CA Civil Code 827 (3). Less than 10%, it’s a 30-day notice.
To calculate the proper amount of a banked increase, it’s necessary to know the allowable rent increase for each year. When figuring out the banked increase, add up all the percentages for the years, for example, .8 + .6 = 1.4%. Multiply the 1.4% by your current rent (called the “base rent”), and you have the amount the rent can be raised.
Until March 1, 1984 the allowable increase was 7.0%.
March 1, 1984 and Dec. 8, 1992: 4.0%.
Dec. 8, 1992 and March 1, 1993: 1.6%.
March 1, 1993 and Feb. 28, 1994: 1.9%.
March 1, 1994 and Feb. 28, 1995: 1.3%.
March 1, 1995 and Feb. 28, 1996: 1.1%.
March 1, 1996 and Feb. 28, 1997: 1.0%.
March 1, 1997 and Feb. 28, 1998: 1.8%.
March 1, 1998 and Feb. 28, 1999: 2.2%.
March 1, 1999 and Feb. 28, 2000: 1.7%.
March 1, 2000 and Feb. 28, 2001: 2.9%.
March 1, 2001 and Feb. 28, 2002: 2.8%.
March 1, 2002 and Feb. 28, 2003: 2.7%.
March 1, 2003 and Feb. 28, 2004: 0.8%.
March 1, 2004 and Feb. 28, 2005: 0.6%.
March 1, 2005 and Feb. 28, 2006: 1.2%.
March 1, 2006 and Feb. 28, 2007: 1.7%.
March 1, 2007 and Feb. 28, 2008: 1.5%.
March 1, 2008 and Feb. 28, 2009: 2.0%
March 1, 2009 and Feb. 28, 2010: 2.2%
March 1, 2010 and Feb. 28, 2011: 0.1%
March 1, 2011 and Feb. 28, 2012: 0.5%
March 1, 2012 and Feb. 28, 2013: 1.9%
March 1, 2013 and Feb. 28, 2014:1.9%
March 1, 2014 and Feb. 28, 2015: 1.0%
March 1, 2015 and Feb. 28, 2016: 1.9%
March 1, 2016 and Feb. 28, 2017: 1.6%
March 1, 2017 and Feb. 28, 2018: 2.2%
March 1, 2018 and Feb. 28, 2019: 1.6%
March 1, 2019 and Feb. 28, 2020: 2.6%
If it’s really obvious that your rent has been wrongfully increased (for example, the allowable increase is 1% and the landlord is trying to raise it 10%), you can file a summary petition at the Rent Board, which speeds up the Rent Board process. Otherwise, if you think your rent is not the proper amount, you can file an “illegal rent increase” petition. The Rent Board will schedule a hearing. It may take time to get a hearing if the Rent Board is backed up. Meanwhile, you will have to pay the increase and if you win at the Rent Board, the landlord will be required to reimburse you for the overage you paid as well as restore your rent to the right amount. If the landlord doesn’t pay the reimbursement within 15 days of the judge’s written decision, the tenant will be able to deduct it from the rent until it is paid up. Through the Rent Board, illegal rent increases can only be re-funded going back three years.
UTILITY, OPERATING & BOND PASSTHROUGHS
You might receive a notice from your landlord saying that he is passing on the cost of utilities (in situations where he pays the utilities), of operating and maintenance, or of a bond that was passed by the voters at election time.
In the case of a utilities passthrough, the landlord must either file a petition (if she is using the last two utilities bills as justification for the increase) or, if not, fill out a work sheet on the Rent Board site and submit that to the tenant.
For an operations and maintenance passthrough, the landlord must file a petition with the Rent Board for approval of the passthrough. The tenant does not have to pay for the increase unless it is approved, but the increase will be retroactive back to the date of the notice of the increase from the landlord.
As for a bond passthrough, the landlord has to serve a notice at the time of a rent increase that includes a worksheet. Bond passthroughs include general obligation and water bonds. For water, here is more info on that passthrough.
For all of the above passthroughs, except for the general bond passthrough, a tenant can file a hardship petition. Basically, a hardship is based on whether a tenant is already paying 1/3 of their income on rent or has excessive expenses, such as medical expenses. A tenant should qualify if they are on “means-tested public assistance, such as Social Security Supplemental Security Income (SSI), General Assistance (GA), Personal Assisted Employment Services (PAES), CalFresh (SNAP/Food Stamps) or California Work Opportunity & Responsibility to Kids (CalWORKS).” Quote is from the Rent Board web site.
If a tenant does not pay utilities (it’s either in her lease or the practice in her tenancy) and the landlord suddenly wants her to, then the tenant can object on the grounds that it is a unilateral imposition of a change in terms of her lease and she is under no obligation to pay it, as per 12.20 of the rent ordinance rules and regulations.
A landlord may petition the Rent Board to pass on to tenants the costs of renovations to the property. This includes work that prolongs the life of the building, such as roof replacement, exterior painting, seismic retrofitting, etc. Capital improvement rent increases cannot occur without the Rent Board’s approval. In order to pass on these costs, the landlord must first petition the Rent Board and receive approval. The Rent Board sets up a hearing before it grants approval. Tenants have the opportunity at the hearing to argue against the petition.
A tenant does not have to pay the passthrough when she receives the written notice. However, if the Rent Board approves the passthrough, the rent will be retroactive back to when the tenant received the notice.
Tenants can be evicted temporarily for a period of up to three months for capital improvement work which will make the unit uninhabitable while this work is being done. The landlord can request three-month extensions. The tenant must be allowed to reoccupy the unit once the work is completed. Prior to the work, all necessary permits must be obtained before the tenant can be asked to leave.
A proper eviction notice must be given for this type of eviction. Tenants must be paid relocation costs (they’re the same as for owner move-in, see the chart on our eviction page). The tenant must let the landlord know in writing before moving that she is interested in re-occupancy.
The landlord must submit a petition for a capital improvement increase to the Rent Board before she can pass it on to tenants. A landlord must provide proof of the cost of the project. Info on what work was done and to which tenant the increase applies must also be included. The Rent Board then sets a hearing date and notifies affected tenants by mail at least 10 days prior to the hearing. The tenant may file a written response at any time before the hearing.
It’s important that as many tenants in the building as possible attend the hearing. Information from both landord and tenants and/or their representatives may be submitted. The Hearing Officer will question the landlord and review the documents, then open the record to tenant questions and evidence. The Hearing Officer will consider the past history of rent increases, as well as failure to perform ordinary repairs, and to comply with applicable state and local law.
At the hearing, a tenant can raise objections. Allowable objections to the landlord’s petitions include:
The work was not done at all, was shoddy, was done without permits, was done a long time ago, or was never completed.
The work was either necessary only because of deferred maintenance (the landlord neglected repairs), or was unnecessary and only undertaken for purposes of “gold plating.”
You moved in within six months of the landlord doing the work and therefore do not have to pay.
You objected to the work; it was not done in response to health or safety concerns or to reduce maintenance costs.
The landlord didn’t spend as much as he claims or got insurance money to cover the costs.
The work is overly luxurious or more costly than required.
Note: A landlord cannot pass on the cost of replacing appliances s/he owns and that she charges a use fee for, e.g., coin-operated washers and dryers. Appliances may be amortized when part of a remodeled kitchen or if they are new services or appliances the tenant did not previously have. If the appliance is a replacement for a current one, the cost will not be amortized as a capital improvement, but will be considered part of operating and maintenance expenses, except for EPA-energy-star compliant appliances.
The Hearing Officer will write a decision within 30 days and send copies to all parties. Both sides have 15 days from the notice of the decision to appeal.
A tenant can appeal a capital improvement increase on the basis of hardship. The criteria used is HUD guidelines, ie., rent payments should compose no more than 30% of gross income.
CAPITAL IMPROVEMENT PASSTHROUGH RULES
Buildings with 1 to 5 units
100% of the certified costs of capital improvements may be passed through to the tenants. Amortization (period over which payments are stretched) schedules are 10, 15 and 20 years. Capital improvement rent increases are limited to 5% of base rent at the time the petition was filed or $30, whichever is greater, in any 12-month period.
Buildings with 6 or more units
Only 50% of the costs of improvements can be passed through. Amortization schedules remain 7 and 10 years; rent increases limited to 10% of the tenant’s base rent at the time the petition was filed or $30, whichever is greater, in any 12-month period. In place of the above, a tenant may elect to have 100% of the costs passed through to the tenant, with an annual limitation of 5% and a total limitation of 15% of the tenant’s base rent applicable to the capital improvement rent increases. (Note: This option may be chosen within 15 days after a decision on a 50% passthrough is mailed to tenant.)
100% of the cost of energy conservation work approved by the Commission on the Environment may be passed through and there is no annual limit on amount of the passthrough. (At present, EPA energy-star-compliant refrigerators are the only items approved for certification.)
All capital improvement petitions which request certification of more than $25,000 in costs must include copies of either competitive bids for the work or copies of time and materials billing for work performed by all contractors and subcontractors. Otherwise, landlord must pay for an estimator hired by the Rent Board. Rent Board may not certify work required to correct code violations for which an NOV (Notice of Violation from the Dept. of Building Inspections) remained unabated for 90 days unless the landlord made timely good faith efforts to complete the work within the 90-day period.
Currently, owners of soft story buildings are required to retrofit them against earthquakes. Unfortunately, 100% of the certified cost of seismic work required by law (and other work required by laws enacted after 11/14/02) may be passed through, subject to the 10%/$30 limit. Amortization schedule is 20 years. (Note: Seismic work not required by law follows the regular scheduled according to building size.)
A tenant can apply for a hardship once she receives the written notice of a rent increase.
SOFT SHELL RETROFIT
Building owners are required to seismically retrofit all “soft-story” buildings under Building Code 34B. These are generally wood frame buildings built before 1978 with at least 2 stories consisting of 5 or more units above the soft story (usually a garage or large commercial space). Many tenants will temporarily lose services such as parking or storage space. Because the work is mandatory, tenants cannot file a Decrease in Services for these losses. However, the landlord is required to provide some compensation and a 30-day written notice of the temporary loss of the service(s). Which services apply (such as parking/garage) and how compensation is to be calculated is defined by SF Administrative Code 65A. Since these buildings should be under rent control, tenants get relocation money and a proper notice. If they don’t get relocated, they can file for a decrease in services for the noise and mess, especially if their apartments are directly affected. Landlords can pass on 100% of the cost, but low-income tenants can file for a hardship with the Rent Board (see hardship info in the back of the manual).