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City Councll Meetlng 7-10-84 Santa Monica, California
STAFF REPORT
TO: Mayor and City Councl1
FROM: Clty Attorney
SUBJECT: proposed Amendment to Rent Control Law
INTRODUCTION
ThlS report transm~ts suggestlons for amendments to the
Rent Control Law to be subIPitted to the voters for approval at
the November, 1984 municlpal election, pursuant to California
Government Code Section 34459. The report contains, for each is-
sue identified, an analysis of the problem and alternatlve solu-
t 10ns , together with the recommendation of the City Attorney and
proposed language for a Charter Amendment.
~ The Clty Council dlrected the preparation of this report at
lts June 12. 1984 meetlng. Since that time, the City Attorney's
offlce has identlfied maJor issues and conducted a thorough legal
analysis.
SUMMARY OF SUGGESTIONS
The proposed amendments to the Rent Control Law are ~n-
tended to achleve four main objectives: first, to respond to
]udiclal decisions concerning basic constltutional issues;
second, to prevent abuses of owner-occupancy evictions, inten-
tlonal wi thho Id~ ng of un1ts, and similar erOSl.ons of the basic
protection of the rental housing s to ck ; third, to ensure due
process of law and effective adminlstrative remedl.es for both
tenants and landlords; and fourth, to specify the independence of
the Board in both regulatory and internal matters, as intended by
the voters and the City Council.
In many areas of concern, the Clty Attorney found that the
Board possesses existing authority under the Rent Control Law to
enact responsive regulations. In these cases, a Charter change
is not regarded as necessary and is not suggested.
The Cl.ty Attorney's office suggests that the City Councl1
propose an amendment to the Rent Control Law covering seven main
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topics. These topics are briefly outlined below. The complete
text of the proposed ballot measure is attached as Exhibit "A. II
1. Powers of the Board. It is suggested that Section 1802
be re-wr~tten to spec1fy the essential independence of the Board
in both regulatory and 1nternal matters. Consistent with the
current Rent Control Ordinance, Section 1802 would grant the
Board sole power over its bu d get and its legal staff and
authority to employ a 1egislat1ve lobbY1st. The Board would have
author1 ty to make bas~c personnel decisions consistent with the
C1ty'S civl.l service system~ it would generally be requ1red to
adhere to the C1ty'S central purchasing system. The Board should
be authorized to adopt replacement regulations if a port~on of
the Charter or Board regulat10n is invalidated.
2. Rent Increases. Section IB05(e) should be amended to
expressly perml.t the Board's current "Net Operat1ng IncoI'1e" (NOI)
increase regulation 4100, a fair return standard upheld in the
Castigll.one and Baker cases. It 1$ also suggested that Sectl.on
1805(h) be amended to prohibit a landlord from increasing rent if
units are intentionally left vacant for three months.
It lS also suggested that landlords be required to certify
that a un~t 1S habltab1e and that no units in the building have
been lntentionally left vacant as a prerequisite to increasing
rent.
The Clty Attorney believes that the Board presently pos-
s esses adequate power to provide hardship rent increases for
long-term owners, to regulate charges for ancillary serVlces, to
grant special "master meter" utility rent increases, and to
prov~de short forms for capital lmprovement increases.
3. EVlctions. We suggest that Section l806(h) be amended
to liml.t owner-occupancy evictions to one natural person per
bu~lding~ to prohiblt eV1ctions in converted condominium units:
to clarify the "good faith" requirement~ and to preclude eviction
unless no other unit is vacant. We also suggest that Section
1806 be amended to require notices terminating tenancy to state
just cause.
We do not recommend a~endments to require deposits of rent
in court, to prohiblt subletting without consent, to permlt
leases w1th f~xed term~nation dates, or to require relocatlon as-
sistance to tenants displaced by owner-occupancy.
4. Removals. We suggest that Section l803(t) be amended
to allow landlords unable to make a fair return to remove units,
as required 1n Baker, and to preclude the City from issuing new
tentative subdivision maps and residential building reports ab-
sent a reflloval perml t. It is also suggested that a sectlon be
added to clarify the relationship between the Rent Control Law
and the Tenant Ownership Rights Law (Article XX).
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5. Remedies. It is suggested that Section 1809 be amended
to author~ze courts to award treble damages for excess rents upon
a show~ ng of fraud, oppresion or malice and to authorize penal-
ties of $500 in adminlstrative proceedings before the Board. The
requirement that the Board impose treble damages and penalties
would be deleted.
The Board should also be specifically authorized to impose
late payment fees and to sue to collect registration fees and
late fees. It is specifically intended that the Board afford a
speedy administrative remedy to determine claims of habitab~lity,
decreased services, and unlawful vacancy as functions of rent.
6. Exemptions. It is suggested that Section 180l(c} be
amended to clarify that the Board is required to approve exemp-
tions. We also recommend an additional limlted exemption from
removal for units actually used for child-care and other non-
proflt residential uses. It is suggested that, as with evic-
t1ons, the owner-occupancy exemption be limited to natural per-
sons for the duration of thelr actual occupancy of the building.
It 18 not recommended that the Rent Control Law be amended
to exempt luxury units or otherwise attempt to target benefits to
the needy because of potential legal problems and the existence
of other City programs.
7. Security Deposlts. We recommend an amendment to
Sect~on 1808(5) to requ~re that security deposits be maintained
in interest-bearlng federally insured accounts, with 1nterest to
be returned to the tenant less deductions permitted by state law.
8. Other Changes. We recommend two changes relative to
Art1c1e XX, the Tenant Ownership Rights Charter Amendment. The
f~rst adds a section to the Rent Control Law clarify~ng tne
relationshlp between the two Articles. The second would amend
Section 2006 of the Charter by allowing processing fees for
Tenant-Participating Conversions in an amount equal to the actual
cost of processing, not to exceed $500 per unit, rather than the
existlng limit of $500 per application.
ANALYSIS OF ISSUES
1- THE POWERS OF THE RENT CONTROL BOARD
The Rent Control Law (City Charter Art1cle XVIII, also cal-
led "The Charter Amendment") clearly specifies that the Rent
Control. Board ("The Board" ) has exclusive power to set maximum
allowable rents and to grant permits for the reooval of rental
housing units from the market. The power of the Board over its
internal affairs 1S less clear. The Rent Control Law states that
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the Rent Control Board is "in the City of Santa Monica" (S ection
1801) and does not expressly preclude other C1ty agencies from
exercising thei r functions with respect to rent control ad-
ministrative matters such as personnel, budget, purchas1ng I and
legal representation. However, the Rent Control Law specifically
requires the Board to "f1nance its necessary expenses" (Section
1803 ( f) ( 6 ) and to "hire and pay necessary staff" (Section
l803(n)).
Over the fJ.ve-year history of Santa Monica rent control,
the questJ.on whether the Rent Control Board is independent in 1ts
internal affairs or is subject to oversight by the City Council
and other C1ty off1cers has been the subject of ordinances and
lawsuits.
At the present t1me, the provisions of the Rent Control law
authorlzing the Board to "hire and pay necessary staff" and to
"flnance its reasonable expenses" have been clarifled and imple-
mented by the Rent Control Ord1nance, Municipal Code Sections
4601-4613, which provides that the Board's employees are within
the classlfied service of t~e Clty, to be classified by the Board
(Section 4607); that the Board 1S to adopt an annual budget,
without City Council review (Section 4608); and that the Board is
to be represented and advlsed by legal staff that it employs and
not the Clty Attorney (Section 4611).
However, in Crei9hton v. Dennis, Superior Court Judge
Raymond Choate ruled that the City Council was required to ap-
prove the Board's budget and that the CJ.ty Attorney was required
to represent and advJ.se the Board. In Howland v. Board, Superlor
Court Judges Rothman and Rittenband ruled that the Board's
employees were in the classJ.f1ed civil service of the City and
that the Personnel Board and City Council were required to ap-
prove employee classifications for Board employees. Both
Cre1ghton and Howland have been appealed.
There are several posslble outcomes of the litigation (as-
s uml ng consistency between Howland and Creighton):
1. Tl'e decis10ns will be affirmed on the basis that the
Clty -hal':er requires the exercise of oversight by original C1ty
agen,::,'es. (This result would inva11date port1ons of the Rent
Contrcl Ord':.nance and necess1tate a change in the status quo.)
2. The decisions will be reversed on the basis that the
Rent Control Law is ambiguous and the resolution of ambiguities
is a funct10n of the City Council, to be performed by ordinance.
(This result would uphold the Rent Control Ordinance.)
3. The decisions will be reversed on the basis that the
Rent Control Law was intended to vest exclusive internal
authorJ.ty in the Board. (This result would invalidate tre Rent
Control Ordinance.)
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Whatever the outcome of Creighton and Howland, a Charter
amendment that clearly states the relationship of the Board to
other City agencies would override an inconslstent court deci-
sion. This is because the legal issues in these cases only in-
vol ve lnterpretation of the City Charter and not state preemp-
tion or constitutionality.
If the relatLonship of the Rent Control Board to other City
agencies is explicltly stated in the City Charter, courts wl11
not lntervene because they disagree with the wisdom of that
relatlonshlp, Rather, courts wlIl only act to lnterpret am-
bLgu~ ties created by potent~ally conflictlng Charter sections or
to determine whether an ordinance, regulation, or POllCY con-
fllcts with the clearly expressed requirements of Charter
provlsions.
If the City Council desires to have the voters clarify the
lnternal powers of the Board, it lS suggested that a new Sect10n
1802 be drafted (exist1ng Section 1802 concerns the Interim
Board, now obsolete) and that the appropriate powers enumerated
in Sectlon 1803 be qualified and clarifled. The specific issues
are discussed below. Suggested language for the introductory
portion of amended Section 1802 lS:
Sect10n 1802. Integrity and
Autonomy of Board. The Rent Control
Board shall be an integral part of the
government of the City, but shall exer-
Clse its powers and dutlss under this
Article lndependent of and wlthout inter-
ference from the City Council, City
Manager, and City Attorney. With respect
to the internal organization and affairs
of the Board:
A. Budget.
There are t~rep primary alternatives:
1 . Spec1fy that the Board is an agency of the City whose
budget is subJect tc approval by the City Council. This is the
lnterpretat10n adopted by the Superior court ln Crei~hton.
2. Specify limitations on or standards for the Clty
council's review of the Board's budget. The Charter may limit
the authority of the City Councll over the Board's budget by
requiring a super-majority for amendment or disapproval or by
requiring a finding of risk of loss or duplication of serV1ces as
a prerequisite to disapproval of a budget ite~.
3. Specify the Board's independent budgetary power and
preclude City Council review. The City Attorney believes that,
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sJ.nce the electorate that enacted the Rent Control Law in 1979
intended to prec'ude the City Council from direct or indirect
1nterference with vigorous enforcement of the law, the Board
should be autonomous in budgetary matters. This view is reflec-
ted in Municipal Code Section 4608. In order to make this intent
expli ci t, and ensure the budgetary autonomy of the Board, the
following language is suggested as Section 1802(a):
( a) Budset. The Board shall,
prJ.or to the begJ.nn1.ng of each fl.scal
year, July 1, hold a public hearing on a
proposed budget and adopt an annual
budget. The City Council and the City
Manager shall have no authority to over-
see, supervise, or approve this budget.
Upon final adoption, the budget shall be
~n effect for the ensuing fiscal year and
the amounts stated therein shall be and
become appropriated by the Board for the
respective objects and purposes therein
specified. At, any meetl.ng after the
adoption of the budget the Board may
amend or supplement the budget by the af-
f1.rmative votes of at least three mem-
bers. Copies of the adopted budget and
any amendments or suppleP1ents shall be
filed with the City Clerk, City
Controller, and City Manager. Necessary
adJustments to City administrative
procedures shall be made.
It 1S noted that under the "Jarvis 4" state constitutional
amendment proposed for the November ballot, the Board's ability
to increase fees without a popular vote and the city's ability to
freely allocate funds for rent control purposes would be severely
constra1ned.
It 1.S suggested that Section l803(n) be amended to specify
that the Board may authorize landlords to pass through the cost
of registrat10n fees to tenano:s in accordance with Board regula-
tions. Suggested text ~or ~n anended Section l803(n) 1S:
( n) F 1m: ~-~in9' The Board shall
rJ.nance its reasonable and necessary ex-
penses by Charging landlords annual
registration fees ~n amounts deemed
reasonable by the Board. The Board may
direct that all or part of such fees may
be passed through from landlords to
tenants and may establish appl1cable con-
ditions and procedures. The Board is
also empowered to request and receive
fund1.ng when and if necessary from any
available source for its reasonable and
necessary expenses.
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B. Staff.
The Howland cases cc,ncern the civil service status of the
Board's staff. While the Rent Control Law provides that the
Board shall "hire and pay necessary staff, " it 1.S silent as to
the civ1.l service status of Board employees, the power to class-
i fy and set pay ranges for employees, the power to bargain col-
lect~vely and approve Memorandums of Understand~ng, and similar
matters.
At present, the status of Board employees is covered by
Municipal Code Section 4607. Under this ordl.nance:
a. All Board employees are with1.n
the classl.fl.ed service of the City, and
are hired and terminated under the
uniform procedures applicable to C~ty
employees generally.
b. The Board classifies its
employees and d~terml.nes the salary range
for each classifl.cat1.on.
c. The Board has power to bargain
W1.th unlons representing Board employees
and to approve an MOD, provided that the
terms of such an MOD are consistent with
the C1.ty Charter and Municipal Code.
The Howland litigation challenges the allocation of these
powe rs to the Rent Control Board. Like the budgetary powers of
the Board challenged in Crei'!hton, the clvil service status of
the Board's employees is purely a municipal affair and may be al-
located through the City Charter in any way that the voters see
fit. Thus, there are three primary alternatives.
1. Clearly speclfy that the Board's employees are to be
h1.red, classl.fled, and d1.sC ipll. ned as other employees of the
Clty.
2. Clearly specify that the Board's employees are
employees of the City, but are to b, claEsified by the Board and
subject to MOU provisl.ons approved by the Board. Some of the
Board's employees, such as the legal staff and administrator
could be exempted from the classified civil service.
3. Clearly specify that the Boardts employees are outslde
the classl.fied service, and are to be the exclusive respon-
sibility of the Board.
The City Attorney recommends that Subsections (b) and (c)
be added to Section 1802 to make the Board's authority regarding
personnel matters essentially consistent with current Munlcipal
Code Sections 4607, as follows:
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(b) p ersonne 1. Except for the
elected or appointed C'.:Immissioners, the
Admlnistrator and at tOl'neys employed to
represent or advise the Board. all
employees of the Board are with1.n the
classifled CiV1I service of the Clty.
The Board shall appoint an Adm1.nistrator
to administer and supervise the exercise
of its powers and duties, who shall be
directly responsible to the Board. All
employees of the Board, except the
Administrator and attorneys, shall be
hired, terminated. suspended, demoted,
laid off, and recalled in accordance wlth
the provisions of Article XI of the
Charter and implementing provisions of
the Municipal Code. The Board shall
classify employee positions, establish
employee salaries and benefits, and
evaluate the performance of its
employees. The _ Board may enter into and
approve a Memorandum of Understanding
W1.th representatives of its employees
concernlng thelr wages, benefits, hours
of work, and terms and conditions of
employment in accordance with state law.
The Clty Council shall have no power to
abolish positions established or classi-
fled by the Board under thlS Art1.cle,
notwithstanding any other section of this
Charter.
A rel.ated area is the Board's author1.ty to employ legal
counsel. The Cre19hton declsion requires the City Attorney to
represent and advise the Board and requlres the Clty Council to
approve the retention of any private attorneys to advise the
Board in part3.cular matters. Again. there are three
alternatives.
I. Specify the duty of the City Attorne:r to represent and
advise the Board.
2. Speclfy the Board 's authority to -lure legal staff, but
requ1re representat1.on by the City Attorney 1n particular sltua-
t ions, such as litigation where a denial of due process of law or
taking of property is alleged.
3. Specify that the Board shall be represented and advised
Dy legal staff that it employs and that it may retaln private
counsel 1n partlcular matters.
In keep1ng with the princ1ple that the Board should be
autonomous in essential matters, the City Attorney recommends
specifying by amendment that the Board's legal staff, and not the
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CJ..ty Attorney, furnish the Board with legal advice and
representatJ..on in c~vil matters. A suggested Section 1802 (c),
similar to current Municipal Code Section 46Ll, is as follows:
(c) Board Legal Work. Legal staff
hired by the Board shall represent and
advise the Board, its Commissioners, and
its staff in any civil matters, actions,
or proceed~ngs in which the Board, its
Commiss1oners, or its staff, in or by
reason of their offic ial capacity, are
concerned or are a party. The Board may,
in its sole d1scretion and without City
Council approval, retain private attor-
neys to furnish legal advice or represen-
tation in particular matters, actions or
proceedings.
The City Attorney will contlnue to prosecute crJ..minal ac-
t10ns for v1olation of the Rent Control Law. No charter change
1S suggested. However, it is suggested that Section 1810 be
amended to clarify exactly' what constitutes a violation of the
Rent Control Law. Suggested text is as follows:
Section 1810. Criminal Remedies.
Any person violat1ng th1S Article shall
be guilty of a misdemeanor. Any person
convicted of a misdemeanor under the
provisions of th1S Article shall be
pun1shed by a fine of not more than five
hundred dollars ($500) or by imprisonment
in the county Jail for a period not ex-
ceeding six months, or by both such fine
and imprisonment. The following shall
constitute a violation of this Article:
(1) Any violation of a provision
of this Article.
(2) Any violation of a rule or
regulation of the Board.
(3) Any knowing or willful faih,re
to obey any decis10n or order of the
Board.
C. Contracts and Consultants.
If the Board is regarded as an agency of the City, it 1S
bound by the centralized purchaslng system and competitive bid-
d1ng requirements of the City. An amendment to the Charter may
specify that the Board is lim1ted in its ability to contract, has
plenary author1ty to contract, or is subject to competitive
bidding and centralized purchasing requirements with specific
exceptions.
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Two areas where the Board might have specific contracting
authority (in addition to outslde counsel) are consu]tants to as-
Slst the Board in the adoption of regulat10ns and legi sla t1 ve
lobbyists (resolv1ng the issue in Scaccianoce v. Board).
If it lS desired to specify that the Board is subJect to
the centralized purchasing system, except with respect to profes-
sional serv~ces, the following language may be presented to the
voters as Section 1802(d):
(d) Contracts and Purchases. The
Board shall comply with the provis~ons of
the City Charter providing for a central-
ized purchaslng system and competitive
bidding, and shall procure goods and ser-
V1ces as do other City agencies.
Provided, however, that the Board shall
have sole and final authority without
City Council approval to contract with
and employ the professional services of
attorneys and legislative lobbyists.
D. Conforming Regulatlons.
The City Attorney believes that the Board should have the
power to adopt regulations to Substltute for portions of the Rent
Control Law that may be inval~dated by judicial or legislative
act. At present, the ab~l1ty of the Board to do this is impaired
because the Board cannot act contrary to the express language of
the Charter. Therefore, the C1ty Attorney suggests that the fol-
low~ng language be added as Section l802(e):
(e) Conforming Regulations: If any
port~on of thlS Artlcle is declared ~n-
valid or unenforceable by decision of a
court of competent Jurisdiction or ren-
dered invalid or unenforceable by state
or federal legislation, the Board shall
have authority to enact replacement
regulations consistent with the intent
and purpose of the invalidated provision
and applicable law. Such replacement
regulat~ons shall supercede invalidated
or unenforceable provisions of this
Article and inconsistent ordinances of
the City Council to the exent necessary
to resolve any inconsistency.
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II. RENT INCREASES
A. Fa1r Return Standard.
Ch arter Section 1805 establ1.shes broad guidelines for
general and individual rent increases and authorizes the Board to
adopt a formula (Fa1.r Return Standard) for calculating rents.
Subsection (e) contains a non-exclusive list of factors to be
cons1dered 1n awarding rent increases, includ~ng "the landlords'
rate of return on investment. " Additionally, no rent increases
are to be allowed unless "necessary to the landlord making a fair
return on investment. "
The Board or~g1nally promulgated a "return on investment"
standard (Regulation 4040) which was clearly conS1.stent with
Section IB05(e). After 4040 was declared unconstitut1.onal by
Judge Lavine, a replacement standard (Regulation 4100) was
developed using the Net Operating Income (NOr) principle.
However, the Charter does not expressly authorize an NOI
standard.
We believe that 4100 is fully consistent with Section
1805(e). Our bellef is based upon several notable cases.
However, at least one case challenges the Board's authority to
adopt a non-~nvestment based fair return standard (Santamon
Properties v. Rent Control Board). To resolve any doubt s,
Section 1805 should be amended to expressly authorize an NO!
standard and to give the Board the necessary flexibility, it is
recommended that Section IB05(e) be amended. The C1ty Attorney's
suggested language is:
(e) In making individual and
general adjustments of the rent ceiling,
the Board shall consider the purposes of
th~s Article and the requirements of law.
The Board may adopt as its fa1r return
standard any lawful formula, including
but not I1mited to one based on invest-
ment or net operating income. The Board
shall consider all factors relevant to
the formula 1.t employs; such factors may
include: 1.ncreases or decreases in
property taxes, unavoidable increases or
decreases 1n operating and maintenance
expenses, the extent of utilities paid by
the landlord, capital improvement of the
controlled rental unit as distinguished
from normal repair, replacement and main-
tenance, increases or decreases in l1ving
space, furniture, furnishings, equl.pment,
or services, substantial deterioration of
the controlled rental unit other than as
a result of ordinary wear and tear,
failure on the part of the landlord to
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provide adequate hous1ng services or to
comply substantially with applicable
hous1ng I health and safety codes, federal
and state income tax benef:tts, the
speculative nature of the investment,
whether or not the property was acquired
or is held as a long term or short term
investment, the landlord's current and
base date Net Operating Income, and any
other factor deemed relevant by the Board
1n providing the landlord a fair return.
Because of the proposed amendments to Section l805(e) and
the Board's current use of an Nor formula, sections l80S(f) and
(g) are unnecessary. Accordingly, it is recommended that they be
deleted.
B. General AdJustments For Vacant Units.
The Board's practice ~as been to allow landlords who inten-
tionally keep units off the market to take advantage of general
rent increases. Upon an application for individual increase,
rent for vacant units is imputed. However, log:tc suggests that
landlords who intentionally keep the:tr units vacant do not need
any rent increase in order to earn a fa1r return. Moreover, any
1ncrease awarded them encourages depletion of the available hous-
ing stock. Accordingly, we recommend that general rent adjust-
ments be conditioned upon certification that units have not been
withheld from the market.
Subpart (3) should be added to Sect1.on 1805(f} (formerly
1805(h)) as follows:
( f) No landlord shall increase
rent under this Article if the landlord:
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( 3 ) Has held a unlt vacant
for three (3) consecutive months or long-
er without good cause determlned by the
Board. NO landlord shall increase rent
unless the notice increasing rent con-
tains one of the fallowing statements, or
their substantial equivalents: "The un-
derslgned (landlord) certifies that no
unit on the same property as the unit
subJect to this rent increase notice has
been vacant for three ( 3 ) consecutive
months or longer. II or "The undersigned
(landlord) certifies that one or more
units on the property have been vacant
for three ( 3 ) consecutive months or long-
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er, and the Santa Monica Rent Control
Board has determ~ned that there is good
cause for such vacancy. II If a landlord
fails to comply with this subsection,
tenants on the same property may refuse
to pay the improperly not1.ced increase,
may seek admin~strative or civ~l remedies
under this Article, and may raise the
landlords noncompliance as an affirmative
defense 1.n any resulting unlawful
detainer action.
C. No Rent Increases For VlolatLon qf ~abitabllity
Standards.
The Charter explicitly authorizes both rent decreases based
upon the existence of substantial habitability problems and con-
d1.tioning of the general adjustment upon compliance with ap-
pll.cable habltabilLty standards. Nevertheless, habltabll1.ty
problems persist.
Var1.0US mod~fications - in the Charter language could be made
to strengthen the Board's power to effectuate rent control by en-
suring compliance with habitability standards. For example, the
Charter could be a~ended to:
( 1 ) Require withholding of individual and/or general ad-
justITlents if premises do not comply with habitability standards.
(2 ) Authorize rollbacks and refunds for violations of
habitability standards.
(3) Require that a landlord attest to the unit's com-
pl~ance with hab~tability standards on rent lncrease notices and
on increase pet1tions.
(4) Spec1.fically provide that taking the general adJust-
ment or an lndividual increase when the premises do not meet ap-
plicable habitabLlity standards constitutes charging excessive
rent and that tenants may raise habitability as an aff1rmative
defense in an eviction for nonpayment of rent where the tenant
refused to pay an increase because of habitability violations.
The City Attorney recommends that options 1, 3 and 4 be
adopted and specifically recommends that:
Section 1805(c) be amended by the addition of the following
language at the end of the second sentence "and shall include a
declaratlon by the landlord that the unit meets all applicable
habitability standards. II
Subpart (2) of Section 180S(f) (formerly 1805(h)) should be
amended to read as follows:
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(f) No landlord shall 1ncrease
rent under this Article if the landlord:
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(2) Has failed to comply
substantially w1th state or local hous-
ing, health or safety law. No landlord
shall increase rent unless the notice in-
creaS1ng rent contains a statement in
substantially the following form: liThe
undersigned (landlord) certifies that
this property complies substantially with
all state and local housing, health and
safety laws. II If a landlord fails to
comply with this subsection, the tenant
may refuse to pay the improperly noticed
1ncrease, may seek adm1nistrative or
civil remedies under thJ.s Art1cle, and
may raise the landlord1s noncompliance as
an affirmative defense in any reSUlting
unlawful detainer action.
D. Hardshlp Increase For Long-Term Owners.
Concern has been expressed that in particular cases, rents
charged in Apr11, 1978 (the base date for determ1n1ng rent in-
creases) were substantially below market due to long-term tenant
tenure or some other reason. Since Regulation 4100 generally
carries forward these base date rents in increase calculat1ons,
inequ1ties could be perpetuated.
Regulation 4102 establishes a presumption that each
landlord's NOI dur1ng the base year (1978) provlded a fair return
on property. This presumption may be rebutted only 1n enumerated
C1rcumstances as contained in Regulat10n 4103. Part (b) of that
regulation allows for an imputed adJustment in base year NOI if
lithe rent on the base date was d1sproportionate due to one of"
three factors. The third factor Wh1Ch comes closest to the con-
cern expressed here, is:
(3) The rent on the base date was
substantially h1gher or lower than
preceding months by reason of premiums
be1ng charged or rebates being given for
reasons unique to particular units or
limited to the period determining the
base rent.
If addit10nal language, focused upon th1s part1cular con-
cern is necessary, the Board may add it to Regulation 4l03--no
amendment of the Charter would be necessary. This would also be
true if Charter Section l805(e) were amended to specifically
refer to an NOr standard. S1nce the 11st of factors thereunder
14
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.
is non-exclusive, the Board may consider disproportionately low
(or high) rent on the base date as a relevant factor.
E. Charges for Ancillary Space and Service.
An amendment authorizing rent increases for ancillary space
and service has been suggested. One of the factors listed in
Charter Section 1805(e) relevant to determining rent increases is
"increases or decreases in living space, furniture, furnishings
or equ1pment." This allows the Board to grant rent increases or
special charges for added space or services. It could also do so
by 1nterpretive regulation. No amendment is necessary, although
clarifying language may easily be added.
F. Short Form Capital ~mprovement Increases.
The Board has considered, and unt1l now reJected, adopting
by regulation an expedited process for handling petitions for
cap1tal improvement rent increases. Because any description of a
pet1tion process 15 necessarily detailed and subject to exper1en-
tial improvements, it is not recommended that any particular pro-
cedure be 1ncluded in the Charter. This may, and should, be
handled by regulation.
If the voters want to require the Board to provide for
short-form petit10ns, the fOllowing add1tion to Charter Section
1805 is suggested:
(g) The Board shall provide an ex-
pedited procedure for consideration of
rent increases for capital improvements
where both the landlord and the current
tenant(s) of the effected units concur in
the nature of the capital improvement to
be made or already made. All other rent
increases for capital improvement shall
proceed accord1ng to regular administra-
tive procedures.
I l a6d~~ion, Section lB05(d)(12) could be amended to provide for
Co sllorter time 1iml t (e. g., 60 days inst ead of 120 days) for
short-form cap1tal improvement rent 1ncreases.
G. Special Utility ~ Increases.
Charter Section 1805 ne1ther specifically precludes nor
provides for special general adjustments in the event a landlord
pays for all or part of a unitfs utilities. However, it 15 clear
that the Board has the author1ty to do so by re'Julation. No
charter amendment is necessary, although clarification could be
made.
15
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,
H. Vacancy Decontrol.
The Charter does not prohibit vacancy decontrol. Indeed,
Section l803(r) expressly empowers the Board to allow it.
However, the City and Board have consistently opposed vacancy
decontrol in litigat10n and state legislation on the grounds that
it is disruptive, unnecessary and unavailing in determining con-
stitutlonal requirements, and likely to encourage actual and con-
structive evictions. No charter change to mandate vacancy
decontrol is suggested.
III. EVICTIONS
Var~ous rnodiflcat1ons have been suggested to Section 1806
which prohibits eVlctions without specifically stated legal
cause. This section covers those suggestions specifically ad-
dressed to Sect10n 1806, the suggestion for a prohibition on sub-
letting, and the suggestion for an authorization of f1xed ter-
mination dates in leases. The latter two are included in this
part because landlords would, presumably, enforce such rights
through eviction proceedlngs.
A. Owner Occupancy.
Sectlon l806(h) presently author1zes evictions to recover
possesslon for occupancy by the landlord or a l1.st of nine
enumerated relatives. By regulation, the Board has limited the
owner's right to evict pursuant to l806(h) to one unit per bU1.1d-
ing and has prohibited such evictions where an owner or
enumerated relative already occupies a unit in the build1ng.
It has been suggested that section l80G(h) be eliminated or
that the list of relatives be shortened to further lim1.t the num-
ber of evictions under this section. Evict10n restrictions
operating as bans upon owner occupancy have been struck down in
other Jur1.Sdlctions as takings of property. Thus, 1806(h) should
not be wholly eliminated. However, the suggest10n that the list
of deslgnated relatlves be shortened could be readily implemented
by amendment deleting those relatives to be excluded from the
list. Fo) e:{ample, the list could be l1mi ted to parents and
children. The City Attorney recommends that eviction to allow
occupancy by s~bl1.ngs and ~n-laws be elirnlntated.
It has also been suggested that evictions for occupancy by
a landlord or des1.gnated relative be prohibited where another
unit on the property is vacant. We recommend that such a
prohibition be adopted. Additionally# we suggest that "property"
be defined as "rental units on a parcel or lot or contiguous par-
cels or lots under common ownership. "
Addit1.onally , it has been suggested that relocation benefits
be required where a tenancy is terminated to allow for occupancy
by the owner or a des1.gnated relat1ve.
16
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.
The adoption of a provision for relocation benefl.ts would
neceSS1.tate various complex policy decisl.ons as to the type of
benefits, the class of benefic1.ar1.es, and procedures for paY1.ng
or conferring the benefits. Given the fact that the council may
require relocation benefits by ordinance, and the complexity of
the issue, staff recommends against an amendment on the subJect.
At present, Regulatl.on 9002 contains various provis1.ons
pertal.n1.ng to Section l80G(h) wh ich we recommend be included 1.n
the Charter in order to control abuses of the owner-occupancy
prov1.sion. We suggest that the following language be added to
l80G(h):
For purposes of evictions under
th1.s subsection:
( 1 ) A "landlord" shall be defined
as a natural person who has at least a 50
percent ownership interest in the
property.
( 2 ) No eVlct1.0n may take place 1.f
any landlord or enumerated relatl.ve al-
ready occupies one un1.t on the property.
( 3 ) The notlce terminating tenancy
shall contain the name, address and
relationship to the landlord of the per-
son intended to occupy.
(4 ) The landlord or enumerated
relat1.ve must intend, in good faith, to
move into the un 1. t wi thin 30 days after
the tenant vacates and to occupy the unit
as a pr ima ry residence for at least six
months. The Board may adopt regulations
governing the determination of good
fa1.th.
: 5) If the landlord or relative
spf';~1.f ec. on the notice terminating
te~ -lnc~ f,~ils to occupy the unit within
30 days after the tenant vacates, the
landlord shall:
(i) Offer the unit to
the tenant who vacated it.
(ii) Pay to said tenant
all reasonable expenses incurred in
moving to and/or from the unit.
17
. . .
.
B. Statement of Cause on Not1ce to Quit.
Present Char~er language does not explicitly require that a
notice terminating a tenancy pursuant to sect10n 1806 state the
cause for the termination. However, this requirement may be iw-
plied by state law and is explic1tly established by Regulation
9001.
It has been suggested that the requirement that cause be
stated be incorporated into the Charter. S1nce section 1806
neither requires that cause be stated in the notice term~nating
tenancy nor mentions term1nation notices at all, the sugge sted
amendment could serve to avert a dispute as to the Board's power
to requ~re statements of cause in termination notices. Moreover,
it would be in keeping with fundamental notions of fairness and
due process. It could also prevent unnecessary litigation by ad-
vising the tenant, early on, of basis of the landlord's cla1m of
entitlement to possession.
Accordingly, staff recommends that the f1rst sentence of
1806 be amended to read:
No landlord shall take action to ter-
minate any tenancy or bring any action to
recover possession or be granted recovery
of possession or be granted recovery of
possession of a controlled rental unit
unless: . . .
We also recommend that the conclusion of 1806 be amended to
prov1de:
In any notice purport1ng to terminate
tenancy the landlord shall state the
cause for terminat1on, and in any action
brought to recover possession of a con-
trolled rental unit, the landlord shall
allege and prove compliance with th1s
section.
C. Depos it of ReT! t.-!! Cc_ur c..
It has been suggested that tenants defending unlawful
detainer actions based on nonpayment of rent who raise Charter
provis10ns as aff1rmative defenses be requ1red to deposit rent
into court at the beg1nning of unlawful detainer actions. The
City of Los Angeles recently adopted such a provision.
Wh11e the Californ1a Supreme Court has upheld the power of
localities to estab11sh substantive requirements for evictions in
B~rkenfeld v. City of Berkeley, 17 Cal. 3rd 129, 550 P.2d 1001,
130 Cal. Rptr. 465 (1976) it also held that they are preempted
from interfering with state-established eV1ction procedures. So,
18
. , . .
.
a "deposi t into court II amendment could spawn Ii tiga tion if the
deposit requirement were suscept1ble to character1zation as
procedural rather than subs~antive.
The Los Angeles ord1nance precludes a tenant from rais1ng
certa1n aff1rrnative defenses based upon the rent control or-
dinance if the landlord has obtained a pre-trial depos1t order
and the tenant has not compl~ed with the order prior to the tri-
al. Though the va11dity of the Los Angeles deposit provision has
not been litigated, it is probably not preempted because it does
not impose a procedural barrier which would interfere with the
power of the courts. However, as noted in our staff report of
May 8, 1984, the effect of the Los Angeles provis~on 1S to
deprive the tenant of the benefits of the good cause eviction
provis1ons unless he or she makes a pretrial deposit ordered by
the court. Thus, the deposit requ1rement discourages tenants
from assert1ng their rights under the rent control law. It also
works a particular hardship upon 10W-1ncome tenants with good
defenses.
Civ11 Procedure Code Section 1170.5, adopted in 1982, al-
ready requires defendants in unlawful detainer actions to pay
depos its in certain C1rcuffistances. That statute requires that
the courts either set cases for trial within 20 days of a request
or, upon a finding of probability that the plaint1 ff-Iandlord
w11l prevail, determ1ne the amount of damages suffered by reason
of the delay beyond the time 11ffi1t and require the defendant to
pay that amount into court.
Tnus, an amendment requ1r1ng that tenants defend1ng nonpay-
ment of rent claims pay rent into court at the outset of the ac-
tion would be subJect to legal challenge, may be unnecessary 1n
view of state legislat10n and would certainly operate to di s-
courage tenants -- particularly low-income tenants -- from as-
serting their rights under the Charter. Therefore, we recommend
aga1nst such an amendment.
D. Prohibitions On Sublett1ng.
An amendment authorizing. pr .:>hibi tions on sublett1ng has
been suggested. At present, Sectic'1 ] 806 (b), which authorize s
eV1ct1on based upon the tenant - s vi ;:)latl.i)D of a covenant other
than a covenant to surrender upon .otlce, covers v101at.l.ons of
covenants aga1nst sublett1ng. Sect10n 1806 (9) author1zes the
.land.lora to 1nst1tute an eV1ction proceeding where the tenant
hO.lding at the end of the term is a sub-tenant not approved by
the landlord. Moreover, state law spec1r~cal.ly makes any tenant
who sublets contrary to the provis1ons of a lease guilty of un-
lawful deta1ner. civil Procedure Code Section 1161.4. In V1ew
of these provisions author1zing evictions for unauthor~zed sub-
lett1ng, no amendment would appear to be necessary.
19
. . . .
\
,
E. Permlt Leases With Flxed Termination Dates.
An amendment authorlzing leases with flxed termlnatlon
oates has been suggested. Whlle a landlord and tenant may volun-
tarlly agree that a tenant w~ll vacate on a certaln date and
voluntarlly carry through on that agreement, a provls~on specif~-
cally authorlz~ng f~xed term~nat~on dates would be unenforceable
and contrary to the baslc purposes of the rent contrOl law. The
Clty Attorney therefore recommends against such an amendment.
IV. REMOVALS
A. Santa Mon~ca Plnes Case.
In thlS case, the Cal~forn~a Supreme Court upheld Sectl.on
l803(t) against a clalm of state preempt~on regarding condominium
convers~ons and upheld Judge R1ttenband's decisl.on that the
developer had no vested r1ght to convert. Howeve r , the Court
also seemed to say that the r 19h t to convert arl.ses contem-
poraneously with the f1ling, of the final subdivision tract map.
Upon conversion, each apartment unit could be sold to an 1n-
dl.vidual buyer, who would then have to fully comply wl.th the Rent
Control Law. However, Section 1806{h) currently allows owners to
ev~ct for personal or relatlve occupancy. Th1S feature, combined
Wl th the rlght to sell indlvidual units ldentlf1ed in Santa
Mon1ca P1oes, undermlnes the Charter's eviction protectl.ons.
Th1S prOb.1em couia De sO.LVed, conslstent w1th Santa Monl.ca
Plnes, by lim~tlng owner-occupancy evictl.ons under 1806(h). The
Rent Control Board currently Ilmits evictl.ons under 1806(h) to
one per "property. " If the limitat10n were extended to one per
"bullding," then the or1gl.nal lntent of 1806(hJ COUld be preser-
ved. Alternat~vely, evictl.on for owner occupancy could be
prohib1ted 1n converted condom1nium units. Th1S best effectuates
the orl.gl.nal intent of the Charter conSl.stent wlth Santa Monica
Plnes.
We suggest tnat tne tOllowing language also be added to the
end 01: ltlOb l h) :
~o eV1ctJ..on pursuant to th1b sut:3ectJ..on
shall be allowed 1n any condom.!. nl.l'ffi or
stock cooperat1ve unJ..t wh 1 ch has been
converted from an apartment or other
rental unlt atter Aprll la, 1979, unless
the Rent Control Board has issued a
removal perm1t or declared a vested r1ght
for sal.d unlt. As used 1n th1S subpart,
a unlt shall be deemed converted after
April 10, 1979, if on April la, 1979, the
recorded tract map or parcel map for the
property showed the unit as included in
the property.
20
. .
,
.
In addit~on to the orig~nal intent of the Charter not to
allow ev~ctions from converted units, Section 1803{t) was design-
ed to regulate those conversions in the firs place. The cura-
t~ve language suggested above does not, by itself, regulate con-
versions. Currently, the Housing Element of the City's General
Plan limits conversions by discourag~ng the issuance of tentative
subd~vision maps. As long as this provision remains, no add~-
tional protect~on in the Rent Control Law is necessary. However,
the purpose of placing convers~on limitations in the Charter in
the f~rst instance was to place the matter beyond the reach of
the City Council. Accordlngly, it is suggested that this intent
be preserved in the wake of Santa Mon~ca Pines, by adding the
following paragraph as Sectlon la03(t)(3).
The Hous~ng Element of the General
Plan of the City of Santa Monica shall at
all times contaln a provlsion that
ne~ther the CJ..ty Council nor any City
agency shall approve an application for
tentative subdivision tract map or parcel
map nor issue a Residential Buildlng
Report for a unit converted after April
10, 1979, untJ..l and unless the applicant
first obtains a removal permit as
required by this Sectlon.
B. Article XX.
Passage of the Tenant Ownership R~ght Charter Amendment
(TORCA) in June, may require some slight modification of the Rent
Control Law to ensure consistency between the two Articles and
remove any doubts as to the extent of continued tenant protec-
tions available to tenants 1n buildings converted pursuant to
Article xx.
SectJ..on 1813 could be added as follows:
Section 1813. Relation to Art1cle
XX. Section l803(t) of th~s Article
shall not apply to any building for whiCh
approval has been received pursuant to
Art1cle XX (Tenant Ownership Rights
Charter Amendment) of this Charter. All
other provisions of th1s Art1cle,
however, shall continue to apply with
full force and effect to each unit in any
build1ng receiving approval pursuant to
Article XX. Tenants residing in such
units, whether or not t1qualifying," "par-
ticipating," or any other such designa-
tion under Article XX, shall enjoy all
the r1ghts and remedies provided by this
Art1cle WJ.. thout limitation as to dura-
21
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. . .
~
.
tion. Th~s Sect~on is declarative of
existing law and does not impose any new
requ~rements or limit any existing ones.
C. Brooks-Scanlon Problem.
In Baker, Judge Lav~ne declared Section 1803(t) ~nval~d on
the grounds that it imposed four condit~ons for removal: the
first three relat~ng to ~mpact on housing avallability for low
and moderate-lncome tenants, and the fourth relating to the
landlord's ability to earn a fair return by ma~ntaining the rent-
al un~ts. Judge Lavine found that the first three conditions
violated the doctrine establJ..shed by the United States Supreme
Court in Brooks-Scanlon Co. v. Railroad Comm1n, and that a
landlord must be allowed to leave the regulated market if other-
wise unable to earn a fair return.
The City Council has adopted Ordinance No. 1255 (CCS) ,
grantlng author~ty to the Rent Control Board to regulate
removals, but 1mpos ing the s~ngle limitat10n relat1ng to fair
return. Th1S was cons~dered curative of the Brooks-Scanlon
problem ldentified in Baker. ThlS should be 1ncorporated ~nto
the Charter by el1minating subparts ( 1 ) , (2 ), and (3 ) of Seetlon
1803(t).
We also recommend a 120-day tlme limit for flnal Board ac-
tion on removal applicatlons in order address due process con-
cerns ra~sed ~n Baker. Should the Board fail to act within 120
days, it would be subJect to a writ of mandate and possibly at-
torney's fees. However, the proposed language would not result
in an automatic removal permit should the Board fail to take
timely actlon.
The suggested text of amended Section l803(t) 1S therefore
as follows:
Section l803(t). Removal of
Controlled Unit from Rental Housins
l'1arket.
(l) Any landlord who desires to
remove a controlled rental unit from the
rental hous~ng market by demolition, con-
version or other means is required to ob-
taln a permit from the Board prior to
such removal from the rental housing
market in accordance wlth rules and
regulations promulgated by the Board. In
order to approve such a permit, the Board
is required to find that the landlord
cannot make a fair retur n by retaining
the controlled rental unlt.
22
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. , . .
(2) Notwithstanding the foregoing
provisions of this subsect~on, the Board
may approve such a permit:
(i) If the Board flnds that
the controlled rental unit 15 unin-
habitable and is incapable of being made
habitable in an economically feasible
manner, or
(1~) If the perm1t is being
sought so that the property may be
developed with multifamily dwelling units
and the permit applicant agrees as a con-
dit10n of approval, that the units will
not be exempt from the provisions of this
Art~cle pursuant to Section 1801 (c) and
that at least f1fteen (IS) percent of the
controlled rental unlts to be built on
the site will be at rents affordable by
persons of low income.
(3) The Housing Element of the
General Plan of the C1ty of Santa Mon~ca
shall at all tlmes contain a proviSlon
that nelther the City Council nor any
City agency shall approve an application
for tentative subdivislon tract map or
parcel map nor lssue a Residentlal
Buildlng Report for a unlt converted af-
ter Aprll 10, 1979, until and unless the
applicant first obtains a removal permlt
as required by thlS Section.
(4) The Board shall render its
r1na1 deC1S10n w1thln 120 days of the
f11ing of a cowp1eted application under
this Section.
V. REMEDIES
The remedies provlS1ons of Artlcle XVIII have been the sub-
Ject of much I1t1gation. Many of the lssues raised now in
lit1gation may be resolved by amendment.
A. Excess Rent Hearlngs and Treble Damages.
Charter Sections lB09(a) and IB09(b) establ1sh alternate
CiVll and admin1strative remedies for rent charges exceeding max-
imums established pursuant to the rent control law. In both, the
basic relief for an unlawful rent charge is a monetary award from
the landlord to the tenant.
23
. " . .
In McHu9h v. Board, Judge Lawrence Rittenband of the Los
Angeles Super10r Court held that the Board I s award of monetary
damages as between landlords and tenants in an administratlve
proceeding lntrudes upon the powers reserved to the courts by the
California Constitution. The Judgment in McHugh precludes the
Board from conduct1ng adminlstrative hear1ngs on excess rent com-
plaints. The case is presently on appeal. SlDce the issue 1S a
matter of constitutional interpretatlon, it cannot be resolved by
amendment. The courts will decide whether the Board may conduct
the excess rent hearings required by Section lB09(b).
In additlon to authorlz1ng the Board to determlne the
amount of past overcharges, Sections lB09(a) and lB09(b) require
the Board to:
(l) Award to a tenant from the landlord a penalty of $500
or triple the amount of the overcharge, whichever is greater.
(2) Authorize the tenant to withhold the award (lncluding
the penalty) from future rental payments.
By regulation, the Board has established an exception to
the mandatory penalty award required by the Charter. Regulation
8039 provldes that a landlord may avoid lmposition of the excess
rent penalty by proving that the unlawful charge was neither in-
tentlonal nor the result of a failure to take practicable precau-
tions against a violation. Simllar penalty systems have been up-
held ln other Jurisdlctlons. However, the Section 1809(a) penal-
ty has been sucessfully challenged ln three lawsuits now on ap-
peal (AlPur, Hovey and Hayashi). These cases demonstrate that
the penalty provislon, as presently worded, will probably be
rewritten by the courts unless it is modified by amendment.
In Almir, Hovey and Hayashi, Los Angeles Superior Court
Judges John L. Cole and Harry Hupp expressed serious reservations
about the validity of the treble damage provision as applied in
admlnlstrat1ve proceedings before the Board. They noted that the
California Supreme Court IS Birkenfeld decision only makes con-
stitutlonal those rent control provlsions reasonably necessary to
accomplish the purposes of a rent control law. Expressing the
opinion that the penalty awards in these cases were not reasonab-
ly necessary, the judges posed a list of quest~ons including:
(1) Whether a munlclpal agency may adJud1cate the rights of
private persons (th1S is the McHugh issue).
(2) Whether state law pre-empts penalty awards of "treble
damages" upon showlngs other than the oppression, fraud or
malice:
(3) Whether penalties may be imposed without a jury trial.
(4) Whether the partlcular penalty awards in the cases were
unconstitutional as excessive in amount.
24
. " . .
Additionally, the superior court posed two questlons about
Regulation 8039:
t ~ J Whether the requirement that a landlord prove that a
penalty should not be applied to him violates the landlord's due
process rights by "presumlng" that he or she should be penalized.
(6) Whether the regulation is invalid as conflictlng with
the Charter because the regulation provides that the penalty wlll
not be lmposed under certaln circumstances while the Charter
makes lts imposition mandatory whenever an unlawful charge has
occurred.
Judges Cole and Hupp both upheld the Board's power to rend-
er admlnistratlve declslons on excess rent claims, subject to
Judlcial review. (Their holdlngs on this issue are contrary to
the declson in MCHu9h.) Additionally, Judge Cole upheld the
city I s power to adopt a penalty to enforce rent ceill ngs, and
Judge Hupp determined that state law does not preempt the city
from authorlzlng rent withholdlng (an issue which will be decided
by the California Supreme Court ln Fisher v. Berkeley). However,
both Judges struck the penalty awards in administrative proceed-
lngs as vlolating the rlght to trial by jury.
They based thls decls10n upon the Ca1ifornla Court of
Appeal's 1951 declsion 1n Grossblatt v. Wrlght construing the
penalty prov1s1on of the former federal rent control law. Like
the Charter, that law also imposed a treble penalty for violat2on
of rent ceilings. In Grossblatt, the Court of Appeal held that a
landlord defend2ng a court action for excess rent charges was en-
ti tIed to a trial by jury. While Grossblatt did not deal Wl th
adm1nistrative penalty awards, Judges Cole and Hupp decided that
It was controlling. The Board has appealed that decision.
Additlonally, Judge Hupp decided that state law preempts
penalty awards on showings other than oppression, fraud or
malice. He also lmposed restrictlons on rent withhOlding. Judge
Cole decided that the penalty award in Hovey was unconstitutlonal
as excessive. In doing so he relied upon the California Supreme
Court's declsion in Hale v. Morgan, holding that statutory penal-
tles Wh1Ch are unreasonable in amount are unconstitutional and
suggestlng that flat penalties, in which the amount of the award
does not depend upon the circumstances of the case, are par-
ticularly subject to judicial reversal on a case by case basis.
Judge Cole also noted that Regulation 8039 was invalid as con-
fl1cting wlth the Charter, but he did not strike the regulation
because he had invalidated the penalty award on other grounds.
There are numerous options for amending section 1809 in or-
der to address the issues raised in the penalty cases and Ilmit
future llt~gation of its validity. The optlons available include
the following:
25
, , . .
( 1 ) The section could be rewr1tten to l1mit treble penalty
awards, or all penalty awards, to court proceedl.ngs and confl.ne
the Board's jurisdl.ction to awarding excess charges plus interest
or excess rents, plus interest and a $500 penalty.
(2 ) The penalty amount could be changed so that it would
either be more lim~ted or more dependent upon the circumstances
of the 1ndivl.dual case; e.g., a penalty of up to six month's rent
depending upon the c1rcumstances.
(3 ) The present amount could be retained but the showing
necessary for its award could be proof of fraud, oppress~on or
mall.ce. That lS, the state standard for punitive damage awards
could be incorporated.
The problems w1th the regulat10n noted by the super10r
court could be addressed by
(4) Incorporatl.ng the present except10n l.nto the language
of section 1809 in order to eliminate the present conformity
problem.
(5 ) shl.ft1ng the burden of proof to the tenant and/or
chang1ng the standard for imposition of the penalty as in No. 3,
above.
Absent some amendITlent to section 1809, and assuming the
Board rega1ns lts power to hear excess rent claims by preva1l1ng
on appeal in McHu Sh , the penalty system w111 be the subJect of
cont1nued litl.gation. Since the courts will, rewrlte the penalty
provislons unless they are amended, we recommend the following
modlflcatlons:
(1) Reta1n treble damages as a Judlcial remedy but amend
.lB09(b) to ll.ml.t adml.nl.strative awards to the excess charge plus
a $500.00 penalty.
( 2 ) Conform the standard for treble damages to state law
oy conditJ.onl.ng thel.r award upon a showl.ng of oppresslon, fr aud
or malice.
( 3 ) Improve the efficl.ency of the rent withhold1ng remedy
DY specifying that an order authorizing rent withholding surVlves
sale of the property and that a landlord must pay the balance of
rent author1zed to be withheld to a tenant who vacates while a
wJ.thholding order is in effect. (4 ) In order to encourage
voluntary resolution of disputes, the City Attorney recommends
that 1ndependent med1atiion services be made available to
landlords and tenants and that Board hearings not commence unless
e1ther party rejects mediation.
These changes could be accomplished by amendlng Sections
IB09(a) and (b) to provide:
26
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,
(a) Any landlord who demands,
accepts, rece1ves or retains any payment
of rent in excess of the maximum lawful
rent 1n violation of the provisions of
th1S Article or any rule regulation or
order hereunder shall be liable in a
c1vil action to the tenant from whom such
payments are demanded, accepted, received
or retained, for reasonable attorney's
fees and costs as determ1ned by the
c au r t , plus damages in the amount by
wh~ch the payment or payments demanded,
accepted, rece~ved or retained exceed the
maximum lawful rent. A civil penalty of
treble the amount of the excess charge
shall be awa rded against the landlord
upon a showing that the landlord has ac-
ted willfully or with oppression, fraud
or malice.
( b) In lieu of filing a civil ac-
tlon, a tenant may file an administrative
compla1nt. The Board shall establish by
rule and regulation a hearing procedure
Slm1lar to that set forth in Section
1805 (d).
(1) Upon the f1ling of the
complaint, the Board shall inform the
parties of the avallability of mediation
serV1ces not funded or controlled by the
Board. W1thin 60 days of the filing of
the complaint, or upon written reJection
of mediat10n services by e1ther the
landlord or tenant, the Board shall set a
date for hearing of the complaint.
( 2 ) In any administrat1ve
hearing under th~s Section, a landlord
who demands, accepts, receives or retains
any payment or rent in excess of the max-
imum lawful rent shall be liable for
damages 10 the amount of the excess and
may be liable for a penalty of up to
$500. The tenant may deduct the penalty
and award of damages from future rent
payments in the manner provided by the
Board. An order authorizing rent with-
holdi ng under th1S Article shall survive
the sale or other transfer of the proper-
ty and shall be binding upon successors
of the landlord against whom the order
was made. If a tenant authorized to
withhold rent under thlS Art1cle vacates
27
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<
the property, the landlord shall pay to
such tenant a sum equal to the balance of
the rent that the tenant could have
withheld.
B. Decreases.
The Charter expressly empowers the Board to grant rent
decreases for decreases in l~v~ng space, furn~ture, furnishings
or equ~pment, for substantial deter10ration of the unit other
than ordinary wear and tear, for failure of the landlord to
prov1de adequate hous1ng serv1ces, or for failure of the landlord
to comply substantlally with applicable housing health and safety
codes. The Los Angeles superlor court ruled on the validity of
these provisions in Sterlin9' Severely restricting the Board's
powers, Judge Laurence Rittenband held that:
(1 ) The Board may adJust rents downward to reflect
decreases in housing services.
(2 ) The Board may not adJust rents downward to reflect
habitability problems or violatlons of "state and local health or
safety laws" apparently because state law preempts local action
ln these areas.
l J ) The Board may not award "damages" in the form of rent
withold~ng because such awards infringe upon the powers reserved
to the Judiciary by the state constitution.
(4) The Board's determinations in excess rent cases may be
prospectlve only, and the Board may not award retroactive relief
2n the form of damages. (The Board's decrease decisions have, in
fact, only been prospective in applicat~on. Thus, this holding
appears to be unnecessary.)
(5) Prospective rent decreases ordered by the Board may
not be implemented by the tenant untll the period for appeal from
the Board's rullng has expired and no appeal has been taken. If
an appeal is taken to the super10r court, the tenant may ~mple-
ment the decrease "only after final adjudication by the courts. "
S ~2rl -f.:9 ~., now on appeal. Because the conclusions in the
Sterling J~dgment are apparently based upon interpretation of the
California constltution and upon preemption theory, the questions
it covers cannot be resolved by Charter amendment. Resolutl.on
will have to come from the courts. However, certa1n aspects of
the decrease procedur e hav~ng to do with implementatlon of and
compliance with decrease decisions could be clarl.fied by Charter
Amendment subject to the appellate deClsion in Sterling.
Under the present Charter language, decrease decisions are
effective when made by a hearing examiner but subject to review
by the Board. If the Board reverses a declsion denying a
decrease, the tenant must repay the amount by which he or she has
28
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decreased his rent payments. This provislon. section
1805 ( d) (11 ) , make s increase and decrease procedures consistent.
However, i_ could be modified so that decrease decisions, like
excess rent decisions, are stayed pending review by the Board.
Such a modificatlon would afford 1ncreased protection to
landlords 1n decrease proceedings.
Present language does not establish any procedures for com-
pliance w1th decrease decisions. In practice, compliance hear-
ings are scheduled to determine whether landlords have corrected
the condit10n which warranted the decrease. Landlords provlng
compliance are then authorized to resume charging the rent in ef-
fect before the decrease. The suggestion has been made that the
Board does not have the authority to hold compliance nearings and
that the former rent may be charged as soon as the defect is cor-
rected, rather than waiting for a Board find1ug of compliance.
We recommend clarifying the Board's power to determ1ne com-
pliance by adding a section (14 ) to 180S(d) as follows.
Decisions decreasing rents shall
remain in effect. until the Board finds
that the landlord has corrected the
defect warranting the decrease. The
Board shall, by regulation, establish
procedures for making compliance
deternnnations.
C. Re9istration Fees.
In 301 Ocean, Superior Court Judge Jacqueline Weiss, held
that the Charter does not authorize the Board to 1mpose late
charges or penalties for late or nonpayment of registration fees.
The court also held that the Board lacks author1ty to condl.tion
the adjustment upon the payment of fees. Though th1s holding ap-
pears to be contrary to the present language of the Charter, an
amendment to that language could lay the issue to rest.
Therefore, we recommend amend1ng section 1803(f) by adding
subsection (15 ) pro'rldi ng "Charge and collect registration fees,
lncluding penaJciec: for late payments. " We also recommend
clarifying the ~ }arc s authority to withhold the general adjust-
ment for late or nOlipaj-mer.t of fees by adding a clause to section
1805 (h) (1) stating "including the provisions requ1.ring the pay-
ment of registrat10n fees and registration penalties. II
Moreover, the Charter does not explicitly authorize the
Board to sue to collect reg1stration fees. Such authorization
could be conferred by add1ng a clause to Section 1811 after the
word "to" , providing "enforce any provisions of this law or its
implementing regulations or to". The title of the Section should
then be changed to "Injunctive and Other Civil Relief".
29
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.
VI. EXEMPTIONS
Charter Secti .:m IBOl(c) defines all res~dent~al rental
units in the City as "controlled rental units" with specif~ed ex-
ceptions. There are several issues that may be addressed w~th
respect to exempt~ons.
A. Are Exemptions Automat~c?
Some controversy has arisen concerning the Board's
authority to requ1re proof of el~gibility for an exempt~on. Any
ambiguity in th~s regard may be cured by clarifying the language
of Section laOI(c) so that it reads:
( c) Controlled Rental Un~ts. All
res~dent~al units . . . except those
found by the Board to be exempt under one
or more of the following provisions:
At the end of Sect~on laOl(c), a subsection should be added
to specify the procedural constraints on exemptions. Suggested
text is as follows:
( 7) Exemptions are not automatic
but shall be granted by the Board upon
appl~cat~on by the owner pursuant to
Board rules, provided that if the Board
does not act upon a completed application
for exemption within ninety (90) days of
~ts f~11ng 1t shall be deemed approved.
B. Owner-Occupied Un~ts.
Section 1801 (c){4) exempts rental unl.ts in owner-occupied
dwellings of no more that three units. There are several alter-
nat~ves to this provision that may be presented to the voters to
e11nunate, narrow, or broaden the exemption, as the City Council
des1res.
If it is intended to el~minate the exemption altogether,
Section l80l(c)(4) would 3imf~y be strl.cken.
If it is intended to narrow the exemption, there are
several alternatives:
l. Requl.re that the "owner-occupant" be a "natural person
who owns at least a fifty (50) per cent ownership interest in the
bUl.lding and resides on the property as his or her principal
place of residence." This language is currently used in Board
Regulations and would be consistent with proposed changes to
Section 1806(h).
2. Specify that the exemption expires when the owner
ceases occupancy.
30
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3. Speclfy that owner-occupancy does not entitle the owner
to remove the property from the market without a removal permit
and preclude the procedure _or removals for purposes of exemp-
tionH under Board Regulat10n 5017.
The City Attorney suggests that Sect10n 180l(c)(4) be
amended to 1ncorporate each of the above suggestions. The lan-
guage would be as follows:
(4) Rental units in owner occupied
uwelllngs with no more than three units.
For purposes of this section:
(1) The term "owner" means a
natural person who owns at least a f1fty
(50) per cent ownership 1nterest in the
bU11dlng and resides on the property as
h1S or her prlnclpal place of residence.
(li) An exemption under th1s
sect~on shall expire by operation of law
when the owner ceases to reslde on the
property as his or her principal place of
residence: thereafter, all units on the
property shall be subject to all provi-
sions of this Articie.
{111} Notwithstandlng any
other provision of thls Article, an ex-
emption under th1s section shall not ex-
cuse the owner from the requirement of
obta1n1ng a perml t to remove any un its
from the rental hous1ng market in accord-
ance with this Article.
It has been suggested that owners of single family homes
should have a one-time decontrol of maXlmum allowable rents.
Th18 could be speclfied in the exemptlons section or in the Falr
Return sect10n (See Section II.)
C. Non-Profit Uses.
An additlonal exemption for units used for child care ser-
vices and other non-profit uses could be added. It is suggested
that such an exernpt10n be limited to vacant units actually used
for residential types of social services, and that other units in
the building be subJect to controls. Suggested language amending
1801 by adding a subsectlon is:
(6) Where a unit is actually used
ror purposes of providing, on a non-
profit basis, child care or other
residential social services in accordance
31
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,
W1.th applicable laws. Th1.s exemption
shall expire when the use upon which
exemption is based ceases.. Th1.s exemp-
tion shall only apply to units that are
vacant at the time of application, and
shall only operate to allow the specified
use without the necessity of obtaining a
removal permlt under this Article. This
exemption shall not be construed to
authorize the eVlctlon of any tenant nor
to authorize the charging of rent in ex-
cess of that permitted under this
Article. The Board may adopt regulatlons
to determine whether a unit quallfles for
an exemption under this section.
If desired, specific criter1.a for determ1.n1.ng qualificat1.on
for thlS exemption can be wrltten into the Charter. In the ab-
sence of such cr1.teria, the Board would adopt regulat1.ons to
determine whether a unit qual1.fies for a II social service" exemp-
tlon, as is suggested in the above text.
D. Target Benefits to the Needy.
We have been requested to analyze amendments that would
target the benefits of rent control to low and moderate income
persons. There are several ways to do this, all of which present
substantial legal or practical problems:
I. Establish an income ceiling for tenants, and permlt un-
controlled rents above the ceiling. The loglcal result would be
that property owners would only rent to persons with high
incomes.
2. Limit rents to a specif1c fraction of a tenant's in-
come. ThlS is unrelated to the owner's return on his property
and would probably be declared invalid, at least to the extent
that an owner could not earn a fair return.
3. Exempt "luxury units" that rented above a certain level
on the base date. ThlS would remove rent ccntr~ls from some more
expensive un its, but would not lnsure tha~~ lov.' and f"oderate In-
come persons benefitted from controls. Further, it l..S noted that
"luxury units" are not necessarily occupied by upper-income
tenants, but can be 1.nhabited by low or moderate-income tenants
who pool the1.r resources.
A var1.ety of programs designed to improve the prov1.sion of
housing to low and moderate income persons, including the
programs stated in the Housing Element and TORCA, have been adop-
ted by the City. There does not seem to be a non-discriminatory,
practical, and effective way of insuring that persons with higher
1.ncome s are not "subsidized" in the course of prov1.ding
protection for persons with lower incomes. For these reasons,
32
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~
the Clty Attorney suggests no amendments explicitly designed to
target the benefits of rent control to low and moderate tenants.
VII. SECURITY DEPOSITS
Sectlon 1803(s) requlres that tenant security deposits be
placed 1.n lnterest bearing accounts insured by the FSLIC and
either used to require return of the deposlt with interest to the
ray operatl.ng expenses or paid to the tenant. The section should
be amended to allow tenant, to allow invest~ent in all federally
l.nsured accounts, and to authorl.ze the Board to regulate the
amount and use of deposl.ts. This would be consistent with Board
Regulations Chapter 14, defl.nlng security deposits and regulating
the amount thereof.
The suggested text of an amended Section 1803(s) 1S:
(5) Securl.ty Deposits. Any pay-
ment or deposlt of money the primary
function of which is to secure the per-
formance of a rental agreement or any
part of such agreement, including an ad-
vance payment of rent, shall be placed in
an 1nterest bearing account at a federal-
ly insured financial institution until
such time as it is returned to the tenant
together with all accrued interest or
used by the landlord in accordance with
state law. The Board may regulate the
amount and use of security deposlts con-
sistent Wl.th the purposes of this Article
and state law.
VIII. OTHER CHANGES
Some concern has been ralsed about the relationship between
the Rent Control Law and newly adopted Article XX, the Tenant
ownership Rights Charter Amendment. The latter modifies the Rent
Control Law ~
tainty, the Clty Attorney recommends that Section 1~13 by added
as follows:
Sect1.on 1813. Relation to Article
XX. Section 1803(t) of this Article
shall not apply to any building for which
approval has been received pursuant to
Artl.cle XX (Tenant Ownership Rights
Charter Amendment) of this Charter. All
other provisions of thl.s Article,
however, shall continue to apply with
full force and effect to each unit in any
33
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I . .
bu~lding rece1.ving approval pursuant to
Article XX. Tenants res1.ding 1n such
uni ts, whether or not "qualifying, " "par-
ticipating," or any other such designa-
tion under Article XX, shall enjoy all
the rights and remedies provided by this
Art~cle without limltation as to dura-
tion. This Section is declarative of ex-
isting law and does not impose any new
requ1rements or l1m1t any existing ones.
AddJ.t1onally, it has been suggested that the processing
fees limit contaJ.ned in Section 2006 of Art1cle XX be raised from
$500 per application to $500 per unit. This is accomplJ.shed by
an amendment to the section.
RECOMMENDATION
It 1S respectfully recommended that the City Council direct
the City Attorney to prepare a resolution submitting the proposed
Amendment to Article XVIII 6f the City Charter for the approval
of the voters, as drafted in Exhibit "A" , with such changes as
the CJ.ty Council may direct.
PREPARED BY: Robert M. Mye rs , City Attorney
Stephen s. 5 tark , Assistant City Attorney
Karl M. ManheJ.m, Deputy CJ.ty Attorney
Marsha J. Moutrie, Deputy City Attorney
"
34
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~
,
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l..X::-lIEIT A
-
'TIn s exhlLlt cont2.1ES the proposed cr-!ans€s to the text of the
Rent COi!"C.rol Charter l>s-.encrent (Artlcle AVrIl). i-i.acltlons are
uncerscoredi deletlons are ~t$t*tt~q*.
. , . .
\
TEXT OF PROPOSED CHART~R AMENDMENT.
SECTION 1. Section 1801 of the C~ty Charter is amended to
read as follows:
Section 1801. Def~n~tions. The follow~ng words or phrases
as used ~n this Article shall have the follow~ng mean~ngs:
( a) Board: The term "Board" refers to the elected Rent
Control Board established by this Article.
(b) CorrU1nss~oners : The members of the Board and Interim
Board are denominated Comm~ssioners.
( c ) Controlled Rental Units: All residential rental units
~n the City of Santa Monica, including mobile homes, and mobile
home spaces, and tral1ers and trailer spaces, except those found
by the Board to be ~xempt under ~ or ~ of the following
provisions:
(1) Rental units in hotels, motels, inns, tourist
homes and rooID1ng and boarding houses which are rented primarily
to trans~ent guests for a period of less than fourteen (14) days.
(2 ) Rental un~ts in any hospital, convent,
monastery, extended medical care fac1l1ty, asylum, non-prof~t
home for the aged, or dormitory owned and operated by an
~nstitution of higher education.
(3 ) Rental units which a government unit, agency or
a uthor ~ ty owns, operates, manage s, or 1n which governmentally
subsidized tenants reside only lf app11cable Federal or State law
or admin1stratlve regulation specially exempt such un~ts from
municlpal rent control.
(4 ) Rental units in owner-occupied dwelllngs with no
more than -t:hrpe ( 3 ) un1ts. For purposes 2f this section:
ji) The term "owner" means 5!. natural person
who owns ~ IBast a f1fty (50) per cent ownership lnterest in ~
build~n9 and resldes ~ the property as his or her principal
place of residence.
(ii) An exemption under this section shall
expire by ~peration of law when the owner ceases to reside on the
property ~ hlS or her prlnc1pal place of resldence: thereafter,
all units on the property shall be subject to all provisions of
this Article.
(iii) Notwithstanding any other provislon of
this Articler an exemption under th1S sectlon shall not excuse
1
. .
.
the owner from the requirement of obtainins ~ permit to remove
any un1ts from the rental housins market in accordance with this
Article.
(5) Rental units and dwellings constructed after the
adoption of this Article~ this exemption does not apply to units
created as a result of conversion as opposed to new construct1on.
~ Where ~ unit is actually used for purposes of
providing, on a non-proflt basis, Chlld ~ ~ other residential
social serVlces 1n accordance with applicable laws. ThlS
exernpt10n shall ~xp1re when the use upon which exemption is based
ceases. This exemptlon shall ~nly apply to units that are vacant
at the time of ~~llcation, and shall confer only operate to
allow the speclfl~~ ~ without the necess1ty of obtainins ~
removal permlt under this Article. This exempt10n shall not be
construed to authorize the evictlon of any tenant ~ to
authorlze the charging of rent 1n excess of that permitted under
this Article. ~ Board may adopt regulations to determlne
whether ~ unit qualifies for ~ exemption under this section.
12l Exemptions ~ not automatic but shall be
9ranted by the Board upon appllcation by the owner pursuant to
Board rules, provided that lf the Board does not act upon a
completed application for exemptlon within ninety (90) days of
lts fll1ns it shall be deemed approved.
(d) Housins Service: Housing services include, but are
not 11mited to repairs, maintenance, painting, providing light,
hot and cold water, elevator service, window shades and screens,
storage, kltchen, bath and laundry facilities and privileges,
janitor services, refuse removal, furniShings, telephone,
parking, and any other benefit, privilege or facil1ty connected
w1th the use or occupancy of any rental unit. Services to a
rental unit shall include a proportionate part of services
provided to common facilities of the bUllding in which the rental
unit is contained.
(e) Landlord: An owner, lessor, sublessor or any other
person entitled to receive rent for the use and occupancy of any
rental un1t, or an cge~t, representative or successor of any of
the forego~ng.
(f) Rent: All perlodlc payments and all nonmonetary
consideration including but not l~m~ted to, the fair market value
of goods or services rendered to or for the benef~t of the
landlord under an agreement concerning the use or occupancy of a
rental unit and premises including all payment and consideration
demanded or paid for parking, pets, furniture, subletting and
securlty deposits for damages and cleaning.
(g) Rental Hous1ng Agreement: An agreement, oral, written
or implied, between a landlord and tenant for use or occupancy of
a rental unit and for housing services.
2
. . .
(h) Rental Units: Any building, structure, or part
thereof, or land ap~urtenant thereto, or any other rental
property rented or uffered for rent for llving or dwelling house
units, and other real properties used for llvlng or dwelling
purpos es, together with all housing services connected wlth use
or occupancy of such property such as common areas and
recreational facilities held out for use by the tenant.
( i) Tenant: A tenant, subtenant, lessee, sublessee or any
other person entitled under the terms of a rental houslng
agreement to the use or occupancy of any rental unlt.
(J) Recosnlzed Tenant Orga~izatlon: Any group of tenants
residing in controlled rental units in the same buildlng or in
dlfferent buildings operated by the same management company,
agent or landlord, who requests to be so designated.
(k) Rent Ceiling: Rent ceiling refers to the limit on the --
maXlmum allowable rent which a landlord may charge on any
controlled rental unit.
<
(1) Base Rent ceiliny: The maximum allowable rent
established in Section 1804 b).
(m) Property: All rental units on a parcel or lot or
contlguous parcels or lots under common ownership.
SECTION 2. Section 1802 of the City Charter is amended to
read as follows:
~t!ittIi!lfttitlrt!ftliltit litl 1rt1 tlf !i!titti mlU!i::
nn '('~ ( "" < 11111111 !Ill 1111 III llllllll 111111!l::;4
!t~ t If 11 ~f ~:
**~+tl!i~t!!tttl;llitt~$tt~i1~41~fi'+l'~~*lt~l++~lt+*t.+I**~t+
(~l I 1$++*I~t~~~*~+lw+*4+l~+'I*,~+tl$+tl~~*ll~+$J
(~Il 1$++*lt*j**~t~t+lt++~+tl**~+tl$+tl+~*ll.+l~
Section 1802. Integrity and Autonomy of Board. The Rent
Control Board shall be ~ intesral part of the government of the
Clty, but shall exercise its powers and duties under this Article
independent of and without lnterference from the City Council,
City Manager, and Clty Attorney. With respect to the lnternal
organlzation and affairs of the Board:
3
. , . .
(a) Budget. The Board shall, prior ~ the beginning of
~ fiscal year, July lL hOld a publlC hearing ~ a proposed
budget and adopt an annual b~dget. The City Council and the Clty
Manager shall have ~ authorit~ to oversee, supervise, ~ approve
th~s bud~et. Upon flnal adoptlon, the budget shall be ~ effect
for the ensulng fiscal year and the amounts stated therein shall
be and become approprlated,~ ~,B?ard for the resP7ctive
obJects and purposes thereln speclfled. At any meetln9 after the
a~option of the budget the Board may amend ~ supplement the
budset by the affirmatlve votes of at least three members.
Coples of ~ adopted budget and any ~mendments ~ supplements
shall be flIed with the Clty Clerk, C~ty Controller, and Clty
Manager. Necessary adJustments to City admlnistratlve procedures
shall be made.
--
(b) Personnel. Except for the elected ~ appolnted
Comrnissloners, Administrator, and attorneys employed to represent
or advlse the Board, all employees of the Board are within the
classified clvil service of the City. The Board shall appoint an
Administrator to administer and supervlse the exerClse of its
powers ~ dutles who shall be dlrectly responslble to the Board.
All employees of the Board, except the Administrator and
attorneys, shall be hlred, termlnated, suspended, demoted, laid
o~.f_, and recalled .!E. accordance with 1:he provisions of Article XI
of the Charter and !mplementlng provisions ~ the Municipal Code.
The Board shall classify employee positlons, establlsh employee
salarles and benefits, and evaluate ~ performance of its
employees. The Board may enter into and approve ~ Memorandum of
~~derstandln9 wlth representatives of lts e~ployees concernlng
thelr w~ges, benefits, hours of work, and terms and conditions of
employment in accordance with state ~ The Clty Counell shall
have no power to abollsh positlons established ~ classifled by
th~ Board under this Article, ~~twithstanding any other sectlon
of this Charter.
--
(c) Board Legal Work. Legal staff hired by the Board
shall r~present and advise the Board, its Commissioners, and its
staff ir: any civil, ~atters_~ actions, ~ proceedings in WhlCh ~
~Qard, lts Commissloners, ~ 1ts staff, in ~ by reason of their
~fflcial capacity, ~ concerned or ~ a E9rty. The Board ~ay,
ln lts sole Q:l,SCretlon, and wi thou.!:. ap,no.;a~ of the City Counc1l,
retaln prlvate attorneys to furnlsh le3al advi~ ~
representat10n in particular matters, actions ~ proceedings.
(d) Contracts and Purchases. The Board shall comply w1th
the provisions of the City Charter providing for ~ centraliz~
purchasing system and competitive bldding_ ~ shall p~ocure
gQods and services ~ do other City agencles. Provided, howeVer,
that the Board shall have ~ and flnal authorlty to contract
wlth and employ theprofesslonal services of attorneys and
l~g1slative lqbbyists.
~ Conforming Re9ulations. If any portion of this
Artlcle ~ declared lnvalid ~ unenforceable EY decision of ~
4
, . . .
t
court of competent jur1sd1ction ~ rendered invalid ~
unenforceable EY state or federal leer_slation. the Board shall
have author~ty to enact replacement rC9ulations -COnsistent with
the 1ntent and purpose of the invalidated provis~on and
applicable law. Such replacement re9ulat~ons shall supercede
invalidated ~ unenforceable p~ovis~ons of this Article and
~ncons~stent ordinances ~ the City Counc~l to the extent
necessary to resolve any lnconsistency.
SECTION 3. Section 1803 of the C~ty Charter is amended to
read as follows:
Section 1803. Permanent Rent Control Board.
(a) Composition: There shall be in the City of Santa
Monica a Rent Control Board. The Board shall consist of five
elected Commissioners. The Board shall elect annually as
chairperson, one of 1t's members to serve in that capac~ty.
(b) Eligibility: Duly qualified electors of the City of
Santa Monica are eligible to,serve as Commissioners of the Board.
(c) Full D~sclosure of HOldinss: Candidates for the
pos~t~on of Comm~ss~oner shall submit a verified statement
11sting all of thelr interests and dealings 1n real property,
lncludlng but not 11ffi1ted to it's ownership, sale or management,
during the previous three ( 3) ye a rs .
(d) Election of Comm1ssioners: Comm1ssioners shall be
elected at general municipal elections in the same manner as set
forth in Art1cle XIV of the Santa Monica Charter, except that the
first Commissioners shall be elected at a special municipal
elect10n held within ninety (90) days of the adopt1on of this
Article. The elected Commissioners shall take offlce on the
f1rst Tuesday following their elect1on.
(e) Term of Off1ce: Commlssioners shall be elected to
serve terms of four years, beginning on the first Tuesday
followlng their election, except that of the first five
Commissioners elected in accordance w1th Section 1803(d), the two
Commissioners receivlng the most votes shall se~ve until April
IS, 1985 and the remain1ng three Commissioners shall serve until
April 18, 1983. Commissioners shall serve a mC:'xirlurn of two full
terms.
(f) Powers and Duties: The Board shall have the following
powers and duties:
( 1 ) Set the rent ceilings for all controlled rental
units.
(2 ) Require registration of all controlled rental
unlts under Sect~on 1803(q).
5
. . . .
(3 ) Establlsh a base rent ceiling on rents under
Section 1804(b).
(4) To make adjustments in the rent ceiling in
accordance with Sectlon 1805.
( 5 ) Set rents at fair and equitable levels in order
to achleve the intent of this Article.
(6 ) Hire and pay necessary staff, including hearing
examiners and personnel to issue orders, rules and regulations,
conduct hearings and charge fees as set forth below.
(7) Make such studies, surveys and investigations,
conduct such hearings, and obtain such information as is
necessary to carry out its powers and duties.
(8) Report annually to the City Council of the City
of Santa Mon1ca on the status of controlled rental housing.
(9 ) Remove rent_controls under Section l803(r).
(10) Issue permits for removal of controlled rental
units from rental housing market under Section l803(t).
(11 ) Administer oaths and affirmations and s ubpo ena
witnesses.
(12 ) Establlsh rules and regulations for deducting
penalties and settling CiVll claims under Section 1809.
(13 ) Seek criminal penalties under Section 1810.
(14) Seek injunctive relief under Section 1811.
(15) Charse and collect registration fees, includins
penalt1es for late payments.
( g) Rules and Regulations: The board shall issue and
follow such rules and regulations, inCluding those WhlCh are
contalned 1n th1s Article, as will further the purposes of the
Article. The Board shall publlcize its rules and regulaticns
prior to promulgation in at least one newspaper of general
circulat10n in the City of Santa Monica. The Board shall hold at
least one (I) public hearing to consider the views of lnterested
part1es prlor to the adoption of general adjustments of the
cellings for maximum allowable rents under Section 1805 and any
decision to decontrol or re1mpose control for any class of rental
unlts under Sectlon 1803(r). All rules and regulations, internal
staff memoranda, and written correspondence explaining the
decls1ons, orders, and pol1cies of the Board shall be kept in the
Board1s office and shall be available to the public for
~nspection and copying. The Board shall publicize this Article
so that all residents of Santa Monica will have the opportunity
6
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, . , . .
to become lnformed about the1r legal rlghts and duties under Rent
Control in Santa Monica. The Board shall prepare a bro~hure
which fully describes the legal rights and duties of la.ldlords
and tenants under Rent Control ~n Santa Monica. The brochure
will be avallable to the public. and each tenant of a controlled
rental unit shall receive a copy of the brochure from his or her
landlord.
(h) Meetings: The Board shall hold .tl++~+tlf~tttt+~i~t
I..~ such regularly scheduled meetings as are necessary to ensure
the timely performance of its duties under this Art~cle. W+t
tlltt Spec1al meetings shall be called at the request of at
least three Comm~ssioners of the Board. The Board shall hold ~ts
lnltlal meeting no later than 15 days after taking office.
( 1 ) Quorum: Three Commissioners shall constitute a quorum
for the Board.
( J ) Votlng: The affirmative vote of three CommisSloners
of the Board is required for a decision. lncludlng all motlons,
regulat~ons, and orders of tpe Board.
(k) Compensation: Each Commissioner shall receive for
every meetlng attended seventy-five dollars ($75.00), but in no
event shall any Commissioner receive in any twelve month period
more than forty-seven hundred and fifty dollars ($4,750) for
serVlces rendered.
( 1 ) Dockets: The Board shall maintain and keep in its
office all hearlng dockets.
em) Vacancies: If a vacancy shall occur on the Board, the
Board shall within thirty (30) days appoint a qualified person to
fill such a vacancy until the following municipal election when a
quallfied person shall be elected to serve for the remainder of
the term.
(n) Financing: The Board shall finance its reasonable and
necessary expenses by charging landlords annual reglstration fees
1n amounts deemed reasonable by the Board. t*,lfit+tl',,~'+
ttt~tlttlt*t!;tttttttt'*~~:+!~!t1t~:~$~tt~~t~t~itll~tt~~I::t~ of
such fees may be passed throush from landlords to tenants and ma~~
establish applicable cond1tlons and procedures. The Board is
also empowered to request and receive funding when and if
necessary from any available source for its reasonable and
IllfJtlffriilfliil1iIllllllllllllllllllilllllllliftl!tii~:!:~:~:
(0) Recall: Co~missloners may be recalled in accordance
with the provisions of Artlcle XIV of the Santa Monica Charter.
7
. .
. .
(p) Staff: The Board shall employ and pay such staff,
~ncluding hear~ng examiners and inspectors, as may be necessary
to perform its funct~on efficiently in order to fulfill the
purpose of this Art~cle.
(q) Re9~strat~on: WJ..thin sixty (60) days after the
adoption of this Article, the Board shall requ~re the
reg~5tration of all controlled rental units, which shall be
re-reg~stered at times deemed appropriate by the Board. The
initial reg~stration shall include the rent in effect at the time
on the date of the adoption of this Article, base rent ce~ling,
the address of the rental unit, the name and address of the
landlord, the housing serv~ces provJ..ded to the unit, a statement
~ndicating all operating cost increases since the base rent
ceil~ng date, and any other infomat~on deemed relevant by the
Board. The Board shall requ~re the landlord to report vacancies
in the controlled rental units and shall make a list of vacant
controlled rental un~ts available to the public. If the Board,
after the landlord has proper notice and after a hearing,
determines that a landlord has wilfully and knowingly failed to
register a controlled rental,unit, the Board may authorize the
tenant of such a non-registered controlled rental unit to
withhold all or a portion of the rent for the unit until such
time as the rental un~t 1S properly registered. After a rental
unit is properly registered, the Board shall determine what
portion, if any, of the w1thheld rent is owed to the landlord for
the per~od ~n which the rental unit was not properly registered.
Whether or not the Board allows such withholding, no landlord who
has failed to register properly shall at any time 1ncrease rents
for a controlled rental unit until such un~ts are properly
regJ..stered.
( r) Decontrol: If the average annual vacancy rate in any
category, class1fication, or area of controlled rental units
exceeds five ( 5 ) percent, the Board is empowered, at ~ts
d~scret10n and in order to ach~eve the obJect~ves of this
Article, to remove rent controls from such category,
classification or area. The Board may determine such categories,
classif1cations, or areas for purposes of decontrol consistent
with the ob]ect~ves of this Article. In determining the vacancy
rate for any category, classification or area of controlled
rental units, the Board shall consider all available data and
shall conduct its own survey. If units are decontrolled pursuant
to th1s subsection, controls shall be reimposed if the Board
finds that the average annual vacancy rate has thereafter fallen
below f~ve (5) percent for such category, classification or area.
( s ) Security Deposits: Any payment or deposit of money
the primary function of which ~s to secure the performance of a
rental agreement or any part of such agreement, including an
advance payment of rent, shall be placed in an 1nterest bearing
iiiii~itlt1;itf$*tt;I~~lt~;,~t1tt.}i$.ti.~$I;:41~~.*Itt%tit*~+
unt~l such t~me as ~t 1S returned to the tenant
B
. . . .
,
111!1!!il!lillllllllllill!lij!l!jil!!liill!~llllll~'!lill;:;;;;;l
may re9ulate the amount and ~ of securlty deposits cons1stent
with 1he purposes of this Article and state law.
(t) Removal of Controlled Unit From Rental Housing Market:
1!l Any landlord who desires to remove a controlled
rental unit from the rental housing market by demolition,
conversion or other means is required to obtain a permit from the
Board prior to such removal from the rental housing market in
accordance with rules and regulations promulgated by the Board.
In order to approve such a permit, the Board 15 required to *.i+
+'~~I~fli~+lf~ii~tl*;I*l~~l'$.t find
~l~l Itt'tlt~+l~~;lt~li+~lii~~+tl~llt~!;lt~tl*illwttt
!t!;~ttt+~*I~t!*.* ill~flt+t ~tll*~ +~ I ~ ~ ~ ~tl t
tt!~*tjt!t;ttlli!!tl!itltl!ittltftittltltlttit~f~ttfltfltttl1i.
tt!tlt::!tttfl~~!ft;l!!ttltt~tttl~tll:1t~tttlt:tftfittt!ttJttil
J.l that the landlord cannot make a fair return ~4
l,t++t*+*i by retaining the controlled rental unit.
~ Notwithstanding the foregoing provisions of this
subsection, the Board may approve such a per.m1t:
Jl! (i) If the Board finds that the controlled
rental unit is uninhabitable and is incapable of belng made
habltable in an economically feasible manner, or
J~) (ii) If the permit is being sought so that the
property may be developed w1th multifamily dwell~ng units and the
permit applicant agrees as a cond1tion of approval, that the
units will not be exempt from the provisions of this Article
pursuant to Sectlon 1801 (c) and that at least f1fteen (15)
percent of the controlled rental units to be built on the site
w1ll be at rents affordable by persons of low income.
(3) The ~ousing Element of the General Plan of the
City of Santa Monica shall at ~~~ times contain ~ provision that
neither the Cit~ Council nor any City agency shall approve an
application for tentatlve subdivis10n tract map ~ parcel map nor
9
'. '. . .
issu~ ~ Residentlal Buildlng Report for ~ converted unit untl1
and unless the applicant first obtalns a removal permit as
required by this Section.
(4) The Board shall render its final decision within
~ hundred and twenty (120) days of ~ flling of ~ completed
application under this section.
SECTION 4. Section 1805 of the City Charter is amended to
read as follows:
Section 1805. Indlvidual and General Ad~ustment of
Ceilings on Allowable Rents.
(a) General Adjustment: The Board may, after holding those
public hearlngs prescribed by Section 1803 (g), set and adJust
upward or downward the rent ceiling for all controlled rental
un1ts in general and/or for particular categories of controlled
rental units deemed appropriate by the Board. Such an
adJustment, however, need not take effect immediately, and the
Board may decide that new rent ceilings shall not take effect
until some reasonable date after the above-stated time periods.
(b) Annual General AdJustment: Each year the Board shall
generally adJust rents as follows:
(l) AdJust rents upward by granting landlords a
utllity and tax increase adjustment for actual increases in the
Clty of Santa Monica for taxes and utllities.
(2) AdJust rents upward by granting landlords a
maintenance lncrease adJustment for actual lncreases in the City
of Santa Monica for maintenance expenses.
(3) AdJust rents downward by requiring landlords to
decrease rents for any actual decreases in the City of Santa
Monlca for taxes.
In adjustlng rents under thlS subsection, the Board shall adopt a
iIiiiiitlilrtitiiitt!rt:rililtjt~tll1tft~ti~ttlt~t~lt~lt~t~l.p~4
(c) Petltions: Upon receipt of a petition by a landlord
and/or a tenant, the maximum rent of individual controlled rental
unlts may be adJusted upward or downward in accordance with the
procedures set forth elsewhere in this Section. The petition
shall be on the form provided by the Board and shall include ~
declaratlon EY the landlord that the unlt meets all requirements
of Sectlon l80S\hJ. NotwlthstandIng any-other provision of this
Sectlon, the Board or hearing examiner may refuse to hold a
hearlng and/or grant a rent adJustment If an indlvidual hearing
has been held and decision made wlth regard to maximum rent
within the previous six months.
10
. . . .
.
.
(d) Hearing Procedure: The Board shall enact rules and
regulat10ns govern1ng hear1ngs and appeals of individual
adJustment of ce111ngs on allowable rents which shall include the
fOl.lOWl.ng:
t I} Hearing Examiner: A hearl.ng examl.ner appointed
by the Board shall conduct a hearing to act upon the petition for
l.ndividual adJustment of ce1l1ngs on allowable rents and shall
have the power to administer oaths and affl.rmatl.ons.
l2) Notl.ce: The Board shall notify the landlord if
the petl.tion was filed by the tenant, or the tenant, if the
petitl.on was filed by the landlord, of tbe receipt of such a
petition and a copy thereof.
( 3 ) Time of Hearing: The hearing officer shall
notl.fy all partl.es, as to the tJ..rne, date and place of the
hearing.
(4) Records; Tbe hearl.ng examiner may require
either party to a rent adjustment hearing to prov1de it with any
book s , records and papers deemed pertinent in addition to that
l.nformation contained in registration statements. The hearing
examiner shall conduct a current building inspection and/or
request the City to conduct a current building l.nspection if the
hearing examiner finds good cause to bell.eve the Board's current
information does not reflect the current condition of the
controlled rental unit. The tenant may request the hearing
examiner to order such an inspectIon prior to the date of the
hearing. All documents required under this Section shall be made
available to the parties involved prior to the hearing at the
off~ce of the Board. In cases where information f1led in a
petition for rent ce~ling adjustment or in add~tional submissions
flied at the request of the hearing examiner is inadequate or
false, no action shall be taken on said petition unt11 the
deficiency is remedied.
(5) Open Hearinss: All rent ceiling adjustment
hearings shall be open to the public.
(6 ) Right of ASslstance; All parties to a hearing
may have assistance in presenting evidence and developing their
position from attorneys, legal workers, recognized tenant
organization representatives or any other persons desl.gnated by
said parties.
( 7) Hearln9" Record: The Board shall make
available for inspection and copying by any person an official
record wh~ch shall constitute the exclusive record for decision
on the issues at the hearing. The record of the hearing, or any
part of one, shall be obtainable for the cost of copying. The
record of the hearing shall include: all eyhibits, papers and
documents required to be filed or accepted into ev~dence durl.ng
the proceedings: a ll.st of participants present: a summary of all
11
" . .
. "
testimony accepted in the proceedings~ a statement of all
materials officially noticed; all recommended decisions; orders
and/or rulings; all final dec~slons, orders and/or rulings, and
the reasons for each final decis~on, order and/or ruling. Any
party may have the proceeding tape recorded or otherwise
transcribed at his or own expense.
(8) Quantum of Proof and Not~ce of Decision: No
individual adJustment shall be granted unless supported by the
preponderance of the evidence submitted at the hearing. All
partles to a hear~ng shall be sent a notice of the decision and a
copy of the findlngs of fact and law upon which said decision is
based. At the same time, partles to the proceed1ng shall also be
notif1ed of their right to any appeal allowed by the Board and/or
to judicial reVlew of the decision pursuant to this Section and
Section 1808 of this Article.
(9) Consolldation: All landlord petitions
pertaining to tenants in the sawe bUlld1ng will be consolidated
for hearing, and all petitions filed by tenants occupying the
same building shall be consolidated for hearing unless there is a
showing of good cause not to-consolidate such petitions.
(lO) Appeal: Any person aggrieved by the decision
of the hearing exam1ner may appeal to the Board. On appeal, the
Board shall affirm, reverse or modlfy the decis10n of the hear~ng
examiner. The Board may conduct a de novo hearing or may act on
the baS1S of the record before the hearing examiner without
hold1ng a hearing.
(11) F2na11ty of Decision: The decision of the
hear~ng examiner shall be the flnal decision of the Board 1n
the event of no appeal to the Board. The decision of the hear1ng
examiner shall not be stayed pending appeal; however, in the
event that the Board on appeal reverses or modifies the decision
of the hearing examiner, the landlord, in the case of an upward
adJustment in rent, or the tenant, in the case of a downward
adjustment of rent, shall be ordered to make retroact1ve payments
to restore the parties to the pos1tion they would have occupied
had the hearing examiner1s decislon been the same as that of the
Board.
(12) Time for Declsion: The rules and regulations
adopted by the Board shall provide for final action on any
indivldual rent adJustment petition within one-hundred and twenty
(120) days, following the date of filing of the lndlvidual rent
adJustment petltion.
(13) Board Action in L1eu of Reference to Hearing
Examiner: The Board, on its own motion or on the request of any
landlord or tenant, may hold a hearing on an individual petition
for rent adjustment without the petition first being heard by a
hearing examiner.
12
. '" l ~ . .
(14) Decisions decreasin9 rents ~ha11 remain in
ef-ect until the Board finds that the ]andlord has corrected the
defect warrantin9 the decrease. The Board shall, EY resulation,
establish procedures for maklns compliance determinations.
(e) In making individual and general adJustments of the
rent ceiling, the Board shall consider the purposes of this
Article and the requirements of law. The Board may adopt ~ its
fair return standard ~ny law~~l formula, ~nclud~n9 but not
llmlted to ~ based ~ investment ~ net operating income. The
Board shall consider all factors relevant to the formula 1t
employs: such factors-mar 1nclude: t*tltt*lt~ttttt.+~YI~~*~l~~t
'tllt+l+t.*tlf.~t~*+lt*~ *~ll increases or
decreases 1n operating and maintenance expenses, the extent of
~t1l1ties pa1d EY the landlord. capital lmprovement of the --
controlled rental un1t as dlstinguished from normal repair,
replacement and maintenance, increases or decreases 1n I1ving
space, furniture, furnishings, ~tl equipment, ~ services,
substantial deterioration of the controlled rental unlt other
than as a result of ordlnary wear and tear, failure on the part
of the landlord to provide aoequate houslng serVlces or to comply
substantlally with appl~cable houslng. health and safety codes,
federal and state income tax benefits. the speculatlve nature of
the lnvestment. whether or not the property was acquired or is
held as a long term or short term investment, .*~ the landlord's
rate of return on investment, the landlord's current and base
date Net Operating Income, and any other factor deemed relevant
ntmfltlltmt~imdn_iflfflf~mmtuH tift
':/1 ,IIIM!llllllIIIIIIIIIIIMlllllllllllllllllmlll i;t;;t:
~++.+.~I~I!tt~ttJ~'itil~ttt~ttt~iltt+tttt*~tt~t~tft~tttlt~tttt+
liltl!! t ltitt!rilliiiitti!t!iiittttllitf!!tlrlttilt11!itlttit4
It!I!ittlttiJt!i~l!!!fl1ttiirtit!tt!!!i!it!ltlltiiltliti111ttJttt
;tttt~lttl~itt!llttlttt~r%flttlit*1.l'~*~t.'.~4*lt+~I.ft+tlt~,
13
, M . .
,
.
J~l (f) No landlord shall increase rent under this Article
if the landlord:
(1) Has failed to comply with any provision of this
Article and/or regulations issued thereunder by the Board.
lucludiug the 2rovisions requiring the payment of reglstration
fees and re~istratlon penaltles, or
(2) Has failed to comply substantially with any
applicable state or local housing, health or safety law. No
landlord shall increase rent unless the notice increa~in9 rent
contalns a statement in substantl,ally the foIlowin9 form: "The
undersisned (landlordr-certifies that thlS property compIles
substantially wlth all state and local housin9, health ~nd safety
laws." If a landlord fails to comply with thlS subsectl.on, the
tenant may refuse to pay the~mproperly notlced increase, maY--
~ adminlstrative ~ civil remedles under this Article, and ~y
raise the landlord's nonc~rnpliance ~ ~ affirmative defense in
any resulting unlawful detainer action.
(3) Has held a unit vacant for three (3) consecutlve
months 2.!:. longer without <)ood cause determined by the Board. No
landlord shall increase rent unless the notice increaslng rent
contains ~ of the ~011owin9 statements, ~ their substantial
equivalents: liThe unders~~ned (landlord) certifies that ~ unit
on the same property as the unit subJect to th~s ~ increase
notice has been vacant for three (3) consecutlve months or
longer." or "The undersisned (landlord) cert~fies that one ~
more unlts on the property have been vacant for three (3)
COi1"Secutivemonths or lon9~r, and the Santa Monica Rent Control"
Board has determlned that there is good cause ~ such vacancy.
If a landlord fails to comply with this subsection, tenants on
the-same property may refuse to pay th~ improperly noticed --
increase, may seek administrat~ve ~ civil remedies under this
Article, and may raise the landlords noncompliance as ~
afflrmative defense in any resulting unlawful detainer action.
(g) The Board shall provide ~ ~xpedited procedure for
consideration of rent increases for cap~tal improvements where
both the landlord and tr,e current tenant{s} of the effected units
concur in the nature .of tt~ capital improvement to be ~ 2.!:
already made. ~ othe~ ren~ increases ~ ca~ital improvement
shall proceed accord__ng to regular admin~stratl ve procedures.
SECTION 5. Section 1806 is amended to read as follows:
Section 1806. Eviction. No landlord shall take actl0n to
terminate any tenancy including service of any notice to quit or
other eV2ction notice or bring any action to recover possession
or be granted recovery-of possession of a controlled rental unit
unless:
14
, .. . .
. ,
.
(a) The tenant has fa~led to pay the rent to which the
landlord is entitled under the rental housing agreement and this
Article.
(b) The tenant has v~olated an obligation or covenant
of his or her tenancy other than the obligation to surrender
possession upon proper notice and has failed to cure such
violation after hav~ng received written notice thereof from the
landlord in the manner required by law.
( c) The tenant is committing or expressly permitting a
nUl.sance in, or is causing substantial damage to, the controlled
rental unit, or 1.5 creating a substantial interference with the
comfort, safety, or enJoyment of the landlord or other occupants
or neighbors of the same.
(d) The tenant is conv1.cted of using or expressly
permitting a controlled rental unit to be used for any illegal
purpose.
(e) The tenant, who ha~ a rental housing agreement which
had terminated, has refused, after written request or demand by
the landlord, to execute a written extension or renewal thereof
for a further term of like duration and in such terms as are not
inconsistent with or violative of any provisions of this Article
and are materially the same as in the previous agreement.
( f) The tenant has refused the landlord reasonable access
to the controlled rental unit for the purposes of making
necessary repa1rs or improvements required by the laws of the
Uni ted States, the State of California or any subdivision
thereof, or for the purpose of showing the rental housing to any
prospective purchaser or mortgagee.
(g) The tenant hold~ng at the end of the term of the
rental housing agreement is a sub-tenant not approved by the
landlord.
(h) .
The landlord seeks to recover possession 1n good faith
for use and occupancy by herself or h1mself, or her or h~s
children, or parents. t:tt~il'~:i;~~~ifftltt$t~*tl~tJ
1f1~~~+t+t1fl-t1l"t~ I ,<j>Jjl-ttlH.~ 1I.t For Qurposes of
eV1ct~ons under this subsection:
(l) A "landlord" shall be defined as a natural person
who has at least-~ 50 percent ownership l.nterest in the property.
( 2 ) No eviction may take place if a~y landlord ~
enumerated relative alr~ady occupies one unit ~ the property.
ill The notice te.rminating tenancy shall contain the
name, address and relation~hip to ~ landlord ~ the person
intended to occupy.
15
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.
(4) The landlord or enumerated relatlve must intend
in 9oo~ faith to ~ into th~ unit wlthin 30 daY!:;l aft7r the
tenant vacates and ~ occupy ~he unit as a primary resldence for
2! least six months. The Board may adopt re9ulations governlng
the determination of ~ood faith.
(5) I~ the landlord ~ relative specified ~ ~
notice terminatins tenancy fails to occupy the unit within 30
days after the tenant vacates, the landlord shall:
(i) Offer the unit ~ the tenant ~ vacated it.
(il) Pay to said tenant all reasonable ~xp~nses
incurred ~ mov~n9 to and70r from the unit.
(6) ~o evict~on p~~suant to this subsection shall be
allowed in any condomlnium ~ stock cooperative ~ which has .
been converted from ~ apartment or other rental unlt after Aprll
10, 1979, unless the Rent Control Board has issued a removal
permlt ~ declared a ~ed rlght for said unit. As used in this
subpart, ~ unit shall be deemed converted after April 10, 1979,
If ~ April 10, 1979, the recorded tract map or parce~ map for
t}1~ property showed the unit ~ included in the property.
(i) The landlord seeks to recover possesslon to demolish
or otherwlse remove the controlled rental unit from rental
residentlal housing use after having obtained all proper permits
from the city of Santa Monica.
Notwithstanding the above provisions, possession shall not
be granted if it is determined that the eviction is in
retaliation for the tenant reporting violations of this Art~cle,
for exercising rights granted under tnls Article, including the
rlght to withhold rent upon authorization of the Board under
Section 1803(q) or Section 1809 or for organ~zation other
tenants. In any notice purporting to terminate tenancy the
landlord shall state the cause for the termination, and in any
action brought to recover possession of a controlled rental unit,
the landlord shall allege and prove compliance with this Section.
Any vl01ation of this Section shall render the landlord
liable to the tenant in a civil act10n for a~tual and punitive
damages.
SECTION 6. Section 1809 of the City Charter is amended to
read as follows:
(a) Any landlord who demands, accepts, receives, or
reta1ns any payment of rent in excess of the maximum lawful rent,
in violat~on of the provisions of this Article or any rule,
regulation or order hereunder promulgated, includin9 th~
prov~sions ensuring compliance with habitabilit~ standards and
regIstration ~ requirements, shall be liable "I~+t+~~.ft~~
16
t , .. . . .
.
wt~tt~+~ in ~ c~vil action to the tenant from whom such payments
are demanded, accepted, received or reta~ned, for reasonable
attorney's fees and costs as determine,l by the court, plus
damages ~n ~*I.$~*~~I~flf}t+ll*~~t+~I~~+l~t~1 (f$$~tl~tli~t++l(lt
t}~+. the amount by wh~ch the payment or payments demanded,
accepted, recelved or retained exceeds the maximum lawful rent.
A civil penalty of treble the amount of excess ~harges shall be
awarded against the landlord upon ~ showing that the landlord has
acted w~llfully or with oppression, fraud 2E malice.
(b) In l~eu of fi1ins a civil ac~ion, .+lwt~t~4+~'f~tl~*
$+~t~~*ll'~~1 t.1J ~ tenant may file ~ administrative complaint.
The Board shall establish by rule and regulation a hearing
procedure similar to that set forth in Section 1805{d).
l!l Upon the fil~n9 of the complaint, the Board
shall inform the parties of the ava~lability of medl~tion
service~ not f~nded 2E controlled ~ the Board. Within 60 days
of the filing of the complaint, or upon wrltten rejection of
medlation services EY either the landlord ~ tenant, the Board
shall set ~ date for hearing, of the complaint.
(2) In any administrative hearing under this
Sectlon, ~ l~nQlord who demands, accepts, receives 2E retains any
payment ~ rent in excess of the maXlmum lawful rent shall be
{i~i:~;#:~:*;tm;::nifftmimmtm.m!HttmR
~.!f I l~ft.tl~+~~I~+i+t*~~+t~~*l The tenant may deduct the penalty
and award of damages from future rent payments in the manner
provided by the Board. An order authorizin~ rent withholding
under this Article shall survive the sale or other transfer of
the property and shall be bindln~ upon successors of the landlord
asainst ~ the order ~ made. !! ~ tenant authorized to
withhold rent under this Article vacates the property, the
landlord shall pay to such tenant ~ ~ equal to the balance of
the rent that the tenant could have wlthheld.
I _ I .__
(c) If the tenant from whom such excessive payment is
demanded, accepted, received or retained in violation of the
foregoing provisions of this Article or any rul~ or regulat10n or
order hereunder promulgated fails to bring a civil or
adm~nistrative action as provided for in Section 1809 (a) and
1809 (b) with~n one hundred and twenty (120) days from the date
of occurrence of the violation, the Board may settle the claim
arising out of the violation or bring such action. Thereafter,
the tenant on whose behalf the Board acted is barred from also
bringing an action against the landlord in regard to the same
violation for whiCh the Board has made a settlement or brought
action. In the event the Board settles said claim, it shall be
ent1tled to retain the costs it incurred in settlement thereof,
and the tenant against whom the violation has been committed
shall be entitled to the rema1nder.
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(d) The appropriate court in the jurisdiction in which the
controlled rental un1t affected is located shall have
jurisdiction over all actions brought under th1~ Section.
SECTION 7. Section 1810 of the City Charter is amended to
read as follows:
Section 1810. Criminal Remed1es. Any person viOlating
this Article shall be guilty of a misdemeanor. Any person
convicted of a m1sdemeanor under the provisions of this Article
shall be punished by a fine of not more than five hundred dollars
($500) or by impr1sonment in the county ja11 for a period not
exceeding S1X months, or by both such fine and imprisonment. The
fOllowing shall constitute ~ violation of this Article;
(1) Any violation of ~ prov1sion of this Article.
(2) Any violation of a rule or regulation of the
Board.
(3) Any knowing or willful failure to obey any
decision or order of the Board.
SECTION 8. Sect10n 1811 of the City Charter is amended to
read as follows;
Section 1811. Injunctive and Other Civ1l Relief. The
Board, and tenants and landlords of controlled units, may seek
rel1ef from the appropriate court within the Jurisdiction w1thin
wh~ch the affected controlled rental un1t 15 located to enforce
~n~ provision of this Article ~ its implementing re9ulations or
to restrain or enjo1n any violation of this Art~cle and of the
rules, regulations, orders and decisions of the Board.
SECTION 9. Sect10n 1813 of the C1ty Charter is added as
follows:
Section 1813. Relatlon to Article XX. Section 1803(t) of
th1s Article shall not apply to any building f~r which ~pproval
has been received pursuant to Article XX (Tenant Ow~ersh~E Ei9hts
Charter Amendment) of this Charter. All other provis10n~_ o~ !his
Artlcle, however, shall cont1nue to apply with full forc~ and
effect to each unit in any bUl1ding recei~in9 approval pursuant
to Art1cle XX. Tenants r~sidingin such units, w~ethe~ ~ not
"qualifying," IIpartic1patlns," ~ any other such designatio~
under Artlcle XX, shall enJoy all the r1ghts and remedies
prov1ded by this Artlcle w1thout llmitatlon ~ to duration. ThlS
Sect10n 1S declarat1ve of existlng law and does not ~mpose any
~ requirements ~ limit any eX1st1n9 ~.
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SECTION 10. Section 2006 of the City Charter is amended as
follows:
Section 2006. Prohib2t2on Against other Tax and Fee
Requirements. No tax or fee other than those expressly set forth
in this Article may be imposed, e~ther directly or indirectly, by
the City on a Tenant-Participatlng Conversion except the
imposition of t;tttttttt actual processing or map f++, costs not
to exceed ;*1' t F~ve Hundred Dollars ($500.00) per
.Pp~t~.tt~ unit adJusted annually by the Price Index.
19
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\ .19.
CA:RMM:SSS:be
CiTY Council Meeting 6-19-84 SanTa Monica, Cal~forn1a
TO: Mayor and City Council
FROM: C1ty Attorney
SUBJECT: Proposed Amendmen~ to Rent Control
Law -- Outline of Issues
In response to the City Council's d1rection at its June
12, 1984 meet-ing, the City Attorney's Off1.ce has prepared a
list of issues t-hat may be addressed through amendment- to the
Rent Control Law. The following lssues, together with others
that may be ident1.fied aT a later time, will be analyzed in a
comprehensive staff report.
I. Powers of the Rent Control Board.
r r " ,
These issues concern the Board's authority over its
internal financial and con+ract-ual affa1rs. They arise in
response to the dec1sion of the Superior Court ~n Creighton v.
Dennis, now on appeal. The J.ssues in CreJ.9hton only 1 nv-6i ve
interpretatlon of the City Charter: in -each instance, the
voters may amend ~he Rent Control Law to unequivocally provide
for independent authorJ.TY of the Board or supervisory
au~hority of the C~ty Council.
A. Budget. Should the Board adopt J.ts own budget or
should the Clty Council approve the Board's budget?
B. Contract and Consultants. Should the Board be
exempted from the central purchasing system of the City with
respect to purchases of suppl~es and/or serv1ces?
C. ConformJ.ng RegUlations. If parts of the Rent
Con.rol Law are lnvalidated by iudicial decJ.sions, should the
Board have the author1ty to enact replacement regulations
necessary to "save" the law?
II. Staff.
The Creighton and Howland cases inVOlve decisions
whether the Board'j s staff is subject to the Cl ty' s genera 1
civil service requirements. These 1ssues may be addressed b}
Charter Amendment. In the absence of a Charter Amendment, th
courts WJ.ll decide whether ~he present status of Boar
employees under Munic1pal Code Sec~ion 4607 ~s consis~ent w~t
the Rent Con~rol Law and wlth the orJ.gJ.oal Ci+y Char~er.
. ... l- . .
.
A. Class1fication. section 4607 g~ves the Board the
power t-o class~fy its employees, although it st.ates t_hat- Board
employees are w~thin t-he c1vil service of The C1.ty. Should
the Board's power to class1.fy iTs employees be st-a ted
explicitly in The Charter?
B. civil SerV1.ce Exemption for Legal and Managerial
Employees. The Board's attorneys and admin1.strator are
classified civil servant_s, unlike the City Manager and City
Attorney's s taf L Should they be made unclassif1.ed?
C. Legal. The Crelghton declsion reqUlres the City
Attorney to represent and adv1.se the Board. Should T_he
Charter specify the Board's authorlty to be represented by l.ts
legal staff or reqU1.re the CiTY Attorney to represent and/or
advlse the Board? Should T_he Boa r d be author1zed t_o h1.re
"out s~de counsel"?
III. Rent Increases.
Charter Section 1805 requires that_ the Board grant-
general and 1ndividual adJustments in Maximum Allowable Rents
(MAR) so that- property owners W1.ll receive a II falr return on
[ t_he ir ] l.nves tment-_s : 11 rent-_ increases are not allowable unless
"necessary to the landlord making a fair return on
investment. II This section has been the subJect of numerous
lawsults, notably the case of Baker v. City of Santa Mon1.ca,
now on appeal. There are several issues concerning rent
l.ncreases that may be addressed by Charter Amendment.
A. i'!~t Operat"ing Income (NOr). The Board's current
.. Regula t_1.on 4100" pegs rent 1.ncreases t_o a property owner's
"Net" Operat1ng Income" rat"her than his "1.nvestment. "
Regulation 4100 was upheld by the Superior Court in Baker and
by the Court of Appeal 1n Cast"igl~one v. City of Santa Mon1ca,
"NOIII regulat~ons 1.n ot_her cities have also been upheld by
appellat-e court-so However, Regulat-~on 4100 1S subJect to
poss1ble att_ack on grounds t-_hat it conflicts w~th t-he City
Charter. Th 1. S consTruction can be avoided by a Charter
Amendment expressly permit-tlng NOr rent- increase regulat1.ons.
B. General AdJustment for vacant- un1.ts. In order
to discourage landlords from lnten t_lona 1ly withholding unl t_ s
from the rental market, the Charter could be amended to
preclude rent 1ncreases for un~ts t_ha t have deliberately been
left vacant for long perlods of t--ime unless there was a good
reason for the withholding.
C. Hardshlp increase for long-t1.me owners. Concern
has been expre"s.sed rhat owners whose base year (1978) rent s
were lower than market_ rates have been 1uequitably treated.
Th1.s problem may not require a Charter Amendment t-o address,
part1.cularly if Regulation 4100 ~s ultimately upheld (See
Regulation 4103, relat-ing to rebuttal of the pres umpt_ ~on that
t"he base rent provided a fa1.r return on property.)
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D. Char~es for anclllary space and serV1ce.
CharTer Section 1805(e) defines all types of housing
services, such as garage space, furnirure, and other ancillary
it-ems as "rent" . Add1tional remed1es to prevent violations
will be explored.
E. Cap1.tal ImprovemenT_s. The question of an
expedlted process for "capital improvement" rent increases can
be accompl1.shed by Board RegulaT_lon. However, the Charter may
be amended to requ1re T_he Board to prov1.de for an exped1ted
procedure where both landlords and Tenant_s agree.
F. Master Meter BUl.ldings. The l.ssue here is
whether specJ..al provlsion should be made where T_he landlord
pays for substant1.ally all of utillt"ies furnished in a
bU.l.lding. While this may now be done by Board Regulat.l.on, the
Board may be requlred by Charter Amendment to cans1.der the
ext-ent_ of utl.lit-ies paid by the landlord in acting on general
and indlV1.dual rent adJustments.
G. Vacancy Decontrol. Vacancy decontrol may be
required, and quaIlfied In varlOUS respects, by amendment 1"_0
Sect1.on 1805.
IV. Removals.
Charter Sectlon 1803(t) prohlbit"s T.he removal of a
rental unlt" from the market by demollTlon, converSlon, or
other means wlthout a permit- from the Board. Seetlon 1803{t-)
has been the subJect of much lltigatlon, includlng t"_he Baker,
Nash, and Santa Monlca Plnes cases. This lltigation has
resu It--ed in some issues t_hat may be clarified by amendment t-o
t-he Rent Control Law.
A. Owner Occupancy EVlctions at Condominlums. In
Santa Monica Pines v. Rent Control Board, t"he Californla
Supreme Court- st-at-ed t-hat- the flling of a flnal subdlv~sion
map for a condomlnium conversion allows lndivldual unit-s to be
sold. (A rehear~ng has been requested to clar1fy thls pOlnt.)
S~nce Charter Sect~on 1806 (h) allows all owners of unl t-_ s to
evl.ct. for owner-occupancy, Santa Mon1.ca Plnes IDlght be read to
permit all owners of condominium uni t-_s to evict tenants,
rather than only one owner per bUllding as lnt-ended by Board
Regulatlons. It- may be deslred to address this erosion of "the
eviction prot-ect-ions of the Rent Control Law; if so, an
amendment- to Seetlon 1806(h) would be required.
B. The Right to Leave the Market. In Baker t_he
Superior Court declared SeCT_lon 180 3 ( T ) invalid on grounds
t-hat it- allowed the Board to prohlbit removal even though a
landlord showed he could not- earn a fair return on t-he
property. This problem can be cured by amending Sec+l.on
1803(t) by striklng some of i t_s current language and
clarifying that a landlord who lS unable to earn a fair ret-urn
can receive a removal permlt.
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V. Remedies.
The Board1s abil.~ t_y to conduCT_ administrat~ve hear~ngs
and award penalties has been challenged 1.n several lawsul.ts
now pending in the Court of Appeal. While some of t_he issues
in These suirs l.nvolve questl.ons of preemptl.on by State
statutes or infringement on a owner's right to Jury trial,
other lssues may be addressed through a Charrer Amendment.
A. Treble Damages. In Alm1.r, Hovey, and Hayashi,
the Superior Court ruled t_hat_ the Board could not_ award
penaltl.es agalnst landlords who charged exceSSl.ve rents. The
Rent- Cont-rol Law Makes treble damages mandatory upon a f1.nding
that excess rent_ has been charged: "this could be deleted or
modi fled, thereby cur~ng the major problem found by t-he
courts. Al T_ernatl. vely, txeble damages could be perm1tted only
1.n court proceedings. Moreover, t-he Board's Regulatlon
1.mplement-ing Sect-lon 1809 may not conform to the language of
the Charter; this could be cured by Charter Amendment.
B. Complaints for Rent Decreases. In Sterl1.ng, The
Superior Court held that the Board lacked authorl.ty TO issue
rull.ngs awardl.ng tenants prospective rent decreases because of
violations of the RenT Control Law. The Board's aut_horl. ty to
hear tenant complal.ns and t-o make prospect-l. ve rullngs
aut-hor1zing decreased renT might_ be clarif1ed ( aT least 1n
part) by a Charter Amendment.
C. Registrat10n Fees. The Board's authority ~o deny
a landlord a rent increase unless the property has been fully
regist_ered and all Reg1.straT~on Fees (and late charges) have
been paid could be clar1.f1.ed. Moreover, t-.he Board's authority
to impose late charges could be made eXpl1.Clt, +"0 cure T_he
problem identlfied 1.n 301 Ocean v. Board.
D. No Rent" Increase for violation of hab1tabl11ty
standards. The Ren+" Control Law authorizes wi+"hhold1.ng of the
general ad]usT_ment_ lf substantlal habitability problems exist-.
The Charter Amendment could be amended T~O requ1.re such
withholding.
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VI. Exemptions.
Councilmembers have 1.denT_J. f1.ed several J.ssues concerning
propert ies that are exempT from the RenT ConTrol. These
l.ssues may be addressed by enlarg1.ng, narrow1.ng, or
condit-l.oning the eXl.sting cat_egories for exempt_lon specifl.ed
in Charter Section 180l(c).
A. Owner-Occupied, three units or less. The Charter
may be amended T_O ell.minate or narrow This exemption or, on
the aT_her hand, to provide that S1-ngle Family Homes, when
rented by a particular owner for the first time, recel.ve a new
Maximum Allowable Rent.
B. Chlld Care (and oTher non-proflt:) Fac1litl.es.
The Charter may be amended to perml.t l1.mited exemptions when
uni+_s are actually used for the purpose of providing
non-profit servJ.ces such as child care facilit1.es.
C. Luxury Units (target benefi t_s to the needy) . It
has been suggested that T_he CharTer be amended to specl.fy that
all or some of 1. T_S benefits be limited to low and madera t e
income persons. Ach1.ev1.ng this goal without violatJ.ng
constitutional precepts w1ll be dlfficulT. Al ternat-lves such
as exempTions for "luxury" unJ.ts wl11 be explored.
VII. Secur1.ty Deposlts.
The CharTer's provisl0ns on security deposlts could be
clarified, 1.nclud1ng language deleting the restr1.ction that:
funds be depos 1. r_ed in FSLIC insT i T_utions and clarifl.caT-l0n on
when securiTY deposit 1.ncreases can be required.
VI II. Ev~ctions.
Charter Section 1806 requlres spec1fied cause for
eV1CT~ons. Several issues have ar1sen concern~ng eviction
prot_ect ~ons, particularly wlTh respect +_0 owner and relat1ve
occupancy.
A. Owner Occupancy. Several possJ.ble amendments to
the RenT Control Law could be subml.TTed to T_he vo+ers,
1.ncluding a 1im1. raT_ion on +_he number of relat1ves whose
occupancy can furnish grounds for evict-ion, a requirement- that
vacant- uniTS 1.n a bUlldlng be offered TO a relative (or the
potentially displaced tenant) , and mandaTory relocatlon
ass~stance for tenants displaced by owner or relaT_ive
occupancy.
B. Must state cause on Notlce to Quit. Wlal e a
landlord may not eV1ct a Tenant without cause, T_his protection
has been held nOT to apply to the serV1ce of a Notice to Qui +-.
Th1. s could be cured by Charter Amendment.
-~ ~ -- -- ---~- -------- --- ---- ------
, -.' . .
.
C. Permit leases w1th f~xed term1nation dates. The
Charter could be amended to perm~T_ evicTion when The landlord
and tenant- have agreed that the propert-y be vacated on a
part1cular dat"_e.
IX. RenTal Agenc1es.
81-_a T_e laws govern agencies -rhaT prov1de "homefinder"
services to proSpeCT_l. ve T enan-r s. However. the Rent Control
Law could be amended +0 define "rent" ro l.nclude var10US types
of fees for serV1ces rendered from renT_al agencies to
landlords.
x. Other Issues.
Counc~lmembers have made several suggesT-J..ons TO protecT
landlords subJect T_O abuse s of -rhe Rent Control Law by
1-_enanT_S. Some of these have been lisred above, others may be
J.denT-J..fied 1a 1-_er .
A. Sublettl.ng. Concern has been expressed that
landlords are having difficulty ev~cting persons who have
sublet- apartments without" permiss~on of t-he owner.
B. Deposit of rent" J..n court.
Prepared by: Rober+ M. Myers, C1T_y Attorney
STephen S. S1-ark, ASslstant Ci1-_y Art_orney
Karl M. Manhel.ID, DepuTY Cl.ty Attorney
Marsha Jones Houtr1e, Deputy City Attorney
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'. ~VI _.A.e ~ T<( 'i< ,.'
Di\ IE June 14, 1984 " -I f --if'
TO. Clty Attorney
FROM: Clty Clerk
SUBJECT: Posslble agenda ~tem for Council meeting of June 19th
re Councilmember Zane's motlon regarding Rent Control
Charter Amendment
Page 20 of the draft transcrlpt of the above Council discusslon
includes an addltlon to the motlon by Counci1member Epste1n
that "add to the motion that we agendize for next week a very
brlef status report so that if it turns out that Bob is swamped
by requests, the Councll can take approhriate action at that
tlme - - a very brlef status report on w at issues have been
submltted.
I wlll be preparlng an agenda for the June 19th meetlng on
Friday (June 15th). Please adv2se as to whether this item
should appear on that agenda -- either as a new ltem or
continued as Item 14-B from the June 12th agenda.
For your lnformation, other items schedUled for the June 19th
agenda are:
1984-85 Budget public hearing and adoption
Fourth Street Eastbound Freeway on-ramp discussion
continued from June 12th as Item II-D.
Closed SessIon continued from June 12th agenda ~s Item ll-F.
Please telephone us (Ext. 8211) to advise whether a~d how thls
should appear on the June 19th agenda. In other words, If you
are not swamped for requests, it could be interpreted that you
de not need to agendize lt, etcetera, etcetera.
~
AMSjams
cc: Joan Jenson for information
In regard to agenda preparat10n
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