Articles
RENT CONTROL 101
ALL YOU NEVER WANTED TO NEED TO KNOW ABOUT BERKELEY’S RENT CONTROL PROGRAM
1. INTRODUCTION (Dont fight it. Rent control
is here to stay. Know the rules. Remain alert. Stand firm when you can. Learn
how to prosper under rent control.)
2. THE MECHANICS OF RENT CONTROL
2.1. REGISTRATION
o
EXEMPTIONS
Exemptions – Complete
o
Golden Duplex Exemption
o
Owner-Share Exemption
o
Non-profit Co-op
o
Transient (<14 days, hotel tax paid)
Exemptions – Partial
o
Costa-Hawkins SFR/Condo Exemption
o
Section 8 Exemption
o
New Construction Exemption
o
Tenant not in occupancy
o
Other Exemptions
Establishing Exemption
o
Administratively
o
By Petition
Strategic Exemption Creation
o
Collapse to SFR
o
Condo Conversion / sale
o
TIC Sales
o FORMS
Initial Registration Statement
Amended Registration Statement
o
For
Exemption, re-registration
o
For
Change of Owner Name, Address
Vacancy Decontrol Form
o
Services,
too
Unit Status Form
o CONSEQUENCES OF
NON-REGISTRATION
Penalties
No
AGA
No
Evictions
Rent
Withholding
2.2.
RENT INCREASES
o The AGA (65% of CPI)
o Increases By Petition
Capital
Improvements / Offset Policy
Extra
Tenants
Change
In Space Or Services
Historically
Low Rent
Fair
Return on Investment
Eligibility
Petition
Pied-a-terre
Petition
Restoration
of AGAs
o Vacancy Increases –
The Main Game
o Exceptions:
Prior
Eviction (the land mine clause)
Change
in terms of tenancy that causes departure
Opt-Out
from Section 8 – 3 years
Habitability
Citation
Constructive
Eviction
o On-Line Data Base - Useful
o 305 Rent History Printout –
Useful
2.3. COUNSELORS –
consult, listen, evaluate, get second opinion
2.4. HEARINGS –
to be avoided when possible, managed when not.
o
Hearing Examiners
LM, KL, DH
o
Paperwork issues
o
Continuances
o
Preparation
o
Documentation
o
Best posture at hearing: professional,
knowledgeable, non-confrontational
o
Representation
2.5. CERTIFICATION (mostly
moot now)
2.6. TENANT PETITIONS
o
Non-Registration / Rent Withholding
o
Overcharges
o
Service Reduction
o
Substantial Deterioration
o
Reduction in Number of Tenants Allowed
2.7. SECURITY DEPOSITS
o
State Law
Up To
2 x Rent (3x if furnished)
Return
Or Account Within 3 Weeks
Inspection
Requirement
o
Berkeley Law
Applies
To Most Exempt Units As Well
Interest
On Deposits
o
New Security Deposit Option for 2009
Conditions,
Restrictions, Documentation
o
In roommate situations, no requirement to split the deposit when one
tenant leaves
o
Pet deposit is OK, negotiable, no limit
2.8. SAFETY INSPECTION PROGRAM
o
Habitability Problems – Consequences
o
Annual Inspection Required – a good idea
anyway
o
Gas Appliance Inspection Required
o
Its Good Business
o
Avoiding Liability
o
The Habitability Defense
3. TENANT RELATIONS
Tenant Rights - extensive
Best Practice Regarding Tenants
Not friends, not enemies
Tenant Petitions
Problem Tenants: The 90-10 Rule
Owners Right To Enter
4. EVICTIONS [the third rail of Berkeley politics, and
remember that judges are elected]
Non-Payment Of Rent
Owner-Occupant Evictions
Measure
Y (Section 9) Evictions (hard)
Owner-Return
(Section 10) Evictions (easy)
Eviction For Cause
Non
Payment - Yes
Lease
Violation – Maybe, if violation truly significant and unsolvable
Drug
Use – No
Criminal
Activity – No
Refusal
to sign rental agreement – probably not
Damage
to Unit – possible if severe
Tenant
disturbing the peace – possible if outrageous
Sale
of Property – no
Foreclosure
- no
Temporary Eviction For Code Work
Application
Process
Enforcement
Process
Timing,
Cost
The Habitability Defense
Ellis Evictions – The Nuclear Option
5. LONG TERM STRATEGIES
5.1. Vacancy Decontrol –
The Main Game
o
Catch Hidden Subletting
o
Catch Non-Residential Use
o
Never threaten OOX eviction
o
Choose Tenants Wisely
o
Observe Discrimination Prohibitions
5.2. Value follows bedroom
count
o
1-BR to 2 on Euclid, Fairview
o
2-BR to 5 on Fairview
o
Studio + Garage = 2-BR
5.3. TIC Sales
o
No city involvement
o
No inspection requirement
o
Need a good agreement
o
Cautions
5.4. Condominium Conversion
o
Affordable Housing Fee (changing in 2009)
o
Exemption rules (changing in 2009)
o
Work without permits / Disclosure
o
Life Safety Standard
o
Cost - $25,000 ++ for 2-4 units
o
DRE for 5+
o
The math regarding conversion
5.5. Buyouts
o
Perfectly legal
o
The math is often favorable
5.6. Rental on the Short Term
Market
o
Furnished
o
High Quality Units
o
Craig's list, CAL rentals, Sublet.com, extended
stay, corporate housing
o
Beware the B&B prohibition
6. TENANT PROBLEMS / PROBLEM TENANTS
6.1. Illegal Sublets
o
Whole Unit Sublet
o
Housemate Sublet
6.2. Tenants Who Live
Elsewhere
o
Occupancy Petition (office, storage, or P-a-T use)
o
Eligibility Petition (subtenants left behind)
6.3. Rotating Roommates
o
The Sublet Game – the last remaining
original tenant (ABC, ABD, ADE, DEF)
o
Paperwork: Replacement Tenant Addendum, Multiple
Tenant Agreement
o
Original T. v. Replacement T.
o
30-day deadline
o
Only accept $$ from leaseholders
6.4. Pack Rat Tenants
6.5. Complainers
6.6. Take-Over Tenants
Service reductions
o
Eliminate management relationship
o
No master-tenant arrangement
o
Wing-clips
6.7. Professional Tenants may
require multi-faceted strategy
6.8. Problems With Entry
6.9. Projection of unresolved
parental issues onto property owner
6.10. Tenants who take
advantage of RSB rules
6.11. Tenants from Hell (all
of the above)
6.12. Owners' creation of
tenant problems – its bilateral
7. MANAGEMENT UNDER RENT CONTROL
Remain in control of the
property at all times
Use management company if
necessary
Summertime lease termination
plan
City of Berkeley Business
License Requirement
Use a Competent Rental
Agreement
o
Right of entry for inspections
o
Right to take pictures
o
No attorney fee clause
Do Require
Application Form
Do Credit Check
Applicants
Do call former owner
(and former-former owner)
Pay Interest on Deposits in
December of Each Year
Keep Good Records
Know your tenants / be alert
to tenant changes
Go the Second Mile, but
stand firm at the Third Mile
Follow the 80-20 Rule
Improving Units Between
Tenants is A Good Strategy
Inspect annually, and keep
the forms
8. BUYING RENTAL PROPERTY IN BERKELEY
Due diligence:
o
check the leases
o
check the RSB file
o
check especially for owner-occupant evictions
(land mine)
o
get estoppels
o
check the building, the zoning situation, the
permit file
o
do a thorough, personal inspection in addition to
a contractors inspection.
Financial diligence:
o
Do the numbers carefully
o
Do realistic financial projections
o
Will it cash flow?
o
Are there upside potentials?
o
What are the carrying costs?
Michael St. John, PH. D.
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St. John & Associates
BERKELEY
2115 West Street
Berkeley, CA 94702-1947
510.845.8928
.....................................
MENDOCINO
P.O. Box 338
Mendocino, CA 95460-0338
707.937.3711
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Fax 510.845.1813
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