Category Archives: Q&A

Q & A: Is My San Francisco Condominium Subject to Rent Control?

“Is My San Francisco condominium subject to rent control?”

This is an interesting question, and the answer is surprisingly complicated. First, some general principles. Cities may constitutionally impose rent control ordinances, so long as they provide fair returns to property owners. San Francisco’s Rent Stabilization and Arbitration Ordinance applies to all “rental units” – a term that includes basically all dwelling units with certificates of occupancy issued before its effective date, June 13, 1979.

However, Costa-Hawkins, effective as of January 1, 1996, exempted certain kinds of dwelling units from local price controls, including those that were “alienable separate from the title to any other dwelling unit” (namely, single-family homes and condominiums). San Francisco eventually amended the Rent Ordinance in 2000 to respect the interplay between state and local law.

In the years after Costa-Hawkins’ enactment, some property owners were claiming the benefits of condominium conversion without actually selling any of them as separately alienable units. Essentially, the owner of an apartment would get final map approval to be able to sell the individual units in a (former) apartment building, using this as a pretext to increase rents on existing tenants. In 2001, the California Legislature identified this as a “loophole” in Costa-Hawkins and passed SB 985, amending Costa-Hawkins to exempt condos only under certain circumstances.
Continue reading Q & A: Is My San Francisco Condominium Subject to Rent Control?

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Surreal Estate Q&A #4: Deregulation of Mixed-Use Property

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“I have a building with a retail space on the bottom and a single apartment on top in San Francisco. The renter has been there for years, and I haven’t increased the rent yet. These days, his rent is well below market rate. I’m wondering if I can increase his rent, and by how much. ~ Michael”

Michael,
Thank you for your question. First of all, if his initial term lease has expired, you can always increase the rent by at least the annual allowable rent increase, as published by the San Francisco Rent Board. And if you haven’t done this for a few years, you can actually “bank” past year’s allowable increases and impose them all at once. (You lose out on the equivalent of rent increase “compound interest” by waiting, but you don’t actually forfeit your allowable increase by waiting.)

That said, I think your question is directed more toward whether the dwelling unit is rent controlled. My first follow up question would be whether the building was constructed after 1979. However, the profile of this building (one commercial, one residential) sounds like it is probably not “new construction”.

So the only real issue here is Costa-Hawkins deregulates this kind of unit. The language of Section 1954.52(a)(3) deregulates a dwelling unit that “is alienable separate from the title to any other dwelling unit . . .”. The building is multi-unit, but because only one of the units is a dwelling unit, the entire building is technically “separately alienable” from other “dwelling units”.

That said, I would want to double check zoning and make sure that there was never any residential use of the downstairs space, to avoid the imputing of “residential use” to a non-residential unit, as was the case in the recent decision, Burien, LLC v. Wiley.

~JAG

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Surreal Estate Q&A #3: Effective Date of Costa-Hawkins; Decontrol of Newly Constructed Units

Hello,

I have seen varying statements regarding the date before which a building must have been built in order to be subject to rent control laws under Costa-Hawkins. Some writing states that no unit in a building built in 1979 or later can be subject to rent control. However, other sources state (and as far as I can tell the law reads) that any unit in a building built before in 1995 or before could be subject to rent control.

Can you please resolve this confusion for me?

Thank you,

Jacob – Berkeley, CA

Jacob,

Thank you for your question. First, the year 1979 does not appear in Costa Hawkins. I’m assuming you got this date from the Berkeley Rent Stabilization and Eviction for Good Cause Ordinance. (Keep in mind that rent control is a local matter – Costa Hawkins is a state-wide law that decontrols rental rates under certain circumstances.)

The Berkeley Ordinance exempts “Newly constructed rental units which are completed and offered for rent for the first time after the effective date” of the Ordinance. (See, Section 13.76.050.) So, any new construction will not be subject to rent (or eviction) control of the Ordinance. This kind of language is common in rent ordinances, because the city legislatures want to protect existing tenancies but do not want to impair incentives for new construction. (After all, most of these ordinances were enacted in the late 70s/ early 80s to address shortages in “affordable, safe and sanitary housing”.

Costa-Hawkins became effective in 1996 (with some holdover dates from 1995 while its provisions phased in), and it made a similar distinction between existing property (with existing tenancies) and new construction, regulating the former and deregulating the latter (among other reasons, to avoid discouraging new construction). In fact, the California Court of Appeals just recently confirmed that the boundaries of the “certificate of occupancy” requirement from §1954.52(a)(1) of Costa-Hawkins in the case Burien, LLC v. Wiley: A landlord tried to take a structure with existing residential tenancies and deregulate it based on obtaining a new certificate of occupancy for change in use… the court held that this exception refers to the first certificate of occupancy for residential use, not any subsequently acquired one.)

As a practical matter… rental units are generally not regulated by local ordinances, like Berkeley’s, if they are certified for residential occupancy, for the first time, after the effective date of the rent control ordinance. This provision of Costa-Hawkins wouldn’t need to come into play, because the units are already free from rent increase limitations, so there’s nothing to deregulate.

~JAG

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Surreal Estate Q&A #2: San Francisco Condominium Subdivision and Rent Control

I have a question about one of the exceptions in the Costa Hawkins Rent Housing Act. Section 1954.52(a)(3)(B)(ii): “[a] condominium dwelling or unit that has not been sold separately by the subdivider to a bona fide purchaser for value.”

I am trying to determine how the below scenario is affected by that exception: A multi-unit building is subdivided by an owner, then a renter of a unit moves in in 2006 after the subdivision, then that subdividing owner dies in 2007 after the renter had moved in. Finally, in 2007 the entire building is purchased by a single new owner (the condos are never marketed or sold separately), who continues to operate the building like an apartment building.

Does this mean the renter that moved in in 2006 is still covered by rent control? How does the fact the property was sold as one entire building to one buyer and continued to operate as an apartment building affect the situation? Does that trigger the “has not been sold separately” part of this exemption to the Costa-Hawkins Housing Act and thus the unit remains under rent control?

~Ryan from San Francisco, CA.

Thank you for your question, Ryan. We would actually need a bit more information to fully answer, but just for a quick survey of the facts you emailed:

“A multi-unit building is subdivided by an owner”
* This isn’t really relevant (because all condos are subdivided by an owner or owners). The relevant issue for your question is whether this was done before or after the 2001 amendment to Costa Hawkins that added the subdividing condition you’re talking about – Cal. Civ., §1954.52(a)(3)(B)(ii).

“Then a renter of a unit moves in in 2006 after the subdivision.”
* This… probably isn’t relevant. There is a pending appeal from a San Francisco Rent Board decision where the Rent Board held that the relevant date is the date the tenancy commenced (i.e., whether it started before or after the 2001 amendment was enacted) as opposed to when the multi-unit structure was subdivided. Here at Costa-Hawkins.com, we’re fairly certain the relevant inquiry is if the unit was completely subdivided before the 2001 amendment, not whether a tenancy commenced afterward.

“Then In 2007 the entire building is purchased by a single new owner (the condos are never marketed or sold separately) who continues to operate the building like an apartment building.”
* Again, unless the subdivision occurred before the effective date of the 2001 amendment or the units come within the conditions of its exemption, probably these are still covered by the Rent Ordinance.

~JAG

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Surreal Estate Q&A #1: San Francisco Permissible Rent Increases

I’ve got a quick question regarding rent control policies in San Francisco. I have a single family home that is rent controlled. My landlord wants to raise the rent 4% (above standard rent control increase, I believe). Additionally, the tenant before me was evicted which I believe has some impact on this policy. Can you provide any insight as to his rights?

~ Kate (San Francisco, CA)

First, I see a red flag with “a single family home that is rent controlled”. This is certainly possible, but it is rare. The general rule is that single family houses are exempt from rent control by state law (i.e., Costa-Hawkins).

This is the current link for allowable rent increases in San Francisco. SF Rent Increases. The current annual increase is 1%, and 4% is obviously greater than 1%. However, this is only relevant if the house is rent-controlled. Otherwise, market-rate increases are permissible.

As for the eviction in the previous tenancy, section 37.3(d)(1)(A) of the San Francisco Rent Ordinance says: “The owner’s right to establish subsequent rental rates under this paragraph shall not apply to a dwelling or unit where the preceding tenancy has been terminated by the owner by notice pursuant to California Civil Code Section 1946 or has been terminated upon a change in the terms of the tenancy noticed pursuant to California Civil Code Section 827: in such instances, the rent increase limitation provisions of Chapter 37 shall continue to apply for the duration of the new tenancy in that dwelling or unit.”

“Eviction” is a little vague. Actually, so is “tenant”. The issue is not merely if the previous tenant was evicted, but whether the entire previous “tenancy” (i.e., this had to be everyone, not just your former housemate) was terminated and whether that termination was based on a “non-fault” “just cause” for eviction, under the San Francisco Rent Ordinance.

To clarify: If a landlord evicted all of the previous tenants because they, e.g., didn’t pay rent or breached their lease, they would have used a Cal. Code Civ. Proc., §1161 “eviction” notice (not a Cal. Civ., §827 or §1946 notice), and this doesn’t make a difference to your situation. On the other hand, if the previous tenancy was terminated because the owner wanted to conduct capital improvements or rehabilitation work or reside their as their permanent place of occupancy (i.e., an “owner move-in”), they would have used a Cal Civ., §1946.1 notice to terminate the tenancy.

You can call the rent board (see the section “Find Your Local Rent Board” under the “Resources” section of the menu), which should have information about recorded, non-fault “notices of termination of tenancy”. Unfortunately, without such a termination, it sounds like the unit probably isn’t rent-controlled, so 4% is actually a deal.

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