Signed into law on April 24, 2020, but retroactive to April 7, 2020, Ordinance 68-20 temporarily suspends certain rent increases during the Mayor’s eviction moratorium prompted by the COVID-19 epidemic. The suspension applies to increases under Section 37.3(a) of the Rent Ordinance (which covers annual allowable increases, as well as any banked increases from previous years, and various passthroughs).
Now, it’s questionable whether even the Mayor’s emergency powers under the San Francisco Charter permit retroactive laws, though they may permit immediate ones. And otherwise, the authority of local governments to manipulate landlord’s state law procedural protections is strictly limited. Cities also lack authority to impose rental rate restrictions that prevent rents from keeping pace with inflation.
That said, Ordinance 68-20 contains specific references to the “anniversary date not being affected by deferral of the increase”. Likewise, it states that the right to impose the increase shall “immediately resume” when the moratorium expires. Likely, a landlord may send the increase, preserve the anniversary date, and simply not require the additional payment.
Amid the shelter-in-place order and the broader uncertainty surrounding the COVID-19 pandemic, the Small Property Owners of San Francisco unfortunately had to cancel their regularly-scheduled monthly meeting for April 2020. That tough decision came at a difficult time, when small property owners needed updates on rapidly-changing landlord-tenant law more than ever.
Fortunately, the SPOSF board were able to present a “virtual legal Q&A” featuring Paul Utrecht of Utrecht Lenvin, LLP and Costa-Hawkins.com’s own Justin Goodman of Zacks, Freedman & Patterson, PC.
The duo discussed the incredibly rapidly changing area of landlord-tenant law in context of the COVID-19 pandemic, including changes from every branch of government and at ever level of government.
The online video is available here.
Under normal circumstances, SPOSF holds monthly meetings at St. Mary’s Cathedral, located at 1111 Gough Street in San Francisco. You can join SPOSF by clicking here. Members have access to the full monthly newsletter.
Governor Newsom issued Executive Order N-28-20 on March 16, 2020, based on the sustained impact of COVID-19 (coronavirus) following his March 4, 2020 proclamation of a state of emergency.
Unfortunately, this proclamation is becoming an increasingly common tool to regulate housing supply and pricing, as California has witnessed frequent and significant regional and statewide emergencies in recent years. Among other things, it invokes Section 396 of the California Penal Code, which prohibits increasing rent above 10 percent for a period of 30 days following the proclamation of a state of emergency.
Its anti-price-gouging provisions also prevent evictions for the purpose of re-renting and evading the above price-limitations (but it does not apply to “an eviction process that was lawfully begun prior to the proclamation or declaration of emergency”. Executive Order N-28-20 extends the application of the eviction prohibition to May 31, 2020. It also empowers local governments to prevent evictions for non-payment of rent for both residential and commercial tenants.
Today, March 13, 2020, Mayor London Breed ordered a moratorium on evictions based on a tenant’s inability to pay rent, if the inability is because of a “COVID-19 related impact”. For the next 30 days (and renewed as necessary), the tenant may notify their landlord of an inability to pay rent. They then have one week to provide documentation or other supporting evidence of an inability to pay rent.
Tenants who cannot pay rent will then have six months following the end of the emergency declaration to repay the rent. (Under state law, a landlord can demand rent via eviction notice a year’s worth of past due rent. At the moment, it is unclear whether the grace period would extend this.)
The press release adds that “recommendations from the San Francisco Department of Public Health can be found at www.sfdph.org/dph/alerts/coronavirus.asp along with up-to-date on coronavirus news and information. You can also call 311 and sign up for the City’s alert service for official updates: text COVID19SF to 888-777.”
Most contemporary residential leases begin with a one-year term and then renew month-to-month after the first year. And while the provisions of a lease are fixed during that first year, a periodic, month-to-month lease will renew with whatever terms and conditions are in effect at that time.
Section 827 of the Civil Code details the procedure for changing the terms of a tenancy. This can include changes in the rental rate, as well as changes in other terms (like imposing a requirement to obtain renter’s insurance). State law imposes few limits on the scope of these other terms. For instance, a landlord may change the terms of a tenancy to prohibit smoking. On the other hand, in San Francisco prohibits landlords from changing the terms and conditions of a tenancy and then attempting to evict for violation of the new terms.
As for rent increases, the annual allowable increase in San Francisco has always been below 10% per year (generally between 1-3%), and for small increases like these (or changes to non-rent terms), only 30 days is required. On the other hand, most Costa-Hawkins increases reset a historically low rental rate upon decontrol. These often exceed 10%, and therefore a 60-day notice would be required. AB 1110 changes that, by requiring 90 days’ notice for these larger increases.
The bill’s stated purpose is to “respond to tight rental market conditions by providing tenants with additional notice when served with rent increases of more than 10 percent”. It reasons that the longer notice period would “provide tenants with additional time to respond to rent increases”, but insists that “the longer notice period is not intended to constitute rent control, nor is it intended as a statement of public policy regarding acceptable or unacceptable levels of rent increases”.
The text of AB 1110 is available here
In 1979, San Francisco enacted an emergency ordinance to address “a shortage of decent, safe and sanitary housing in the City and County of San Francisco resulting in a critically low vacancy factor”. It extended rent control and eviction protections to all units constructed before its effective date, June 13, 1979.
For over a decade, San Francisco retained the ability to amend the ordinance via the same police power it used to enact the law in the first place. However, in 1995, California enacted the Costa-Hawkins Rental Housing Act, which permanently decontrolled units that had “already been exempt from the residential rent control ordinance of a public entity on or before February 1, 1995, pursuant to a local exemption for newly constructed units”.
In other words, prior to Costa-Hawkins residential rental units built after June 13, 1979 were already exempt under the San Francisco Rent Ordinance, which defined “rental unit” to exclude “rental units located in a structure for which a certificate of occupancy was first issued after the effective date of this ordinance”. Following Costa-Hawkins, San Francisco could no longer change this.
Until 2020, there was no statewide eviction control, and San Francisco had always been free to limit (or eliminate) the new construction date for its just cause eviction controls. Effective January 1, 2020, AB 1482 created an additional requirement that a city must make a “binding finding within their local ordinance that the ordinance is more protective than the provisions of this section”.
Effective January 19, 2020, San Francisco Ordinance 296-19 makes such a finding in deleting the local exemption for new construction. San Francisco will no longer exclude from the definition of “rental unit” units built after June 13, 1979. While these units will remain exempt from its price controls, the Rent Ordinance’s eviction controls will now require “just cause” to terminate the tenancy of any San Francisco residential rental unit.
The text of Ordinance 296-19 is available here.
[Update: the proposed amendment to the Buyout Ordinance was passed as Ordinance 36-20 on March 6, 2020 with an effective date of April 6, 2020.]
In 2014, San Francisco led California rent-controlled jurisdictions by enacting a “buyout ordinance” to regulate the payment of consideration to a tenant in exchange for their voluntarily vacating. (There are many reasons a landlord would want to do this, but the most compelling one is that Costa-Hawkins permits landlords to charge market rate when a tenant voluntarily vacates their unit. The landlord can recognize a sudden increase in rental income, and the tenant can liquidate the non-transferrable “asset” of rent-control.)
San Francisco’s ordinance imposes certain tenant-protection features, like the compelled notification of tenant rights, including the right to rescind a buyout agreement even after entering one. San Francisco also uses the regulation to collect information on when and how often these agreements are happening. It also collects information about the buyout amount and the status of the displaced occupants. Viewing the loss of low-paying, rent controlled housing as a vice, it applies this information to punish landlords for paying elderly and disabled tenants to move by eliminating certain boons like condo conversion.
To avoid the ordinance, some landlords have filed unlawful detainer actions and settled them to avoid the buyout ordinance. (As currently written, the language expressly exempts the settlement of an unlawful detainer action.)
The Board of Supervisors recently introduced an amendment to the buyout ordinance to capture more agreements within the scope of the buyout ordinance. As introduced, the legislation notes: “Elevating form over substance, some landlords will start buyout negotiations, but then file unlawful detainer actions so that they can resolve the negotiations as ‘settlements’ rather than as ‘buyouts’, and thereby avoid complying with the Buyout Ordinance.”
In its current form, the buyout ordinance would apply to any agreement to settle a pending unlawful detainer action, if the action was filed within 120 days after buyout negotiations commenced. It would also void any such agreement that is not filed with the rent board within 59 days of execution. While San Francisco may have an interest in knowing the circumstances under which its tenants are vacating their rental units, the state (particularly the courts) have an interest in the integrity and enforceability of settlement agreements to fully and finally resolve claims. (And to the extent the City views unlawful detainer actions as “high pressure buyout negotiations”, it might be assured that its Proposition F budget is adequately supporting tenants who prefer not to settle.)
In 1041 20th St., LLC v. Santa Monica Rent Control Bd., property owners had applied for, and received, “removal permits” allowing them to take certain rental units off of the rental market, back in the 1990s. (As opposed to invoking the state-law Ellis Act, these local regulations allowed a landlord to apply for various permits under local law: “Category A permits are for landlords who are ‘unable to collect the current Maximum Allowable Rent (MAR) on the unit’. Category C permits are for landlords who prove a controlled rental unit ‘is uninhabitable and cannot be made habitable in an economically feasible manner’.”
Over the years, the Rent Board “unequivocally stated that the properties had been granted permanent exemptions from the Rent Control Law and did not need to be registered with the Board”. However, in 2016, the Rent Board notified the owners that the units were subject to the rent ordinance because they were not demolished or converted and continue to be used as residential rental units.
The owners had been charging rents that they would not have been permitted to under the rent ordinance, and so the tenants petitioned for a reduction in rent and an award of the overpayment. The owners petitioned for writ of mandate, on the theory that the Rent Board was equitably estopped from now treating the properties as subject to the rent ordinance. The trial court entered judgment reversing the rent board decisions, but the Court of Appeal disagreed.
It reasoned the equitable estoppel could, in theory, apply to a governmental entity in this context, but the Rent Board never had jurisdiction to create new categories of permanently exempt units. It did have authority to issue the permits to allow the owners to stop renting them, but that is not what the owners did. Further, the doctrine of administrative finality (i.e., a bar to revisiting a decades’ old administrative decision) did not bar the current treatment of these units for two reasons. First, the Rent Board continued to maintain that the owners could withdraw the units – but that is not what the owners did. Second, even if the decision amounted to a permanent exemption, administrative finality cannot apply to a ruling that exceeded the administrative agency’s jurisdiction.
Justin Goodman was featured in the Legal Q&A for the December 2019 issue of SF Apartment Magazine – the official publication of the San Francisco Apartment Association.
Justin evaluated a landlord’s obligations (to provide a habitable premises and to avoid disrupting a tenant’s right to quiet enjoyment) at times when PG&E is using rolling blackouts to preserve the power grid.
Justin and his colleague Shoshana Raphael also wrote a feature article “Up in Flames“, which explores a landlord’s duties to tenants and their rights and obligations to the City when their apartment building catches fire.
SFAA is dedicated to educating, advocating for, and supporting the rental housing community so that its members operate ethically, fairly, and profitably. SFAA’s is a trade association whose main focus is to support rental owners by offering a wide variety of benefits that address all aspects of rental housing industry.