1.21 Strategy   Question: I have a long-term tenant who lives in one of my units who always pays rent on time, but seems to be using his unit for storage rather than as a residence.  How can I prove that he is not really living in the unit?  

As many San Francisco landlords know, the rent law was amended five years ago to allow owners to increase rent beyond the rent control limitations if a tenant is found not to be using the unit as a principal place of residence. This provision is known as “Section 1.21,” termed after its designation in the Rent Board Rules and Regulations.  Owners suspecting that one of their tenants really lives elsewhere can file a 1.21 petition with the Rent Board.  A hearing will be set, and if the judge finds in the landlord’s favor, a rent increase beyond what is normally allowed will be permitted.  In other words, the rent can be re-set at fair market value.  

 Absent an admission from the tenant, proving that someone does not reside in their unit is difficult.  Since the law allows temporary absences for reasons such as education, military service, or hospitalization, the owner must establish that the tenant permanently moved their principal residence to another location.  Thus, hiring a competent private investigator, or PI, is the necessary first step.  

At a minimum, the PI should be properly licensed.  In addition, the PI is bound to abide by state and federal privacy laws.  The Rent Board will not tolerate illegal snooping, so make sure that you retain someone who operates within the rules.  Next, determine exactly how you will prove that the tenant is principally residing at another location.  For starters, the PI should search property tax records to see if the tenant owns a home and takes a homeowner’s tax exemption for his residence.  Most Rent Board judges lend great weight to a homeowner’s exemption, filed with the government, where the tenants swear under penalty of perjury that their primary residence is at the home they own.  Besides, why would someone buy a house only to keep some apartment as the main abode?  

The PI should also run a credit header.  This data consists of the addresses reported by the tenants as their residence.  In other words, the credit header shows all past and present mailing places used by the tenant in chronological order.  Another helpful tool is the DMV data base. For example, the PI can sometimes ascertain what address the tenant lists on a driver’s license, or where the tenant has been cited with a traffic violation.  In one recent case, the tenant had multiple DUIs in Riverside County, thereby casting doubt on his story that he resided full-time in San Francisco.  Finally, the PI can also perform a “knock and talk.”  This procedure involves the PI visiting the tenant at his address away from the unit.  When the tenant answers the door, the PI poses as an investigator looking for a John Smith who worked at ABC Company and was recently involved in an accident.  The tenant, also named John Smith, replies that he is not the John Smith who worked at ABC Company.  The PI asks that the tenant confirm, in a declaration, that he lives at this address and is not the employee that is being sought; all too often, the unsuspecting tenant eagerly agrees to cooperate and signs the affidavit attesting to his true place of residence.  

In sum, hire a good PI, and gather all of your evidence before you file the petition.  Once you apply to the Rent Board for a 1.21 determination, the tenant will receive notification and may alter the evidence you need to prove your case.  If you do win, you can turn the rent-controlled storage locker into a market rate rental.   DW