Supervisor Peskin recently passed tw-o new changes to the San Francisco Rent Ordinance. What are these two changes?
 

The first change has to do with a tenant's right to distribute letters and communications, or "leafleting." Several years ago, a major apartment building owner brought a successful challenge to its tenant association's activity of passing out literature in the building. The case was eventually decided by the California Supreme Court, which held that the Golden Gateway Center could limit and restrict the right of the building's tenant association to distribute letters and information in the common areas of a building. The Court reasoned that free speech was not impeded simply by restricting leafleting in the hallways and lobby, as this space was private property not akin to a public forum. "Management's decision to forbid leafleting was not a state action which impinged on the association's free speech rights."
 

As usual, San Francisco ignored a Supreme Court precedent by passing an ordinance allowing tenants to use common areas in order to "distribute literature to other building tenants, including literature distributed on behalf of a tenants' association ... where the literature relates to issues of common interest or concern to the building's tenancies." This legislation means that not only can internal tenant associations distribute newsletters, but arguably citywide organizations like the San Francisco Tenant's Union will use the new law to leaflet your buildings. The ordinance allows owners to establish "reasonable requirements as to the time, place, manner and volume" of such distributions, but the practical enforcement of leafleting restrictions is questionable at best. Hopefully, a disgruntled owner will file legal action to prevent ongoing enforcement of this legislation.

The next law limits an owner's ability to impose operating and maintenance
 

(O&M) rental increases. As many of you know, the Rent Ordinance allows an owner to increase rent when there is a substantial increase in a building's operating and maintenance budget. For example, a new owner is oftentimes burdened with higher property taxes, insurance, debt service, etc. Existing owners may experience a hike in water/sewer charges, garbage removal, and janitorial servicing. The rent regulations (Section 6.10) set forth the various guideline used to justify these types of increases. Before this year, an owner could receive up to a 7% increase beyond the allowable annual increase for each O&M petition filed.
 

Now, for buildings with six or more units, petitions filed after October 28, 2003 will be subject to the following limitation: The same owner cannot impose more than a total seven percent base rent increase on any unit in any five year period due to an increase in operating and maintenance costs. This means that, even if O&M costs dramatically increase in years 2, 3, 4 and 5 after the O&M petition was granted in year 1, the owner is capped at a 7% total increase per unit and must absorb the subsequently incurred losses. For big building owners, this law could have a serious impact on the bottom line, especially if we enter into a high inflationary period and prices begin to escalate. Again, someone needs to present a legal challenge to this legislation.
 

Please remember to pay attention to the legislative updates and alerts. The SFAA will oftentimes send mailers to you asking for your help in opposing harmful legislation that is being considered. Even in this down rental market, the Board of Supervisors, as well as some lawmakers in Sacramento, will continue to assault our ever-diminishing rights as owners, so stay involved!
 

Dave Wasserman