New Rent Law Requires Just Cause to Remove Certain Tenant Services

Unfortunately, the Rent Board could not agree to pass these regulations. The tenant commissioners were supposedly unhappy with the latitude afforded to owners by the proposed regulations, and negotiations ended in March. At present, the Rent Board takes the position that the Superior Court must interpret the provisions of this new law. As a result, there is a high degree of uncertainty in both the landlord and tenant communities.

A Rent Board Memorandum from Senior Staff to the Commissioners, issued on August 31, 2006, summarized the current predicament. Senior Staff noted that some of the fourteen just cause grounds are not applicable to the removal of housing services. For example, condominium conversion, substantial rehabilitation of a unit, and the removal from rental use of all units pursuant to the Ellis Act could not be invoked to remove a housing service only. Other grounds, such as nonpayment of rent and nuisance, terminate the entire tenancy and thus were likewise inapplicable. This left owner/relative move-ins, temporary evictions for capital improvement work, demolition of units, and temporary relocation for lead abatement as possible candidates for consideration.

Yet even these just causes presented a problem. Staff highlighted the inherent illogic of the new law as applied to owner move-ins. “Does the landlord have to ‘reside’ in the parking or storage space or garden as their principal place of residence for 36 months…?” Indeed, does a landlord have to pay a tenant displaced from parking, but not the unit, the massive relocation payments now required under Proposition H? Staff also noted that substantial relocation payments would be due for temporary removing services under the lead remediation and capital improvement grounds. In essence, you could pay your tenants in excess of $15,000 to clear the garage for three months!

Staff observed that the law has no explanation on the type of eviction notice required, or if an unlawful detainer (court eviction action) would be the appropriate mechanism to enforce compliance. More disturbingly, the rent law’s amendment is silent as to what happens if a landlord allows a tenant to use a service, for no additional rent, after the tenancy commenced. Thus, an owner could grant garden access for a period of time, charging no additional compensation for its use, and then be precluded from taking back exclusive access.

Finally, Rent Board Staff correctly reported that the current law seems to conflict with a California Court of Appeal case from San Francisco, entitled Golden Gateway Center v. San Francisco Rent Board (1999) 73 Cal.App.4th 1204. In that case, the Rent Board wrongfully awarded tenants at the Golden Gateway apartment complex rent reductions for the temporary loss of their decks while the owner was repainting and repairing the exterior of the building. The Court of Appeal stated that reasonably necessary repair and maintenance work on the property, which has the effect of temporarily interfering with the tenant’s full use of a housing service but does not interfere with the right of occupancy, does not constitute a decrease in housing services warranting a rent reduction. This new law contains no exception to allow a decrease in services for necessary repair and maintenance work, and therefore creates a conflict with California case law.

Some practitioners argue that because the law states that the specified housing services cannot be “severed” without just cause, a reduction may be imposed provided that a rent reduction is allowed. Thus, an owner could reduce the amount of hours a tenant spends in the garden, or change the hours of the laundry room’s operation, but as long as there is no severance, arguably no unlawful interference with housing amenities has occurred. The Rent Board does not support this interpretation, and conceivably a landlord who imposes a significant reduction of access to a service may be subject to severe wrongful eviction penalties.

A real challenge relates to new owners who encounter tenants using services not designated as such by the lease agreement. In other words, many times tenants store items in places not designated as their storage, or they use a roof deck that is not specified on the lease as a housing service. In these situations, current or future ownerships may now be unable to correct the tenant’s conduct, as undoubtedly tenants will assert that they were given permission to use these services.

Most importantly, an owner who simply wants to re-configure the building by changing parking, take away a dangerous roof deck, or halt late-night garden parties may face the prospect of preclusion. Worse yet, a failed attempt to alter services could result in a wrongful eviction lawsuit.

The courts will undoubtedly interpret the new housing services law. Hopefully, judicial analysis will favor the housing industry, as the outright prohibition envisioned by the Supervisors makes good faith remodels and alterations of a building’s use impossible. Thus, while the Supervisors sought to curtail abuse by real estate speculators, the current result is that law-abiding landlords are subject to this punitive restriction. Unfortunately, the industry may have to fund an appropriate legal challenge to rectify this situation.

DW