When does rent control apply?

I recently purchased a building that was supposedly built in 1979. The realtor said that the building was exempt from rent control and that I could raise the rents to whatever I deemed appropriate. Is that true?

The San Francisco rent ordinance applies to all non-tourist residential dwelling units in the City that are located in a structure for which a certificate of occupancy was first issued before June 13, 1979, the date rent control became law. In general, this means that buildings built after June of 1979 are exempt from rent control, and the landlord is not bound by the eviction control and rent increase limitations of the rent law. In addition, buildings that have undergone “substantial rehabilitation” after 1979 and received certification from the Rent Board verifying a “sub rehab” are also exempt, although only about thirty buildings have received this type of classification.

Yet any structure certified for occupancy before June 13, 1979 is probably controlled, even if it was once used for commercial purposes but is being rented as a residential dwelling. Under state law, condominiums and single family homes that are otherwise covered (built before 1979), but where the tenancy began after January 1, 1996, may be exempt from the rent control limitations (how much rent can be increased every year), but are still governed by eviction control, meaning the landlord must have a just cause reason to terminate the tenancy. Obviously, if the condo or home is built after 1979, neither eviction control nor rent limitation applies.

Even if a landlord is exempt from rent control, rent should not be raised beyond “fair market value,” or what comparable units are renting for in the same area. Tenants in non-controlled units may still bring state and federal fair housing claims against landlords who use rent increases to force out tenants that may be protected under other laws. Also, the lease contract may prohibit a rent increase for the duration of the lease term. Remember that a lease survives the sale of a home in most instances, binding the new owner to its terms and covenants. For example, if the tenant in a non-rent controlled unit has a lease for five years at $1,000 per month, you cannot terminate the lease or raise the rent during that period if the tenant remains in good standing under the lease.

State law also requires landlords who impose rent increases greater than ten percent of the previous rent to give the tenant sixty days’ advance notice, with five additional days if the notice of rent increase is served by mail. For increases ten percent or less, the required notice time is thirty days, with five additional days for mail service.

The question of whether rent control applies, and to what extent, is an extremely important determination that should be made with the assistance of competent legal counsel. There are many variations and exceptions regarding the rent law’s application not discussed in this article. Therefore, before you rely on the advice of a seller or real estate professional claiming that the building is exempt, please consult with a qualified attorney to ensure that the law does not favor another interpretation.

DW