If a rent controlled unit is not the master tenant’s
primary address, can the rent be raised to market rate?
Not necessarily. For
the past 25 years we have written about the benefits of the Costa-Hawkins
Rental Housing Act, a state law which permits an owner to impose an
unrestricted rent increase when the last tenant on the rental agreement or
otherwise having a direct owner-tenant relationship no longer permanently
resides in the apartment and there remains in occupancy only subtenants or
assignees. While this is the codified
rule of law, about 15 or so years ago our Rent Board adopted a policy which
permits tenants to have more than one permanent place of residency. In other words, a maser tenant could claim to
reside permanently both here and in Hawaii.
The result is that many landlords lose the ability to decontrol rental
units where the master tenant primarily lives elsewhere.
This Rent Board “rule” is neither contained within the
ordinance itself nor in the Rent Board’s official rules and regulations. However, the policy is frequently invoked
when a master tenant challenges a Costa-Hawkins rent adjustment through the
Rent Board’s petition process, and the Administrative Law Judge determines that
the San Francisco address is still legitimately a permanent place of
residency. The Rent Board has stated
that nothing contained within the Costa-Hawkins law relegates a tenant to one
permanent place of residency as the basis for adopting this policy. At present, hearing decisions have permitted
up to two homes, yet no intention has been announced to limited a tenant’s permanent
abode to two places; as such, we could see the day when a tenant may have more
than two permanent residences.
This author believes that this policy is flatly wrong and should
be withdrawn by the Rent Board. Yes, the
state legislature did not specifically announce that a California tenant is confined
to only one permanent place of residency, but common sense and logic dictate
that the intent was clearly to limit rent control protection to tenants who
have only one primary address: Their
rent-controlled housing. Otherwise, as
showcased in many Rent Board decisions, master tenants can buy out-of-area
homes or begin renting in other rent- controlled cities while continuing to
reap the benefits of low rent in an SF apartment that they sublet, with
subtenants paying possibly most or even all of the rent remitted to the
Moreover, this policy only benefits the tenant
side. Owners seeking to perform an owner
move-in are required to make the recovered rental unit a principal place of
residence for at least three years, and the rent law states that an owner may
only have one principal place of residency.
This means that an owner who splits time between two geographical regions
might very well be precluded from recovering possession of an apartment via the
owner move-in processes, yet a tenant may freely enjoy two residences with full
rent control protections.
Add to this mess the fact that our statewide industry
is expending immense resources to protect Costa-Hawkins from being
repealed. Last year, we had to raise
over $70 million to defeat Proposition 10, and now a similar measure appears to
be headed to the 2020 ballot. In this
vein, it is important that we work to keep Costa-Hawkins in place while
simultaneously urging our Rent Board to halt the policy of permitting tenants
to have more than one permanent place of residency.