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Supervisor Aaron Peskin has introduced two sets of proposed amendments to the city’s Administrative Code. The first would permit tenants residing in any residential building to distribute literature to other tenants in the building, including literature distributed on behalf of a tenants’ association or other tenants’ organization where the literature relates to issues of common interest or concern to the building’s tenancies. The second would limit permissible rent increases based on a rental property owner’s increases in operating and maintenance expenses to a total of seven percent of the base rent for any unit in any five-year period.
The Association recently testified against both proposed amendments at two separate meetings of the supervisors’ Land Use Committee. Concerning the first set of proposed amendments, the Association was the only organization which testified against the amendments. Concerning the second set of proposed amendments, the Association was joined by the Coalition for Better Housing, representing large-scale landlords in the city, in opposing the amendments.
Excerpts from the Association’s testimony are set forth below for REALTORS® who have an interest in these issues.
Ordinance permitting tenants residing in any residential building to distribute literature to other tenants in the building, including literature distributed on behalf of a tenants’ association or other tenants’ organization where the literature relates to issues of common interest or concern to the building’s tenancies.
We are surprised that Supervisor Aaron Peskin is offering legislation relating to residential tenant communications in view of the holding in the case of Golden Gateway Center v. Golden Gateway Tenants Association. In that case, the court held that the landlord, Golden Gateway Center, had the right to prohibit in its complex of buildings the distribution of literature by the Golden Gateway Tenants Association.
Golden Gateway Center is a secure apartment complex, as most apartment complexes or buildings are. The Building Standards, supplied to each tenant and incorporated into their rental agreements, prohibited the distribution of literature on the premises. In its holding, the court dwelt upon Golden Gateway Center’s security policy and the restriction of public access to the complex. The court said, “The residential buildings do not offer retail, restaurants or entertainment facilities. Access is limited to Golden Gateway’s residential tenants and their invitees. For reasons of security, privacy and cleanliness, building management has consistently denied public access to disseminate advertising or other materials. This emphasis on security and privacy is made clear to each potential resident through the Building Standards incorporated into each lease. In this context, [the] extension of constitutional free speech rights to the quasi-public forum of a large shopping center is inapplicable.”
Golden Gateway Center’s security policy is typical of apartment buildings in San Francisco and, for that reason, the holding in Golden Gateway Center should apply to every apartment building which maintains such a policy and the proposed ordinance, if adopted, should be a nullity.
However, if Supervisor Peskin is determined to offer a proposed ordinance on the subject, as he seems to be, it is suggested that it be amended to allow a rental property owner to designate a single distribution location in the common area of the building for literature regarding matters of common interest or concern to the building’s tenancies. To do so should accommodate the needs of tenants while protecting their private rights from being infringed by unreasonable lease provisions and restrictions, a concern expressed by the court in the Golden Gateway Center case. To allow an owner to establish, as the proposed ordinance does, “reasonable requirements as to the time, place, manner and volume of...literature distribution” strikes us as being too susceptible to varying interpretations for it to serve as a useful control for owners.
(Property Management Tip: As a defensive measure, if the Peskin amendments are passed by the Board of Supervisors and signed into law by the mayor, it may be advisable for apartment owners to reevaluate their house rules and include a ban on unauthorized solicitations or leafleting within their complexes. More specifically:
- Develop a uniform security policy excluding everybody but tenants and their invitees;
- Strongly and uniformly enforce the policy; and
- Block free access by gating.)
Ordinance limiting permissible rent increases based on a rental property owner’s increases in operating and maintenance expenses to a total of seven percent of the base rent for any unit in any five-year period.
Currently, under San Francisco’s rent control ordinance, a landlord may, after a hearing, be permitted to increase rents in excess of the annual allowable rent increase where there has been an increase in operating and maintenance expenses. The amount of the permitted operating and maintenance expense increase is the lesser of (1) the amount by which the per unit per month increase in operating and maintenance expenses exceeds the annual allowable increase or (2) seven percent of the tenant’s base rent.
Operating and maintenance expenses include, but are not limited to, real estate taxes, sewer service charges, janitorial service charges, security system charges, and charges for debt service.
We are opposed to the proposed ordinance for the following reasons:
We believe that in cases where there is a change in ownership resulting in increased debt service and property taxes, the new landlord should be permitted to file a petition with the Rent Board to increase rents based on increased operating and maintenance expenses.
Under the proposed ordinance, if the rent increases permitted by the Rent Board are seven percent of any tenant’s base rent, the landlord would be precluded from petitioning the Rent Board for any further increases for that tenant based on operating and maintenance expenses for five years. We believe this result is excessively burdensome and restrictive, and could be viewed as an unreasonable restraint on alienation.
The rent control ordinance currently in effect permits only one rent increase per unit for each transfer based on increases in debt service and property taxes. We believe this limitation is fair and reasonable, and would view as a positive development the inclusion in the proposed ordinance of an exemption for rent increases based on increased debt service and property taxes, along the lines of what the current ordinance provides.
But more importantly, we are opposed to the proposed ordinance because we believe that it violates the holding in the case of Birkenfeld v. City of Berkeley (1976). In that case, the Supreme Court stated that rent control laws must be “reasonably calculated to…provide landlords with a just and reasonable return on their property.” To include increased debt service and property taxes resulting from a change in ownership in the seven percent limitation on rent increases based on increased operating and maintenance expenses, as the proposed ordinance does, will deprive landlords who purchase rental real property of a just and reasonable return, and very likely lead to the filing of a lawsuit challenging the ordinance’s constitutionality.
The Rent Board must approve all rent increases based on increased operating and maintenance expenses. We are not aware that there have been any significant problems in this area. We believe that the proposed ordinance, while well intentioned, serves no useful purpose and should be withdrawn.
January 2004
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