INSTITUTIONAL MISREPRESENTATION AND FRAUD

I have often heard apartment owners say, “rent control is legalized theft.”

Although I agree with that statement, that is not what keeps me fired up and writing these Stories every month. I get more upset because I often see Rent Board employees attempting to perpetrate fraud and misrepresentation upon property owners. That level of dishonesty really keeps me going because when our government officials attempt to deceive and cheat the public, none of us are safe.

This month’s Story is about the owners of a three-unit property that they have lived on their property continuously since they purchased it in May 1989. On June 2, 1992 they applied for and received a waiver of Rent Control Registration fees. They should have also received an Exemption from Rent Control at that time because owner-occupied properties with three units or less are exempt from Rent Control under the Rent Control Law. Unfortunately, nobody informed the Owners of that additional requirement until May 20, 1998 when they received a letter from the Board from an “Information Coordinator,” whom I will politely call “Bill Collector” since I do not cause public embarrassment to private individuals who are merely Board employees but do not make Rent Board policy. The two relevant paragraphs from the letter dated May 20, 1998 are quoted below:

“You have neglected to pay the registration fee bills the Board has been sending to you. Nothing in the Board’s records indicates you have attempted to resolve this debt at any time. Penalties have been accruing on the unpaid balance, and the total registration fees and penalties now do is $25,785.06. Additional penalties are accruing on this balance at the rate of 4% per month. [Emphasis added]

If you believe you may be eligible for an exemption or a registration fee waiver that would affect your liability for this debt, you will need to file an application, since Board approval is required before and exemption or registration fee waiver is effective. Otherwise, the registration fees and penalties due must be paid immediately.”

After receiving the threatening letter from Bill Collector, the Owners applied for an exemption on May 20, 1998 and received Exemption #1162 on September 24, 1998. There was no opposition to their application and the Legal Staff Report specifically states, “The applicants applied for and were granted an owner occupied fee waiver on June 2, 1992. Documents submitted with that application verified owner occupancy at that time.” That should have been the end of the Story, but of course it wasn’t.

On or about April 5, 2001 the owners received another letter from “Bill Collector.” It is presented on the following page as written, except for the changed names of the parties and added emphasis to the important parts of the letter.

By reviewing the preceding letter, it is obvious that its writer was aware of the Exemption granted on September 1998 and was speaking of the Registration fees that were due during July 1998 when the Exemption application was before the Rent Board. Therefore, since the Registration Fee Waiver was granted back in June 1992, there could only be two rental units at issue.

Additionally, the person who wrote the letter must be aware that there is a three year statute of limitations for recovery of the fees because: (a) the letter speaks of the age of the debt and (b) the letter says, “the Board is willing to accept payment of three years registration fee or the sum of $816 as payment in full.” Anyone who can operate a calculator can quickly
discover that $11 x 2 units x 36 months = $792 (not $816), however this may have been an honest mistake since the folks who work for the Rent Board are “not the brightest bulbs on the
Christmas tree.”

However, there is no reasonable explanation from coming to a conclusion that the Owners of a two or three-unit property owe $28,163.68 between July 1998 and April 2001. That statement is nothing short of “actual fraud” as defined by Civil Code Section and/or Rent Control Regulation 13004 (i), which defines “Misrepresentation or Fraud” as:

1. The suggestion, as a fact, of that which is not true, by one who does not believe it to be true;

2. The positive assertion, in a manner not warranted by the information of the person making it, of that which is not true, though he believes it to be true;

3. The suppression of that which is true, by one having knowledge or belief of the fact;
or
4. Any other act intended to deceive.

The Rent Control Regulation quoted above was adopted by the Board for the purpose of determining when property owners committed misrepresentation or fraud when filling out their Rent Control Registration Forms, and every time I watch them apply that Regulation I think of what hypocrites they are. Those pirates make the Taliban look truthful.

If you want great examples of Misrepresentation or Fraud, simply go to the Rent Board office and review the site file for 2120 Oak Street. In that file, you will find copies of letters made false demands for $25,785.06 in May 1998 and then $28,163.68 in April 2001. These fraudulent demands were made for the purpose of stealing $816 from property owners who owed them nothing because their property was exempt from Rent Control.

Those of you who own Exempt Properties should always be thankful for how fortunate you are.