MORE INSTITUTIONAL MISREPRESENTATION
AND FRAUD

Rent Board Story Part 91, titled “Institutional Misrepresentation and Fraud,” reported on the Rent Control Board’s extortion scheme in which it demands past rent control registration fees and penalties from property owners which are much greater than any amount that it could hope to legally recover by filing a lawsuit. In that Story, the Board demanded more than $28,000 for a two-unit property which could not have possibly owed more than $792 in past fees. Fortunately, that owner stood fast and called their bluff, so the Rent Board reduced its demand from $28,000+ to $812 and the dispute was settled for that amount. This month the Story is about an owner with the approximate name of Ruth Carter who sold her property and tried to get away from the Rent Board, but the Board still went after her until she finally stood up to them.

When the Rent Control was adopted in April1979, Ruth Carter owned a three-unit property, which she intended to leave to her only son, Robert, who lived in one of the three rental units. Therefore, on or about March 1987 she gave Robert a 50% ownership interest in the property and received an owner-occupied exemption from the Rent Control Board which exempted the property from Rent Control Law and all Rent Control Registration fees as long as the owner lived there.

Unfortunately, shortly after the property was exempt, Robert fell off a roof and injured himself, lost his job, and developed in incurable medical condition. As a result, Ruth placed the property in a trust to protect it from creditors and made Robert the sole beneficiary of the trust. Robert continued to live on the property as his only place of residence until he passed away in December 2002. He was only 46 years old.

On or about March 2003, two tenants of the property based filed excess rent complaints based, in part, on allegations that no person with a 50% ownership lived on the property. So on April 2, 2003, I wrote a letter to the Rent Control Board, which explained Mrs. Carter’s misfortune and that Robert was the beneficial owner and therefore the excess rent complaints should not be based upon any rent collected before December 2002. Mrs. Carter offered to refund the excess rent, but the Board demanded much more than restitution and one of the tenants refused to settle the case. So Mrs. Carter paid all the excess rent the Rent Board demanded and then sold the property in July 2003.

That should have been the end of the story, but unfortunately on July14, 2003, the Rent Board sent Mrs. Carter a letter which demanded payment of $6,816 for past due rent control registration fees. The Rent Board arrived at that figure by setting the beginning date at March 1988 (when Mrs. Carter first set up the trust) and the ending date at June 30, 2004. So I showed Mrs. Carter Rent Board Story Part 91 and explained to her that there was a three-year statute of limitations applicable to collection of those fees. Therefore, the Rent Board could only collect $1,188 if it filed its claim in court (3 units x $11 per unit per month x 36 months). I also explained that, assuming that the Board could impose its outrageous penalties of 4% per month, she could not possibly owe more than $1,400 so there was no reason to pay the $6,816 that the Board was demanding.

Unfortunately, the Rent Board would not let the issue rest, so in November 2005, it filed a small claims court action against her. I advised her that by that time the Board could only collect approximately $264 against her. Although Mrs. Carter was afraid to go to Court and was thinking of sending in the entire amount demanded, she decided to stand up to them and went to court in early January 2006.

On or about January 9, 2006, I received a phone call from Mrs. Carter who was very excited that the small court claims court judge had ruled in her favor and found that she owed the Board only $264.00. I was happy to hear than another small property owner had stood up to the big, bad Rent Control Board. I would like to say that she taught that “bully” a lesson, but the Board will keep perpetrating its favorite fraud on other property owners who don’t stand up for their rights.

According to Civil Code Section 1572 and/or Rent Control Regulation 13004 (i), which defines “Actual Fraud” is defined 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, but it also applies to the Rent Board every time it demands far more money from rental property owners that they can hope to lawfully receive. Every time that happens, I think of what callous hypocrites they are and it makes me angry to see a government agency go after individuals who have suffered enough misfortune already.

If you want great examples of Misrepresentation or Fraud, simply go to the Rent Board office and review the Rent Board Story site file for 1402 Maple Street.