R.B. PROCLAIMS “ART IS A BASIC LIVING ACTIVITY”

Each month I try to explain the wild and crazy things that go on at the Santa Monica Rent Board, which I have often referred to as a “bastion of bias and favoritism.” But mere words alone cannot adequately describe what takes place on at those meetings. Not to worry because videos of the Board’s meetings are at the Board’s website, www.santa-monica.org/rentcontrol/. At that page you can find a link that says “View the Video Archive of Rent Control Board Meetings.” If you do not see these words in blue, you are not at the correct web site, but you can get to the correct web site by clicking on a link at the bottom of the page.

To experience this new form of entertainment, I suggest that you view the meeting of September 7, 2006, because that meeting has a bit of everything outrageous including, but not limited to Rent Board Commissars introducing new and prejudicial opinions and evidence in favor of the tenants, making political speeches and new arguments that the tenants never thought of, and coming to a number of absurd conclusions that have to be heard and seen to be believed.

There were three appeals that evening, a rent decrease petition, a rent increase petition and a “tenant not in occupancy” petition. Tenant Attorney Andrew Zanger represents the tenants in all three cases. The meeting was basically, the Andrew Zanger Show, but the icing on this bizarre cake was Betty Mueller’s proclamation at the end of the meeting that, “Art is a basic living activity.” That statement was used to justify tenants using a controlled rental as an art studio at a rent controlled rent of $638 per month.

Here is a Reader’s Digest version of what took place. The meeting is approximately three hours long, so I have noted the low points to that you can work the slide on the video viewer to view the point in time you wish to review.

ACT I: PLEDGE TO THE FLAG

The meeting opens with a half-hearted Pledge of Allegiance that nearly dies out after the words “under God” are spoken. By the time it ends, only Commissar Kennedy is saying the words and all the Commissars are laughing.

At first it made me angry to see the disrespect shown to the American flag. But then I realized how hypocritical it would be for the Commissars to say the words, “with liberty and justice for all” when they had no intention of carrying out their duties in that manner. Therefore, the four Commissars who did not say those words were being more honest than the one who did.

ACT II: RENT DECREASE FOR PARKING SPACE

The first case on appeal was rent decrease decision D-4224 which proves once again that you property owners can never let a tenant use anything and try to get it back in Santa Monica, where every license ripens into a right and no good deed goes unpunished. This case also shows that whatever is stated on a written rental agreement that is favorable to the owner carries no weight with the Rent Board because any tenant is free to contradict the contract he or she signed.

The rent decrease appeal begins at approximately five minutes and 15 seconds (e.g., 5:15) where Senior Attorney David Daniels explains the case. The basic facts are that the tenant signed a rental agreement in 2002 which gave him two parking spaces in the subterranean garage, but he wants a third space for his child care provider. So he files a rent decrease petition against a new owner. The tenant is not happy about the $40 rent decrease he won from the hearing examiner because he wants a rent decrease of $75 per month. The tenant offers new evidence about the cost of parking spaces and David Daniels tells the Board not to consider new evidence at 15:24. This is the first time of seven times that Attorney Daniels tells the Board not to consider new evidence. The other six times, he is telling Board Commissars Sklar, Koury and Muller to stop introducing evidence on behalf of the tenants.

The other six times are as follows:
(1) At 28:26 after Sklar asks for new testimony about how the landlord took a sundeck away from the tenants, Daniels tells him not to ask for new evidence. (2) At 31:38 Daniels tells the Board again not to consider new evidence on sundeck. (3) At 36.50 Daniels tells Sklar not to ask for new evidence about use of the third parking space for a child care worker. (4) At 37:12 Sklar states that parking costs more near the beach, and Daniels says there is no testimony in the record about high demand for parking or the expense of parking in that area. (5) At 1:03:00 Daniels tells Mueller says not to consider the availability of parking near the beach. (6) At 1:07:50 Daniels tells the Board again not to consider new evidence again

The reason for the consideration of new evidence described above is that Commissars Sklar and Koury were trying to increase the amount of the rent decrease for the tenant. The tenant only asked for $75 but Sklar wanted to give him $200-250 and Koury wanted to give him $100 per month. You would never know it by listening to that “dynamic duo,” but Sklar and Koury are practicing attorneys, and Sklar represents tenants against landlords on a regular basis when he is not being a “fair and impartial” Rent Board Commissar. Therefore, cheating landlords and favoring tenants is good for the legal business in Santa Monica.

Even more interesting is to watch the many ways that Sklar and Koury try to get around the rule of “no new evidence on appeal.” At approximately 37:28 Commissar Sklar dismisses the fact that only two parking spaces are stated on the written rental agreement by dismissing it and saying, “The tenant’s testimony is just as good evidence as a written document.” Of course, Sklar never mentions the rule of law called the parol evidence rule in which a signed agreement is presumed to state the intention of the parties unless the party challenging it is able to state an exception to that rule.

Although there is no evidence in the record that an outside parking space should rent for $250.00 per month, at 38:29 Sklar tries to put that fact into evidence by saying that parking spaces might be $250 near the beach. He does this again at 39:10 by asking the owner’s attorney, “How would you address the issue that the space might be worth $250, why wouldn’t that be true” Then at approximately 41:49 Sklar says “I don’t know where this 40 bucks [the amount of the rent decrease] came from so I want to give you giving you the opportunity to say why it should not $250 because it might be in the record.”

After reviewing this exchange, you might believe that is was very fair of Commissar Sklar to give the landlord’s attorney an opportunity to rebut the new evidence that he was putting into the record. But I was thinking that listening to Sklar is like watching the beginning of the Ed Wood movie, “Plan 9 from Outer Space” where the amazing Criswell introduces the movie by saying, “This story is true. If you don’t believe it, then prove it did not happen.”

In the next part of the video, Commissar Koury employs a tactic that puts Sklar’s methods to shame. He introduces new facts and a new argument and then says he won’t consider it! This begins at approximately 50:36 where he says. “Every time I get a parking ticket, it is 47 bucks . . . or 50 bucks or 60 bucks so that space is important. Then he says, “I don’t know if I am talking about something that is not in the record. If I am, then I am not going to consider that.”

At this point he smiles and notices that “counsel is fidgeting” which is a reference to David Daniels motioning to him to stop. If you watch this part of the video, you will see that Commissar Koury is not a stupid person and he knows what he is doing. He is adding new facts and arguments to the record, and then says that if the information is not there, then he won’t consider it. Commissar Koury’s mistake was to believe that everyone else is not smart enough to realize what he was doing.

What took place next is not shown on the video, but while the legal staff helped Commissar Koury clean the ice cream cone from his forehead, Commissar Sklar ran with the ball again.

Beginning at 52:30 Commissar Sklar says that since the address is on the record, the Board can take “judicial notice” of the fact that the address is by the beach. Then at 52:54, he wants to give a decrease of “200 bucks.” Then at 53:11 he again says that he wants to take “judicial notice” of the availability of parking near the beach. He never seems to realize that the Rent Control Board, as an administrative agency, cannot take “judicial notice” of anything because it is not a court. The concept of administrative notice is as unknown to him as the parol evidence rule.

Then, at approximately 58:00 Commissar Toy makes a political speech saying that when new owners buy a property “there’s a whole new game in town” and he states that since the old owners permitted the tenant to use the space, the tenants had a right to it. Then he slams the landlord by bringing up the issue of a leaky window that was not even before the Board on appeal to show that this new landlord was a bad landlord. Finally, at 59:50 Toy says that he too wants to consider that the building is located in a congested area because it has an address by the beach.

In all fairness, Commissar Toy did something honest and useful during that appeal. He reminded the Board that this is a remand hearing and that they previously agreed to limit the rent decrease to $75, so that is what the Rent Board did when it voted to modify the hearing examiner’s decision and increase the rent decrease from $40 to $75 per month.

ACT III: RENT INCREASE DECISION

I had a rent increase decision on appeal before Rent Board that evening, but it was pretty boring because the Commissars could not figure a way to disallow property taxes as an operating expense, although it is fun to watch them try. Therefore, my client was allowed to keep his rent increase awarded by the hearing examiner.

The high point of that appeal is where Commissar Mueller is trying to determine the landlord’s profit by reading the expense table of the decision at 1:37:50. Watch how Rent Board Administrator Mary Ann Yurkonis (aka “the Mighty Yurko”) tries to understand the question that Commissar Mueller is asking and tells her that the information she seeks cannot be in the expense table. Once Commissar Mueller realizes that she is pointing out the greatly increased expenses instead of increased profits, she lets the matter drop. The whole exchange is hilarious.

ACT IV: “ART IS A BASIC LIVING ACTIVITY”

The third decision of the evening was a Regulation 3304 petition number N-167, which is a type of petition in which landlords try to prove that tenants are not living in a controlled rental unit is using the unit for some other purpose, such as storage, entertaining, massage parlor, and kennel or as an office. Unfortunately, the Regulation says nothing about art studios.

The Regulation at 3304 (g) states nine factors, but six of them address situations where tenants live at other properties or in a different country. The six that definitely apply to this case are:
(1) the tenant does not carry on basic living activities at the unit for extended periods of time;
(2) another property or unit is listed as the tenant’s place of residence on any motor vehicle registration, driver’s license, voter registration, or with any other public agency, including federal, state, and local taxing authorities;
(3) utilities for the unit are billed and mailed to a different residential property;
(4) the tenant’s personal possessions are not located in the unit;
(8) the unit is used primarily for storage, entertaining, or as an office;
(9) the tenant rents more than one unit at the property and the number of occupants is less than the number of bedrooms in the combined units.

I have written many Rent Board Stories in the past about what a sham these petitions are, and this case proves it once again. But in this case, the Law Office of Rosario Perry had a favorable decision from the hearing examiner and the legal staff because two tenants, (husband and wife) rented two one-bedroom units next to each other (Units A & B) and were using unit “A” as an art studio.

Beginning in the video at about 1:41:00, Senior Attorney Daniels explains the facts of the case. The hearing examiner granted a rent increase from $638 to $1,305 per month for Unit “A” because that unit it being used as an art studio while the tenants live in Unit “B.” Unit “A” has no appliances in the kitchen, no hot water and the gas meter has been off shut off. The floor is covered with plywood to protect it from the paint and other materials being used. There are no towels or toiletries in the bathroom, and the bathtub is being used for storage. In 2004, the tenants applied for and received a business permit to do computer and graphic art in the unit and “a portion of unit A is written off as a business expense on the tenant’s tax return. See 1:45:00. (The senior attorney was being polite about that last fact. The tenants actually claimed 80% of the rent as a business expense.)

The tenant/husband spoke to the Board first at about 1:50:00. He said that he and his wife used Unit “A” to do “reading, repairs, yoga, meditation, correspondence, listening to music, sewing, and computer projects.” Then at 1:54:15 introduces a new argument by saying that he recently got into an argument with the landlord, who got in his face and pushed him. When his three minutes to speak were over, Commissar Sklar wanted to hear more and let the tenant proceed. So the tenant argued at 1:54:27 that he and his wife only made $1,008 selling art in the past year and ended his argument with the statement at 1:55:30 “Making art is a spiritual activity not a commercial activity. Making art is a living.” There was not a dry eye in the house after that plea.

Then at 1:56:15 Commissar Toy tries to help the tenant out by asking about basic living activities “other than the art stuff.” But the tenant does not get the hint, so Commissar Toy asks where, if anywhere, he uses the bathroom. Then the tenant almost gets the hint and says that you can clearly see a towel in the bathroom in the photos. Therefore, the unit was at least qualified to be a restroom in a gasoline filling station.

After seeing that the spiritual argument was getting some traction with the Rent Board, the 1:55:05 the wife/tenant addresses the Rent Board, but she does not describe any “basic living activities” that took place in Unit “A” either. At 1:58:28 she says. “We do our interesting mind activities in “A”. . . we meditate, do yoga, listen to music, computer research, correspondence and we do art. Making art is living.” Then at 2:00:55 she brings up new irrelevant and prejudicial subjects by saying that the landlord won’t let some tenants use the laundry room and that he would not let an elderly tenant install a window air conditioner during a heat wave. Senior Attorney David Daniels is silent during the introduction of this new and prejudicial argument and/or evidence.

At approximately 2:04:00, a tenant activist from Pacific Plaza says that he knew the tenants for 20 years and that their art is their life. Then at 2:06:25 he informs the Board of new arguments and/or evidence by saying that the current landlord inherited the property from his parents so his taxes are low. Therefore, it is implied that the landlord is a rich guy who can afford to support an art studio for the poor artists. Then the tenant activist states that the units were not habitable at the time they were rented to the tenants (i.e., in 1995).

At approximately at 2:08:38 Attorney Andrew Zanger says that the hearing examiner’s decision is a shock because the unit was used for leisure time activities such as a bedroom or a den and that “they perform their art functions there, not as a business.” Mr. Zanger’s shock and awe may have been genuine because it shocking to have a decision where the hearing examiner and legal staff agree that the landlord should win a case and Mr. Zanger’s clients should lose it. But Mr. Zanger’s shock did not last long, because the parade of starving artists was about to begin.

The parade of starving artists begins at about 2:11:47 where Bruria Finkel only describes herself as an artist in Santa Monica and a founding member of the Santa Monica Arts Commission. She must have forgotten to mention that she was also a two-term former Commissar of the Rent Board and sat on the Board until 2002 with three of the Commissars who are present now. May have also forgot to mention that her husband, David Finkel, was also a two-term Rent Board Commissar before he was appointed to the Santa Monica court as a judge who decided tenant eviction cases where few tenants were ever evicted and the attorney fees awarded to tenants who had free legal aid were simply astounding.

Bruria Finkel then proceeded to tell the Board about the hard life of an artist and misinformed the Commissary that the City does not collect any tax on less than $60,000 of income. Maybe she forgot that the City always collects a “processing fee” and that the limit was $40,000. Maybe she never knew that.

“Artist” Bruria Finkel then argued that the hearing examiner did not understand the artist’s lifestyle or the use of the unit. She then argued that the City encourages everyone to work everywhere in the City, but she did not explain why she did not give them a studio for in her fine home. Then at 2:24:15 former Commissar Finkel states, “The art world and the art business is a crazy place [sic]. Artists don’t make money they have opportunity to make money. . “These two people are eking out a living to support the things they love most” When the bell rings at 2:15:09 to announce that time is up, she keeps right on talking and tells the world what she thinks about landlords in her grand finale.

“When a landlord rents an apartment for $1,500 when a rent controlled apartment or the tenants there are paying around $680.00, something in the wind should call you and you should pay attention to that. There is some kind of a money-grabbing opportunity here. And that is what this landlord has done. He came in with a notion that he can make money on [apartment] “A” because it didn’t have a kitchen. Or it didn’t have. . .a towel. (sic.) Or it didn’t have something else that appears to be a living. (sic.) As far as we are concerned, or as far as you should be concerned, the spirit is equal to the body. And these people use Section 8. . .apartment A for their spirit and for their activities as artists. That is an important recognition to make.”(sic., sick)

After Bruria Finkel ran out of breath and/or got tired of talking, two more members of the Santa Monica Art Commission told the Rent Board about the hard life of starving artists. And when the matter was taken under submission, starving, part-time actor, Commissar Alan Toy begins at about 2:34:26 by giving his opinion of why Regulation 3304 was adopted. He tells about the tenant who lived next to him who only used a rental unit for storage. But that was not like using a rental unit for recreational and spiritual activities.

At about 2:37 00 Commissar Toy says that as far as he is concerned, both units were rented at once by the same agreement. It was irrelevant that the tenants were taking a tax deduction, and that fact was an invasion of their privacy. But he never worries about privacy when landlords try to prove that they live on properties of three units or less that should be exempt from rent control. The Board simply sends out Peeping Pete Sorvino and uses property tax records to establish that the landlords claim a property tax homeowner’s exemption at some other location. And although the Rent Control Board continues to collect rent control fees for two units no matter how the units are used, Commissar Toy said that he would consider Units “A” and “B” to be one unit in this case. Then at 2:40:00, Commissar Toy says that considering all of the factors, Unit “A” was a residential rental unit.

It was very strange to see the Board’s treatment of the rental agreement in this case. In the first rent decrease case described above, (where the written rental agreement favored the owner because it only stated two parking spaces), that agreement carried no weight with the Board. They wanted to rely on the tenant’s testimony and considered what was done with the space after the tenancy began. But in this case, where the rental agreement said that both units were rented at the same time and on the same agreement, the Board found that very important, although the issue in this case is not how the tenants rented the units but what they did with them after they controlled them. Thus, the irrelevant issue was the most important issue in this case.

At 2:40:50 Commissar Sklar says that the tenants were carrying on basic living activities at the subject unit. Then at 2:41:05 he added new evidence by saying that there was toilet paper in the bathroom and dishes in the sink. (Those were in addition to the towel in the bathroom that the husband/tenant described.) Commissar Sklar then passed to ball to Commissar Koury who continues that argument at 2:44:02 where he says “The critical thing to me is the written rental agreement where they rented two contiguous units.” Yes indeed. In a case where the most important issue is how the tenants are currently using a controlled rental unit, Commissar Koury finds the most important fact to be how the unit was originally rented in 1995.

But the best speech of the night begins at 2:45:06 where Betty Mueller reviews the Regulation 3304. Commissar Mueller is usually boring, but when she has a lucid moment, she is the brightest light of the “holiday tree” known as the Rent Board. She reviewed the factors at Regulation 3304 (g) and stated the following.

Number 1, the tenant does not carry on basic living activities at the unit for extended periods of time; I think art is a basic living activity so they certainly aren’t carrying that out there. So they, they . . .

Number 2, another property or unit is listed as the tenant’s place of residence on any motor vehicle registration, driver’s license, voter registration, or with any other public agency, including federal, state, and local taxing authorities; well, that may be true. They may use unit B or unit A or whatever it is.” (Notice her firm grasp of the facts.)

Number 3, utilities for the unit are billed and mailed to a different residential property; well, the only utility is electricity but they live right next door. (Note: if the tenants turned off the electricity too, they would have scored a “perfect 10.” The fact that the gas meter was turned off carries no weight with Commissar Mueller.)

Number 4, the tenants’ personal possessions are not located in the unit. No, they certainly are located in the unit. (She did not say if she was talking about the towel in the bathroom identified by the husband/tenant or the toilet paper and dishes in the sink that Commissar Sklar added.)

Number 8, the unit is used primarily for storage, entertainment or as an office. No, that’s not true. (After all, the unit is used as an art studio and the Regulation does not say anything about using it that way.)

After Commissar Mueller completed her brilliant analysis, all of the Commissars agreed that the landlord’s petition should be denied and they all voted to reverse the hearing examiner and the legal staff.

Then Commissar Toy gave the most incoherent speech of the evening since Bruria Finkel ran out of breath. He chastised the landlord’s attorney for bringing such a merit less case before the Rent Board beginning at 2:49:35 where he says:

“This is a relatively new regulation for us and our staff is still working through what they think we meant. (Note: it was adopted 3 years ago and this is case number 167). In this case I think the staff got it wrong, but I think that Mr. Perry’s Office, which I think you work in, has a similar case before us on several occasions, and he is probably as aware as anyone in the community as what we think we want and . . . will go forward in the future trying to spare his clients the expense and procedure knowing that something like this wasn’t even close to coming . . . I mean maybe you thought . . .”

The speech rambles on, but the sentences and thoughts are so disjointed that when I try to type them the text ends up looking like typographical errors. You have to see it and hear it to believe it.

In the opening sentences he says “it is a new process, the Staff got it wrong, but Mr. Rosario Perry should have known what we think we want, and so he should stop wasting his client’s money because this was not even a close case.” Listen to his speech and you must come to a conclusion that this part-time actor should stick to reading lines that others write for him.

The moral of the story is that if you are one of the few landlords to run the gauntlet and get a case before the Rent Board where the Hearing Examiner and the Legal Staff agree with you, it might not even be a close question.

And if you don’t believe it, just watch the video of the Rent Board meeting of September 7, 2006. Then you can take “judicial notice” of how blatantly biased the Rent Board is.