MR. KRONOVET– SANTA MONICA’S “CANDIDATE OF CHANGE”

As you probably know from seeing the cover of this magazine, for the first time in nearly 30 years of rent control the Santa Monica Rent Control will have a Commissioner that was NOT endorsed and supported by the Santa Monican’s for Renter’s Rights (SMRR). Although he will only have one vote and will need two the votes of two additional Commissars to accomplish anything, for once the City Hall Council Chambers will not be wall-to-wall with bobble-heads who nod in agreement while other Commissars say stupid things like, “art is a basic living activity” (former Commissar Meuller) and/or “rent control law was not meant to help low income people” former Commissar Sklar.” You could call Bob Kronovet “the candidate of change.”

The Rent Control Law is supposed to be a law that regulates housing prices, not a free legal aid society for tenants nor a club to advance a leftist political agenda so that Santa Monica can be more repressive of property rights that cities like West Hollywood and Berkeley. I ran for the Rent Control Board twice, and have given some thought to what I would try to do to change the system. Some of the most egregious examples of unnecessary conflict created by the Santa Monica Rent Control Board are stated below.

No Rent Increases For Additional Occupants: The biggest reason for unnecessary eviction actions and legal fees is the Board’s refusal to permit rent increases for additional occupants. If Santa Monica apartment owners were permitted to increase the rent by 15 % per additional person (as Los Angeles owners are permitted to do) the number of evictions based upon illegal subleasing would certainly be reduced. Additional reductions would result by permitting additional rent increases for pets (perhaps a rent increase of 5%).

The Rent Board recognizes that the number of persons living on a property DOES have an effect on operating expenses because it permits tenants to seek rent decreases when owners do not permit tenants to have replacement occupants “roommates.” However, the number of persons living on a property is not considered in “landlord” rent increase cases. In summary, the Rent Board creates needless conflict by blaming the owners for evicting too many tenants instead of adopting reasonable regulations which would reduce tenant evictions.

The Rent Board has steadfastly refused to permit “short form” capital improvement rent increases– not even for earthquake retrofitting expenses. As a result of this unreasonable and destructive attitude, thousands of housing units were lost in 1994 when the Northridge Earthquake arrived. That woke the Board up and made it more reasonable– but only for a short time.

For approximately two years following the earthquake, the Board permitted short-form rent increase petitions, but it soon returned to “business as usual.” Most owners don’t realize that in 1999 the City adopted very strict earthquake retrofitting code requirements which will eventually cause many of you to perform thousands of dollars of retrofitting improvements without any means of recovering the cost from existing tenants. Or maybe you will end up with a lead paint abatement order or and mold infestations problem. If you do then, “tough luck “because the Rent Control Board, which was created to promote “public health, safety and welfare, does not actually function in a manner to promote those objectives.

No “Short Form” Rent Increases Permitted for Unusually High Operating Expenses: Every Spring the Board issues informative operating expense reports when deciding the annual general rent adjustment. To do this, they calculate average expenses for a hypothetical apartment building, which has not seen sold since 1978 (Proposition 13 tax relief in effect) and in which the tenants pay their own gas and electric unit expenses. I like these reports because they provide useful information concerning changes in operating expenses. Unfortunately, after 30 years most properties have changed ownership so the property taxes are higher and there are hundreds of units where the owners pay all utility expenses. In other buildings, tenants waste water because is “free.” There should be a process where property owners can prove that their expenses are higher than those stated in the annual general rent adjustment report. One size does not fit all.

No Increases Permitted for Security Deposits: State Law permits property owners to have a have a security which is equal to two months of the rent. The Rent Board takes the position that security deposits can never be increased, and as a result, many owners are stuck with security deposits that were established years ago, or none at all. The Rent Board has no logical justification for taking the position that security deposits may never be increased. On one hand, security deposits are defined by the Rent Control Law as “rent” (although they are clearly NOT rent for a number or reasons.) Therefore, the Board gets to regulate them because they ARE defined as Rent. On the other hand, IF security deposits are “rent” then they should be treated the same way as “rent” and increased with every general adjustment.

This is another example of where the City of Los Angeles approaches the issue in a reasonable manner. When the rent is increased each year, security deposits may be increased by the same amount. As a result, there is less litigation and aggravation because most owners do not request additional security deposits and most tenants do not demand interest from the deposits. This is because one cancels out the other and most landlords and tenants are content to leave the issue alone.

Creation of New Penalties and Damage Awards for Tenants: Between 1983 and 1990 the Superior Court injunction in McHugh v. Santa Monica Rent Control Board prevented the Rent Board from imposing excess rent awards and penalties. Then, at the end of 1989 the California Supreme Court determined that the Board could lawfully award restitution but it could not impose penalties. Undeterred by the McHugh Decision, the Rent Board the Board adopted new penalties known as “general adjustment blocking” in 1990.

For example, if an owner began collecting excess rent 10 years ago and the Board determines that this was the result of a non-intentional calculation error, the ten years of general rent adjustments are included as part of the “lawful rent.” But if the Board decides that the error was intentional (which happens at least 90% of the time) the “lawful rent” remains frozen at the rent level of 10 years ago so that each general adjustment creates results more excess rent to be paid to the tenant. In many cases this penalty is worse than the treble damages penalty of the original Rent Control Law which was invalidated by the McHugh decision.

Comply with Time Limits and Eliminate All Secret Files: The Rent Control Law requires that the Board “take final action” within 120 days after any type of rent adjustment or excess rent petition is “filed.” A petition was “filed” on the date a landlord or tenant filed it. The Board followed the law for the first 15 years of rent control, but then they discovered that they could accept a petition and “deem it filed” whenever they got around to it because there is no remedy when the Board issued untimely decisions. As a result, time limitations are almost meaningless because by the time you can get a case to a court so that a judge will order the Board to “take final action” the Board will get around to doing it shortly thereafter.

For example, the Rent Board Story I wrote last month titled. “Another Dumb Dragon Decrease Decision” reported that Decrease Petition D-4392 was filed on January 31, 2008, by a tenant doing business as TerraBella travel services. She claimed (among other things); (1) the owner removed the name of TerraBella travel services from the building directory of tenants, (2) the owner only kept the Jacuzzi heated four hours every day of the year instead of twelve hours, and (3) the sauna timer was replaced so that it was only on for 25 minutes per twist of the dial. The tenant claimed that it had to be on for one hour per twist of the dial. I am writing this column on January 6, 2009, (a year after the petition was filed) and the Board has not yet scheduled the final appeal hearing. The poor tenant had to go without a heated Jacuzzi for nearly two winters.

Excess rent complaints are worse. When an excess rent complaint is filed, the Board gives it a “pre-filing” number so that the legal/administrative staff can work behind the scenes to get the owner in more trouble. For example, Excess Rent Complaint M-0975 was “submitted” by the tenants on July 23, 2008 it was “deemed filed” on October 29, 2008 and the first hearing is set for January 2009. There is no way to tell when the Board will take “final action” on the case.

The problems identified above have the following features in common.

First, none of the issues identified above exist in the City of Los Angeles. That is because the City of Los Angeles Rent Stabilization Commission functions as an administrative price control agency, not a government-funded tenants’ rights organization.

Second, none of the problems are required by the Santa Monica Rent Control Law itself. All of the problems were created by the Rent Control Board after the Rent Control Law was adopted. Nothing in the Law prohibits “short form” capital improvement rent increases, or requires that security deposits be frozen or authorizes the Board to create and apply new remedies and penalties.

Third, none of the issues identified above are reasonably related to solving the “serious housing shortage” that purportedly led to adoption of the Rent Control Law more nearly thirty years ago. Each of the policies makes it more expensive and aggravating to operate rental units in Santa Monica which can only make the “housing shortage” worse.

Unfortunately, the “serious housing shortage” is one of those problems that the most local politicians would rather not solve because its existence assures their continued political existence. However, Mr. Robert Kronovet can be a “candidate of change” because he does not benefit from continuing the class warfare. Stay tuned to this column to see what happens.