2009– the year to many was a tsunami. Citizens everywhere were inundated with massive government bailouts of banks, Fannie Mae & Freddie Mac, auto industry, Cash for Clunkers, stimulus packages. Billions and trillions of dollars were flushed down a rat hole, while unemployment surged to 10 %, foreclosures were astronomically high and income and property values declined precipitously.

Economists see yet another deluge in 2010 and predict a bumpy ride. So fasten your seat belts and let’s take a little spin through Santa Monica and California and try to determine what all the angst and disappointment is about.

Perhaps the greatest problems for Santa Monica owners are the ever increasing vacancies and the sliding rents. There is a sea of signs.

In Santa Monica the 1% annual general adjustment, the lowest ever, certainly didn’t bring any joy to rental property providers. Especially after the expert testimony with conclusive facts and figures from the talented ACTION speakers’ bureau. Kudos to Susan Schoen, Mat Millen, Walter Ho, Lisa Olson, Michael & Jeffrey Millman, and Jim Jacobson.

Purchasing and Posting No Smoking Signs in Common Areas
The policing ostensibly was left to tenants in the building. But the perceived health liability remains an owner’s problem.

The Ellis Task Force
The czars maintain that although owners withdrew certain properties from the rental market under the Ellis state law, they are re-renting them without City Hall’s consent. The Ellis Task Force, comprised of staff from the City Attorney’s office, Rent Control, Code Compliance Division, Police, Planning Dept., spies, bureaucrats, began meeting last year in response to disgruntled and dispossessed tenants.

The czars found 59 properties, totaling 245 units that had not been demolished or converted, with approximately 45 re-occupied without a required re-occupancy permit.
About 110 units returned the market under rent control.

RCB administrator, Tracy Condon, reported there were 513 Ellis withdrawals, comprising 2, 461 units from the inception of the state law in July, 1986 to December 31, 2008.

I read on the RCB agenda for January 14th, 2010, proposed amendments to Regulation 12060 and 13001 regarding properties with drawn under Ellis would be discussed. I didn’t attend the meeting and the proposed amendments as yet have not been posted on their website. I’ll report at our next owner education meeting, February 1.

As I commented previously, one business that is thriving despite current economic conditions is the manufacture of FOR RENT signs.

And now tenants are asking for rent reductions. Which brings us to Temporary Rent Reductions.

The question arose – Can I reduce a tenant’s rent without changing my Maximum Allowable Rent (MAR)?

The answer is yes, except for those tenants who are still in the initial term of their tenancy, usually a one-year lease. Reduction of rent in this case will reduce your MAR.

Be sure to use an ACTION form or create your own written agreement with the tenant. Be sure both parties sign.

The Rent Board cautions your agreement should include such terms as:

1. The amount of the temporary rent to be paid.
2. The number of months the temporary rent will be paid.
3. The date the agreement begins and ends and the MAR to be paid when the temporary reduction ends.
4. Acknowledgment by the owner that when the voluntary agreement has ended and the rent goes back to the MAR, the owner cannot retro actively collect the rent which was waived during the agreement.

Beware the WATER and LEAF BLOWER POLICE. Heavy fines if you get caught.

As you are probably aware, California faces a $28 Billion deficit.

Remember former senator Everett Dirksen? He’s known for some wonderful quotes. Right on point is “A billion here, a billion there, and pretty soon you are talking about real money”. Also: “We are so accustomed to millions and billions of dollars that ‘thousands’ has almost passed out of the dictionary.”

Ever thought what a difference a few zeros make?

$1,000,000
(1 Million Dollars)

$1,000,000,000
(1 Billion Dollars)

$1,000,000,000,000
(1 Trillion Dollars)