RELOCATION FEES DEBACLE

Last month, this column told the story about the incredibly dumb and/or malicious Rent Board hearing examiner who awarded a monthly rent decrease of $40 for “Loss of laundry room” plus $10 for “Deteriorated paint in the laundry room” which resulted in a total rent decrease of $50 per month. That decision awarded the tenant received a rent decrease for the condition of paint inside a laundry room, which he could not even see because he was locked out of it. Just as I finished writing that story, I received another incredible Decision from the same hearing examiner. That decision was from a rent increase petition filed by landlord “Romeo.”

I don’t file many rent increase petitions any more. Once the Costa-Hawkins vacancy decontrol act was passed, the Rent Board decided that rent increase petitions were nothing but a nuisance and the level of lying, cheating and changing the rules in those decisions became so bad that it became a waste of time for most owners to file them. However, Romeo had a couple of tenants who had so much fun driving up the operating expenses for a house that he managed that for the past five years, that the operating expenses were higher than the potential gross income during that time. Although I could write pages about the days of hearings and the stealing that took place in that decision, I am only going to comment upon one issue in this Column. That issue is the tenant relocation fees.

Many apartment owners may not yet not realize it, but in the spring of 1999, our illustrious Soviet Monica City Council decided that there was a serious housing emergency because too many owners were fixing up their buildings to receive market rents. So they decided to adopt a Temporary Relocation Fees Ordinance to be certain that tenants were paid for all their expenses if they had to vacate their rental units while construction was taking place. The Relocation Fees Ordinance is very generous. Santa Monica Municipal Code section 4.36.100 (a) and (b) require that, “ If a landlord is required to temporarily recover possession of a rental housing unit… the landlord shall relocate the tenant to a motel or hotel accommodation which is safe, sanitary, located in Santa Monica, and contains standard amenities such as a telephone. The landlord shall bear the full cost of this accommodation and also provide the tenant with vouchers for food, laundry, and pet accommodations….” Subsection (c) states, “ Moving costs shall consist of all actual reasonable costs of moving, including, transportation of personal property, packing and unpacking, insurance of personal property while in transit, compensation for any damage occur-ring during moving, storage of personal property, disconnection and reconnection of utility services and any other additional costs attributable to a tenant’s special needs, including needs resulting from disability or age. [Emphasis added]

Additionally, Municipal Code at Section 4.36.090 contains the following provisions for those landlords who decide to argue the point with the tenants:

(b) Any landlord who fails to provide relocation assistance as required by Sections 4.36.040, 4.36.050, 4.36.070, and 4.36.100 of this Chapter shall be liable in civil action to the tenant to whom such assistance is due for damages in the amount of the relocation fee the landlord has failed to pay, a civil penalty in the amount of five hundred dollars and reasonable attorney’s fees and costs as determined by the court. The court may also award punitive damages in a proper case as defined by Civil Code Section 3294. Any person, including the City, may enforce the provisions of this Chapter by means of a civil action.

(c) Any person violating any of the provisions or failing to comply with the requirements of this Chapter shall be guilty of a misdemeanor.

The Santa Monica Municipal Code makes it clear that it is not worth the risk of arguing about relocation fees demanded by tenants, and it made no sense for Romeo to argue the point with the tenants in his case. After receiving a threatening call from the City Attorney’s office he wrote the tenants a check for $1,000.00 based upon relocation fees at $100 per day with the remainder to be paid upon receiving expense receipts from the tenants. Between December 17, 2000 and March 2001, the tenants demanded and received $6,065.61 for food lodging and storage of personal items. The tenants had such a great time at the hotel that they would not move back into the unit until two days after the work was completed and they were free to return. Romeo decided that rather than fight the tenants and City Attorney over relocation fees, he would include the expenses in Rent Increase Petition I-1478, which we filed on September 28, 2001. The tenants responded by filing a small claims court action in which they demanded an additional $735 for food expenses.

Romeo’s rent increase petition for the one rental unit at issue went through three days of hearings. The tenants brought an attorney who argued about most of the expenses, but nothing was said about the relocation fees expenses. After all, what could the tenants say about that issue? They called the City Attorney’s office and demanded the fees in the first place. They submitted the bills and receipts. They chose the hotels and storage areas. They could not argue that $6,065.61 was an unreasonable amount when they were demanding an addi-tional $735 at the small claims court. So the tenants had no defense.

Unfortunately, although the tenants made no defense to the relocation expenses, they did not need any defense because their case was assigned to the “Left-Headed Hearing Examiner.” The same hearing examiner I told you about last month. The same one who gave a rent decrease because tenants were locked out of a laundry room and gave an additional rent de-crease because the inside of that room needed to be painted. She decided that it was unreasonable for Romeo to pay the amounts the tenants demanded and received and so she disallowed $808.00 and amortized the remaining expense over five years.

The treatment of Romeo’s relocation fees demonstrates why so few people bother to file rent increase petitions with the Rent Board any more. If you can’t successfully claim amounts demanded by tenants and paid directly to them under the threat of punitive damages and criminal penalties made by the City Attorney’s office, how do you convince a biased and unreasonable hearing examiner that your other expenses are “reasonable and necessary”?

It should not be implied from this Column that Romeo’s rent increase petition was unsuccessful. On one hand, a rent in-crease of $455 per month is a pretty good rent increase. On the other hand, the total rent after the increase is $977, which is still pretty low rent to live in a single family house three blocks from the ocean in Santa Monica. Or looking at it another way, if you had operating expenses for five years that were greater than the rental unit’s annual potential gross income, you better get a rent increase or it will be obvious to almost any judge who reviews the case on appeal that some-thing is wrong with the Board’s rent increase process. It would seem that no return for five years could not possibly be a “fair return” on investment.

Unfortunately, when it comes to Rent Control, the obvious is often obscure.

And if you don’t believe it, go to the Rent Board and read Rent Board Case I-1478.