“PEEPING PETE” AND OTHER STRANGE BEDFELLOWS

Rent Control Regulation 3304 has been a big topic of discussion in this magazine and at the ACTION meetings. For the first time in nearly ten years, the Board adopted a reasonable regulation that could be fair to property owners. In a nutshell, Regulation 3304 permits an owner to increase the rent fair market levels if the tenant is not using the controlled rental unit for residential purposes. For example, if the rental unit is used as an office, storage, massage parlor, etc., and the tenant lives somewhere else, a rent increase may be permitted. I use the term “may” because Regulation 3304 can only work if it is applied in a fair and reasonable manner. Whether or not that happens remains to be seen.

In theory, the Regulation 3304 petition process should be easy because the Rent Board has been deciding whether or not owners reside on their properties since 1979. This happens because owner-occupied 3-unit or less properties may be exempt from Rent Control Law if the owner(s) live in one of the units as a principle place of residence. A few times a year, the Rent Board discovers that a property owner does not actually live on the rental property and they have a public “weenie roast” where the property owner gets humiliated at a Rent Board hearing. I have seen many of these hearings, and they aren’t pretty.

When the Board wants to know if anyone is actually living in a rental unit, they usually call a Rent Board “Investigator” who is approximately named “Peeping Pete Sorvino.” He shows up on properties unannounced, peeps in windows, checks utility meters, and talks to tenants to find out if the owner really lives on the property. He is so effective that some landlords who have small children keep them from leaving their beds at night by telling them that “Peeping Pete” is under their bed and will grab them if they leave it before dawn. Yes, Peeping Pete is very effective if the objective if to prove than a property owner does not live on a property. But when the issue is whether or not a tenant lives in a unit. Pete is not so zealous or diligent.

I recently attended a hearing for a Regulation 3304 petition where “Peeping Pete” did an investigation, which was nothing like the investigation he does when he wants to know if an owner lives in a unit. When the issue is where a tenant lives, he eliminates the element of surprise. He leaves a message on the tenant’s answering service, arranges a friendly meeting shortly before the hearing and then takes photos of the rental unit with the tenants “living” in the unit.

At that hearing, I asked him if he ever alerts the landlords but not the tenants when doing these “investigations” and he said, “No.” He also testified that he was conducting about twenty investigations at that time, but he only alerted the tenants (never the owners) when he was “investigating.” Therefore, having Peeping Pete investigate where tenants live is about as useful as having Hillary Clinton investigate allegations of wrongdoing in the Whitewater real estate deal.

In addition to the lackluster “investigations,” Regulation 3304 Petitions will be hard to prove for a number of other reasons. One reason is that the owner has the “burden of proof” to prove that the tenant does not live in the rental unit. It is not easy to prove where someone else lives, especially when the Board has no interest in deciding the issue because it gets its Rent Control Registration Fees no matter who wins the dispute. Therefore, in a Regulation 3304 petition the owner has to prove that the tenant lives some other place, while the tenants have the information that would prove that fact.

Then, in order to increase the degree of difficulty, the Rent Board amended its subpoena Regulations at Chapter 15 on July 10, 2003 to make it more difficult to get Rent Board subpoenas enforced at Regulation 3304 hearings. Specifically, Regulation 15032 (c) was amended to require that the subpoenas be personally served on the party at least five days prior to the hearing. In the case I filed, Peeping Pete couldn’t even meet with the tenants five days prior to the hearing!
At the Rent Board meeting of June 26, 2003, I pointed out that the requirement of personal service should not be applied to subpoenas served on tenants who are supposed to live on the property but actually live more than 150 miles from Santa Monica property, but the Rent Board was not impressed with the argument and left that Regulation unchanged.

The final illustration of the strange problems resulting from Regulation 3304 appears in the Santa Monica Mirror for the week of July16-22, 2003. On the front page is the story of a real estate developer who plans to evict the tenants from 52 buildings and 795 rental units in Venice Beach so that he can build condominiums. Meanwhile, at page 9 of that same newspaper, that same developer is suing the Rent Board because he claims that Regulation 3304 is unlawful. He claims that he (or his wife) wife lives in Santa Monica and are Santa Monica tenants entitled to protection of the Rent Control law, although he owns at least one home in Beverly Hills.

For the reasons stated, Regulation 3304 has created some pretty strange situations and bedfellows. And if you don’ believe it, go to the Internet website for the Santa Monica Mirror at www.smmirror.com and look up the stories titled, “Battle of Lincoln Place Rages On” and “Venice Landlord Has SM Housing Problem.”