If a rent controlled unit is not the master tenant’s primary address, can the rent be raised to market rate?
Not necessarily. For the past 25 years we have written about the benefits of the Costa-Hawkins Rental Housing Act, a state law which permits an owner to impose an unrestricted rent increase when the last tenant on the rental agreement or otherwise having a direct owner-tenant relationship no longer permanently resides in the apartment and there remains in occupancy only subtenants or assignees. While this is the codified rule of law, about 15 or so years ago our Rent Board adopted a policy which permits tenants to have more than one permanent place of residency. In other words, a maser tenant could claim to reside permanently both here and in Hawaii. The result is that many landlords lose the ability to decontrol rental units where the master tenant primarily lives elsewhere.
This Rent Board “rule” is neither contained within the ordinance itself nor in the Rent Board’s official rules and regulations. However, the policy is frequently invoked when a master tenant challenges a Costa-Hawkins rent adjustment through the Rent Board’s petition process, and the Administrative Law Judge determines that the San Francisco address is still legitimately a permanent place of residency. The Rent Board has stated that nothing contained within the Costa-Hawkins law relegates a tenant to one permanent place of residency as the basis for adopting this policy. At present, hearing decisions have permitted up to two homes, yet no intention has been announced to limited a tenant’s permanent abode to two places; as such, we could see the day when a tenant may have more than two permanent residences.
This author believes that this policy is flatly wrong and should be withdrawn by the Rent Board. Yes, the state legislature did not specifically announce that a California tenant is confined to only one permanent place of residency, but common sense and logic dictate that the intent was clearly to limit rent control protection to tenants who have only one primary address: Their rent-controlled housing. Otherwise, as showcased in many Rent Board decisions, master tenants can buy out-of-area homes or begin renting in other rent- controlled cities while continuing to reap the benefits of low rent in an SF apartment that they sublet, with subtenants paying possibly most or even all of the rent remitted to the property owner.
Moreover, this policy only benefits the tenant side. Owners seeking to perform an owner move-in are required to make the recovered rental unit a principal place of residence for at least three years, and the rent law states that an owner may only have one principal place of residency. This means that an owner who splits time between two geographical regions might very well be precluded from recovering possession of an apartment via the owner move-in processes, yet a tenant may freely enjoy two residences with full rent control protections.
Add to this mess the fact that our statewide industry is expending immense resources to protect Costa-Hawkins from being repealed. Last year, we had to raise over $70 million to defeat Proposition 10, and now a similar measure appears to be headed to the 2020 ballot. In this vein, it is important that we work to keep Costa-Hawkins in place while simultaneously urging our Rent Board to halt the policy of permitting tenants to have more than one permanent place of residency.