Subdividing a Home

I own a single-family home, which I use as an office, but live elsewhere. I rent out the bedrooms, but there is no master tenant. Does my building fall under rent control?

Many owners mistakenly believe that single-family homes are exempt from rent control.  In most instances, if the home was built before June 13, 1979, some form of rent control applies.  The rent law consists of two parts:  eviction control, which restricts the reasons for terminating a tenancy to one of the 15 “just cause” grounds contained in the Rent Ordinance, and price control, which limits the amount of rent increases to the annual allowable (and banked) percentages and approved pass-through sums pursuant to landlord petitions.  Under the state’s Costa-Hawkins Rental Housing Act, single-family homes and condominiums may be exempt from price control if the tenancy began on or after January 1, 1996, but eviction control would still apply.

However, owners who choose to subdivide their single-family home by renting out rooms under separate tenancy agreements give up their exemption to price control, as the home now consists of multiple rental units.  Costa-Hawkins excuses single rental dwellings that are contained within a home or condominium, but the exemption fails when they have been converted through use into more than one dwelling.   It makes no difference if the neighborhood is zoned for single-family occupancy, or if the landlord’s subdivision violates the Planning Code.  Rather, the rent law considers what the owner is actually doing with the property and disregards whether or not this use has been sanctified by the local government.

The Rent Board’s regulations allow an owner who resides in a rental unit with his or her tenant to evict the tenant without just cause.  Yet in order to enjoy this privilege, the owner needs to reside with the tenant as a roommate.  In this instance, the owner concedes that the home is used as an office.  Therefore, the benefit of this regulation does not apply.  Similarly, a non-owner master tenant may evict his or her subtenant without just cause, provided that the subtenant was provided with a written disclosure of this rule at the inception of the tenancy.  Without such a written notification, full eviction control applies.

In sum, this home is subject to both prongs of the rent control law because the owner resides elsewhere and has separately rented out rooms to multiple tenants. Landlords, when deciding to lease a condominium or home that is otherwise subject to rent control, should always rent it as a single tenancy so as to preserve the ability to raise rents beyond the law’s limitations.  You can be generous with roommate allowances, but never subdivide the property.  Finally, if you are going to live with your tenants, make sure that your renters are roommates, meaning they share the common areas with you so that their occupancy can be terminated without just cause.

 

–Dave Wasserman  

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