Understanding Rent Stabilization Department Guidelines
The Rent Stabilization Department outlines regulations for fair rates of return, upward adjustments, landlord rent increases, and petitions. Learn about filing petitions, the hearing process, and how landlords can ensure a fair return on their investment.
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Presentation Transcript
Rent Stabilization Department Rent Stabilization Department Monthly 2ndTuesday Series Upward Adjustment/Fair Rate of Return March 11, 2025
Focus Rent Stabilization Department What is a Fair Rate of Return ? What is an Upward Adjustment Petition ? How do I file an Upward Adjustment Petition ? Introduction to the Hearing Process. 2
When can a Landlord Increase Rent? Rent Stabilization Department Landlords cannot charge Rent for a Covered Rental Unit in amount that exceeds sum of Base Rent plus any lawful Rent increases > Lawful Rent increases Annual General Adjustment (Section 1808) Petitions for Upward Adjustment (Sections 1813 and 1814) > Petitions for Upward Adjustment only apply to units subject to rent stabilization provisions of Article XVIII Does not apply to fully exempt units (Section 1804(a)) Does not apply to partially exempt units (Section 1804(b) and 1805) 3
What is an Upward Adjustment Petition? Rent Stabilization Department A request by a Landlord for a one-time Rent increase that is greater than the Annual General Adjustment because a greater increase is required for the Landlord to receive a fair return on their investment > Section 1801 of Article XVIII regulates excessive rent increases while ensuring Landlords a fair return on their investment > The guarantee of a fair return is constitutionally required Landlord s burden to demonstrate that the requested increase is necessary to receive a fair return 4
Section 1813: Fair Return Standard Rent Stabilization Department Article XVIII adopts the MNOI with CPI adjustment standard Two critical equations: > ??? = ????????????????? ????????????????? > ??????????????? = ???????????? ( 0.5 ? ???? ????? ) 5
Calculating NOI: Gross Rental Income Rent Stabilization Department Gross Rental Income (1813(b)(5)(B)) > Includes: gross rents and all other income/consideration received in connection with use and occupancy of Rental Unit > Excludes: utility charges for sub-metered gas, electricity or water; charges for trash/sewer; charges for laundry services; storage charges; and additional rents that are supplementary to primary rent 6
Calculating NOI: Operating Expenses Rent Stabilization Department Operating Expenses exclude: > mortgage principal or interest payments or other debt service; > any penalties pursuant to Article XVIII; > land lease expenses; > political and lobbying contributions; > depreciation; > any expenses for which Landlord has been reimbursed unreasonable increases in expenses since Base Year; > expenses associated with master-metered gas/electricity; > expenses attributable to unreasonable delays in maintenance/repairs 7
Determining CPI Increase Rent Stabilization Department Base Year CPI = Calendar year CPI for 2021 = 6.3% Current Year CPI = Calendar year CPI for calendar year preceding the calendar year the application is filed > Example: If filed in 2024, then you look at the 2023 CPI. > Total increase from 2021-2023 = 15.45% > 50 percent = 7.7% 8
Vega Adjustments Rent Stabilization Department MNOI standard presumes that Base Year NOI provided a fair return > Landlord has a right to rebut this presumption > Based on at least one of the following: Exceptional expenses in Base Year Base Year operating expenses unusually high or low compared to other years Exceptional circumstances in Base Year Gross income in Base Year was disproportionately low due to exceptional circumstances 9
Table 1: FY2021 HUD Fair Market Rents Rent Stabilization Department 10
How Do I File an Upward Adjustment Rent Stabilization Department 11
Step One (1) Determine Eligibility Rent Stabilization Department A Petition for Upward Adjustment of Rent will only be accepted if: 1. The rental property substantially complies with all the provisions of Article XVIII and the PRHB Regulations, and all applicable orders of the Department; and 2.The rental property substantially complies with California Civil Code Section 1941.1 et seq. and California Health and Safety Code Sections 17920.3 and 17920.10. 12
Step Two (2) Gather Supporting Documents and Information Rent Stabilization Department You will want to gather additional information and documentation to support your Petition. Additional information may include: Description of the facilities on the Property, including the total number of Rental Units, the number of bedrooms and bathrooms in each Rental Unit, and the occupancy status of each Rental Unit. Description of planned or completed Capital Improvements where such Capital Improvements are necessary to bring the property into compliance with applicable health and safety codes. Confirmation the Landlord provides adequate housing services and substantially complies with applicable state and local rental housing laws. Description of past rent increases or decreases for each Rental Unit. Additional documentation may include: Rent roll identifying current rents received for each Rental Unit. Documentation of operating expenses. Income and expense summaries for the three (3) years preceding the filing of the Petition. Documentation of property taxes. Documentation of unavoidable increases or decreases in maintenance and operating expenses. Documentation of substantial deterioration of the Rental Unit(s). 13
Step Three (3) Complete Petition-Do not file! Rent Stabilization Department The Petition includes the following documents: Petition Workbook Workbook You will be submitting several Excel worksheets (collectively the Workbook ) along with the Petition. Worksheets include: Worksheet 1: Tenant Contact Information Worksheet 2: Unit Information Worksheet 3: Adjusted Gross Income Worksheet 3.1: Vega Standard Base Year Worksheet 3.2 Other Income Worksheet 4: Operating Expenses Worksheet 4.1A and 4.1B: Reasonable Costs of Operation and Maintenance Worksheet 4.2A and 4.2B: Reasonable Management Expenses Worksheet 4.3: Property Related Expenses Worksheet 4.4: Utility Expenses Worksheet 4.5A and 4.5B: Capital Replacement Expenses Worksheet 4.6A and 4.6B: Owner Performed Labor Worksheet 4.7: Other Operating Expenses Worksheet 4.8: Legal Expenses Worksheet 4.9: Exceptional Expenses, if applicable Worksheet 5: Net Operating Income Worksheet 6: Maintenance of Net Operating Income Worksheet 7: Proposed Increase 14
Step Three (3) Complete Petition-Do not file! Rent Stabilization Department Closely review the petition to check that you have: Entered all information correctly. Completed the entire petition, including the Petition and Workbook. Gathered, organized, and labeled all applicable documents ensure documents are clear, legible, and easily readable. Provided explanations for all missing documents. Clearly explained any complicated issues in your Petition. 15
Step Four (4) Serve the Petition on the Tenants in the affected rental units Rent Stabilization Department Once you have completed the Petition, make copies. You will send (1) a copy of your Petition, (2) a Notice of Submission form, and (3) a completed Proof of Service to each of your Tenants. This is known as serving your Petition to your Tenants. The Proof of Service must be completed before you serve the Petition on your Tenants. This form notifies your Tenants that you are submitting a petition to the Department and the Board for a rent increase. The following methods of service may be used to serve the Petition on your Tenants: Mailing your Petition and Proof of Service Form by first-class or certified mail. Delivering your Petition and Proof of Service personally to your Tenants or your Tenants representative of record You and your Tenants may agree to another method of service, such as electronic mail or facsimile if you regularly interact with your Tenants in this manner. 16
Step Five (5) File the Petition with the Rent Stabilization Department Rent Stabilization Department Be sure to sign your Petition before you file all of your materials. File your Petition online at File a Petition Be sure to include your completed Petition, Workbook, Proof of Service Form, and Authorized Representative Form (if applicable) in your online filing upload. File a Petition 17
File A Petition Rent Stabilization Department 18
How Do I file an Upward Adjustment Petition? Rent Stabilization Department The Downward Adjustment https://www.cityofpasadena.net/rent- stabilization/petitions-hearings/landlord- initiated-petitions/ Petitions and Hearings - Rent Stabilization Department https://www.cityofpasadena.net/rent- stabilization/petitions-hearings/landlord- initiated-petitions/ 19
What to Expect? Rent Stabilization Department What to Expect Next Within 10 days of filing your Petition, Rent Stabilization Department staff will notify all parties if the petition is accepted. Rent Stabilization Department staff may schedule an informal staff review of the Petition with the Petitioner. After your Petition is accepted, a Hearing Officer will be assigned to your case. Prior to any Hearing, there will be two (2) mandatory prehearing meetings: (1) a Prehearing Settlement Conference and (2) a Prehearing Conference with all parties. The Prehearing Settlement Conference provides the parties an opportunity to settle before progressing to a Hearing. The Prehearing Conference is a separate meeting where the Hearing Officer will explain the Hearing procedures and inform the parties if additional information will need to be submitted before the Hearing. The Hearing officer will schedule a Hearing to be held on a date no more than 60 calendar days after the acceptance of your completed Petition or 60 days after the completion of a Prehearing Settlement Conference, whichever is later. The Hearing Officer shall issue and mail a decision to all parties within 60 calendar days after the date the Hearing record is closed. The decision of the Hearing Officer shall be final unless a party files a timely appeal to the Rental Housing Board. 20
The Hearing Process Rent Stabilization Department Prehearing Settlement Conference > Prior to the hearing the parties to the Petition for Individual Rent Adjustments shall participate in a Prehearing Settlement Conference with a Hearing Officer. 21
The Hearing Process Rent Stabilization Department Prehearing Conference (Like Trial Setting Conference) > Telephone or Teleconferencing > Parties and their representatives > Hearing officer will: explain the process; and Describe the burden of proof. > Hearing officer may: Briefly review the elements of the petition and review evidence or lack thereof; Formalize a schedule to submit evidence or arguments; and Address any scheduling issues. 22
Hearing Process Rent Stabilization Department Written Order for Pre-Hearing Process > Summary of the conference > If the hearing officer discusses elements and requests additional evidence from the party with the burden of proof, the written order must inform the party of three (3) options to respond: Proceed with the hearing process; Withdraw the petition or concede the challenge of the petition (a new petition can be brought); and Request an extension-postpone in order to submit additional evidence. 23
The Hearing Process Rent Stabilization Department The hearing officer may: > Order or conduct an inspection. > Both parties must have an opportunity to be present Additional submissions > Up to ten (10) calendar days prior to the hearing Stipulations > Can be made amongst the parties Prehearing Motions and Accommodations Interpretation and translation 24
The Hearing Process Rent Stabilization Department Hearings are held: > within sixty (60) calendar days after the acceptance of a completed petition; or > Sixty (60) calendar days after the completion of a prehearing settlement conference; > whichever is later. The Department will provide a hearing notice within fourteen (14) calendar days prior to the hearing date. > Virtual Conference platform can be included as a hearing place. > Reasonable accommodations. 25
The Hearing Process Rent Stabilization Department The hearing officer will issue a decision within sixty (60) calendar days after the hearing is closed. 26
The Hearing Process Rent Stabilization Department Appeal > Any party may appeal a petition to the Board > Request-for-Appeal-of-Petition-Hearing- Decision.pdf > Steps 1. Complete the Request for Appeal Form. 2. Serve the Request for Appeal Form on all other parties. 3. File the Request for Appeal with the completed proof of service. 27
Thank you Rent Stabilization Department Reach us for Registration at: 626-744-7999 https://pasadenarentalregistry.3dienga ge.com/ Reach out to a Housing Counselor-: https://www.cityofpasadena.net/rent- stabilization/contact-housing- counselor/ Rent Stabilization Department Website: https://www.cityofpasadena.net/rent- stabilization/ 28
