A. Authority of the Department.
1. The Department, in accordance with such regulations and guidelines as the Commission may establish, shall have the authority to grant adjustments in the rent for a rental unit or units located in the same housing complex upon receipt of an application for an adjustment filed by the landlord of the unit or units if it finds that one or more of the grounds set forth in this Subdivision exist. Nothing in this Section shall prevent the Department from granting rent adjustments under more than one provision of this Section, provided the rent adjustments are for different work or improvements. The Department shall not grant a rent adjustment for a rental unit under more than one provision of this Section for the same work or improvement. The Department shall not process any applications for rent adjustments under this Section if the landlord has not paid all outstanding fees imposed pursuant to Section 151.05, Section 161.352 and Section 161.901 of this Code. (Amended by Ord. No. 184,080, Eff. 2/19/16.)
a. That on or after April 1, 1978, the landlord has completed a capital improvement with respect to a rental unit and has not increased the rent to reflect the cost of such improvement. If the Department so finds, the landlord shall be entitled to a permanent monthly rent increase of 1/60th the average per unit capital improvement cost; provided, however, any rent adjustment for a capital improvement granted by the Department between February 13, 1981, and May 31, 1982, shall terminate after five (5) years.
Except that, for any capital improvement work for which a rent increase application is filed with the Department on or after October 1, 1989 the landlord shall only be entitled to a temporary monthly rent increase of 1/60th of fifty percent (50%) of the average per unit capital improvement cost for a period not to exceed six (6) years.
This temporary monthly surcharge shall not exceed $55.00 per month for each rental unit unless agreed upon in writing by a landlord and a tenant. If the surcharge, as calculated under the above formula, would exceed $55.00 per month, then the surcharge period of six (6) years may be extended until the allowable capital improvement expenses are recovered. This surcharge shall not be included as part of the Maximum Adjusted Rent for purposes of calculating the automatic rent adjustment pursuant to Section 151.06 D.
Any capital improvement rent increase or surcharge approved by the Department shall terminate if the Department determines that there has been a complete failure of a capital improvement. The Commission may adopt regulations to implement this provision.
For the purposes of this provision, Seismic Retrofit Work shall not qualify as a Capital Improvement.
EXCEPTION:
This paragraph shall not apply in the following circumstances:
If the rental unit is the subject of a notice of noncompliance sent to the Franchise Tax Board pursuant to Section 17274 of the Revenue and Taxation Code, and the work is to correct the violations that were the subject of the Notice.
If the rental unit is the subject of a notice of rent reduction or a notice of acceptance into the Rent Escrow Account Program issued pursuant to Section 162.00, et seq. of this Code, and the work is to correct the conditions that caused the placement.
If the rental unit is the subject of a criminal conviction related to the landlord's failure to comply with a citation or order issued by the Department, the Department of Building and Safety, Fire Department, or Department of Health with respect to the subject rental unit, and the work is to correct the conditions that caused the conviction.
b. That on or after April 1, 1978, the landlord has completed rehabilitation work with respect to a rental unit and has not increased the rent to reflect the cost of the improvement. If the Department so finds, the landlord shall be entitled to a permanent monthly rent increase of 1/60th of the average per unit rehabilitation cost; provided, however, any rehabilitation work begun prior to June 1, 1982, shall be entitled to rent increases of 1/36 of the average per unit rehabilitation cost. Moreover, any rental adjustment for rehabilitation work granted by the Department between February 13, 1981 and May 31, 1982, shall terminate after 3 years.
Except that, for any rehabilitation work for which a rent increase application is filed with the Department on or after January 1, 1999, the landlord shall only be entitled to a temporary monthly rent increase of 1/60th of the average per unit rehabilitation cost for a period not to exceed five years, provided, however, where the landlord has obtained a rehabilitation loan, the landlord shall only be entitled to a temporary monthly rent increase amortized over the life of the loan which is calculated based only on the loan's principal.
This temporary monthly surcharge shall not exceed $75.00 per month or 10% of the Maximum Adjusted Rent, whichever is less, for each rental unit unless agreed upon in writing by a landlord and a tenant. If the surcharge, as calculated under the above formula, would exceed $75.00 per month or 10% of the Maximum Adjusted Rent, whichever is less, then the surcharge period of five years may be extended until the allowable rehabilitation expenses are recovered. If the landlord receives a loan made with public funds to do the rehabilitation work, and that loan allows for deferment of the loan repayment, the surcharge shall also be deferred for the same amount of time. This surcharge shall not be included as part of the Maximum Adjusted Rent for purposes of calculating the automatic rent adjustment pursuant to Section 151.06 D.
Any rehabilitation rent increase or surcharge approved by the Department shall terminate if the Department determines that there has been a complete failure of the rehabilitation work. The Commission may adopt regulations to implement this provision.
For the purposes of this Paragraph, work required for compliance with Section 91.8805 of this Code shall not be eligible as rehabilitation work.
For the purposes of this provision, Seismic Retrofit Work shall not qualify as Rehabilitation Work.
c. That on or after the effective date of this amendment, the landlord has completed Primary Renovation Work and any Related Work in conformance with a Tenant Habitability Plan accepted by the Department and has not increased the rent to reflect the cost of such improvement. For the purposes of this provision, any portion of the Primary Renovation Work and Related Work paid for with public funds is not eligible for this monthly rent increase until the landlord is immediately obligated to repay the public funds.
If the Department so finds, the landlord shall be entitled to a permanent monthly rent increase that shall not exceed the lesser of:
(i) 100% of the Average Per Unit Primary Renovation Work Cost amortized in accordance with a term schedule established by the Commission and an interest rate corresponding to the monthly composite rate for average yields from the sale of ten-year constant maturity U.S. government securities plus one full percentage point; or
(ii) 10% of the Maximum Adjusted Rent at the time an application for a rent increase was filed.
The maximum 10% rent increase permissible under this provision may be imposed no more than once during the tenancy of any tenant household with an annual income at or below 80% of the Area Median Income as established by the U.S. Department of Housing and Urban Development for the Los Angeles-Long Beach primary metropolitan statistical area. For all other tenants, the Commission may promulgate regulations with respect to the number of times during any tenancy that the maximum 10% rent increase may be imposed.
For the purposes of this provision, costs associated with Primary Renovation Work shall include the documented incurred costs for Primary Renovation Work, Related Work, and temporary relocation of tenants undertaken in accordance with an accepted Tenant Habitability Plan.
Any rent increase granted pursuant to this provision shall be imposed in two equal increments over a two-year period. Upon receipt of the Department's approval of a primary renovation rent increase, the landlord may impose the first increment after providing notice to each affected tenant pursuant to Section 827 of the California Civil Code. The second increment may be imposed no earlier than 12 calendar months after the first increment is imposed and after providing notice to each affected tenant pursuant to Section 827 of the California Civil Code.
For the purposes of this provision, Seismic Retrofit Work shall not qualify as Primary Renovation Work.
EXCEPTION:
This paragraph shall not apply in the following circumstances:
If the rental unit is the subject of a notice of noncompliance sent to the Franchise Tax Board pursuant to Section 17274 of the Revenue and Taxation Code, and the work is to correct the violations that were the subject of the Notice.
If the rental unit is the subject of a notice of rent reduction or a Notice of Acceptance into the Rent Escrow Account Program issued pursuant to Section 162.00, et seq. of this Code, and the work is to correct the conditions that caused the placement.
If the rental unit is the subject of a criminal conviction related to the landlord's failure to comply with a citation or order issued by the Department, the Department of Building and Safety, Fire Department, or Department of Health with respect to the subject rental unit, and the work is to correct the conditions that caused the conviction.
If the rental unit is the subject of a citation or order from a government agency to abate hazardous materials and the citation or order is issued before the acceptance of a Tenant Habitability Plan by the Department.
d. That on or after the effective date of this amendment, the landlord has completed Seismic Retrofit Work and any Related Work in conformance with a Tenant Habitability Plan accepted or waived by the Department and has not increased the rent to reflect the cost of such improvement. For the purposes of this provision, any portion of the Seismic Retrofit Work and Related Work paid for with public funds is not eligible for this monthly rent increase until the landlord is immediately obligated to repay the public funds.
If the Department so finds, the landlord shall be entitled to a temporary monthly rent surcharge that shall be 50% of the Average Per Unit Seismic Retrofit Work Cost amortized over 120 months in accordance with a term schedule established by the Commission and an interest rate corresponding to the monthly composite rate for average yields from the sale of ten-year constant maturity U.S. government securities plus one full percentage point; provided, however, that any rent adjustment for Seismic Retrofit Work granted by the Department shall terminate after ten (10) years.
Except that a temporary monthly rent surcharge shall not exceed $38.00 per month for each rental unit unless agreed upon in writing by and between a landlord and a tenant. If the temporary monthly rent surcharge, as calculated under the above formulas, would exceed $38.00 per month, then the temporary monthly rent surcharge period of ten (10) years may be extended until the allowable Seismic Retrofit Work expenses are recovered. This temporary monthly rent surcharge shall not be included as part of the Maximum Adjusted Rent for purposes of calculating the automatic rent adjustment pursuant to Subsection D. of Section 151.06.
For the purposes of this provision, costs associated with Seismic Retrofit Work shall include the documented incurred costs for Seismic Retrofit Work, Related Work, and temporary relocation of tenants undertaken in accordance with an accepted Tenant Habitability Plan.
For the purposes of this provision, if a landlord obtains and/or receives, at any time, compensation for any portion of the money spent on Seismic Retrofit Work, including, but not limited to, insurance, court-awarded damages, federal or state subsidies, grants, cash rebates, and federal or state tax credits (other than tax deductions and depreciation), this compensation must be deducted from the cost (or remaining cost) of the Seismic Retrofit Work before amortizing the costs among the units.
EXCEPTION:
This paragraph shall not apply in the following circumstances:
If the rental unit is the subject of a notice of noncompliance sent to the Franchise Tax Board pursuant to Section 17274 of the Revenue and Taxation Code, and the work is to correct the violations that were the subject of the Notice.
If the rental unit is the subject of a notice of rent reduction or a Notice of Acceptance into the Rent Escrow Account Program issued pursuant to Section 162.00, et seq. of this Code, and the work is to correct the conditions that caused the placement.
If the rental unit is the subject of a criminal conviction related to the landlord's failure to comply with a citation or order issued by the Department, the Department of Building and Safety, Fire Department, or Department of Health with respect to the subject rental unit, and the work is to correct the conditions that caused the conviction.
If the rental unit is the subject of a citation or order from a government agency to abate hazardous materials and the citation or order is issued before the acceptance of a Tenant Habitability Plan by the Department.
2. Procedures for Departmental Review of Adjustment Requests. (Amended by Ord. No. 184,080, Eff. 2/19/16.)
a. Applications. An application for a rent adjustment under this subsection shall be made within twelve months after the completion of the work. The application shall be filed with the Department upon a form and with the number of copies prescribed by the Department and shall include, among other things, the addresses and unit numbers of the unit or units for which an adjustment was requested. If the rent adjustment request is the result of the same Capital Improvement, Primary Renovation Work, Seismic Retrofit Work, or Rehabilitation Work, the application may include all rental units in a housing complex for which an application for a rent increase is filed.
The applicant shall produce at the request of the Department such records, receipts or reports as the Department may deem necessary to make a determination on the adjustment request. Failure to produce requested items shall be sufficient basis to terminate the rent adjustment proceedings. All applications shall be accompanied by a declaration stating that the above information is true and correct.
An application for a rent adjustment under this subsection shall be accompanied by a $25.00 filing fee. The landlord shall not recover this filing fee from any tenant. The requirement to pay this fee shall not apply to the first application for the housing complex made by a landlord within a calendar year pursuant to this subsection.
b. Notice. Upon receipt of a completed rent adjustment application under the provisions of Subsections a., b., c., d., or e. of Section 151.07(A)(1) of this Code, the Department shall notify the tenant or tenants of the subject unit or units by mail of the receipt of such application, the amount of the requested rent increase, the landlord's justification for the request, a tenant's right to submit written objections to the adjustment request within 10 days of the date of mailing such notice, and of the address to which the objections may be mailed or delivered.
c. The Department shall, within 60 days of the receipt of a completed application, make a determination on the application for rent adjustment. The determination shall be either to approve, modify, or disapprove the requested rent adjustment. Copies of the findings and determination of the Department shall be mailed by the Department to the applicant and all affected tenants. Said findings and determination shall provide that any rent increases approved on or after January 1, 1981 for capital improvements, rehabilitation work begun prior to June 1, 1982, or Seismic Retrofit Work shall not be included as part of the Maximum Adjusted Rent for purposes of computing rent increases pursuant to Section 151.06 of this chapter.
3. Requests for Hearing.
a. The determination of the Department shall be final unless a request for hearing is filed by or on behalf of the applicant or an affected tenant, and such request is received by the Department within 15 days after the mailing of the findings and determination. A request for hearing shall be in writing and filed in the office of the Department upon a form and with the number of copies required by the Department. Each request for hearing shall be accompanied by a filing fee in the amount of $35.00. (Amended by Ord. No. 164,167, Eff. 12/12/88.)
b. A request for hearing shall set forth specifically, wherein the requesting party believes there was error or abuse of discretion by the Department in ruling on the application for a rent increase. Additionally, a request for hearing may be made based on new, relevant information which was not submitted to the Department at the time of the initial determination due to mistake, surprise, inadvertence, or excusable neglect, and which information would have affected the determination of the Department if it had been submitted earlier. The filing of a request for hearing by a tenant or tenants will not stay the effect of the determination of the Department. However, any increase collected by the landlord pursuant to the Department’s determination but not approved by the hearing officer shall be forthwith refunded by the landlord to the tenant or tenants from whom such rent increases were collected, or offset by the landlord against the next legally due rental payment. (Amended by Ord. No. 156,597, Eff. 5/20/82, Oper. 5/15/82.)
c. If a request for hearing is received by the Department within the 15 day period, then the requested hearing shall be held within 30 days of the receipt of the request by a hearing officer designated by the Department. Notice of the time, date and place of the hearing shall be mailed by the Department to the applicant and tenants of the subject rental units at least 10 days prior to the hearing date. (Amended by Ord. No. 156,597, Eff. 5/20/82, Oper. 5/15/82.)
d. The hearing shall be conducted by a hearing officer designated by the Department. At the time of the hearing the landlord and/or any affected tenant may offer such documents, testimony, written declarations or evidence as may be pertinent to the proceedings.
e. In making a determination on an application for rent increase, the designated hearing officer shall make a written determination upholding, reversing or modifying the determination of the Department. If the determination is to reverse or modify the determination of the Department, the hearing officer shall specifically set forth the reasons or such reversal or modification.
f. Time Limit. A final decision shall be made by the hearing officer within 45 days of the termination of the time for filing of a request for hearing. The Department shall mail copies of the findings and determination of the hearing officer to the applicant and all affected tenants. Said findings and determination shall provide that any rent increases approved on or after January 1, 1981 for capital improvements or rehabilitation work begun prior to June 1, 1982 shall not be included as part of the maximum adjusted rent for purposes of computing rent increases pursuant to Section 151.06 of this chapter. (Amended by Ord. No. 156,597, Eff. 5/20/82, Oper. 5/15/82.)
4. Limitation on Rent Adjustment. (Added by Ord. No. 154,808, Eff. 2/13/81.)
a. (Amended by Ord. No. 156,597, Eff. 5/20/82, Oper. 5/15/82.) For every rental unit which experiences a rent increase based on capital improvement and/or rehabilitation work begun prior to June 1, 1982 and also approved by the Department after February 13, 1981:
The Department shall mail a notice to the landlord of the rental unit indicating that the Department will issue a written order to the landlord requiring the termination of the rent increase after the cost of the work has been fully recovered, unless it determines that the rental unit became eligible for a rent increase pursuant to Section 151.06 C. or that a reduction in rent would work an undue hardship on the landlord.
b. An application for relief from the proposed order may be made within 30 days after the mailing of the notice in accordance with such procedures as the Commission may establish.
c. For any rental unit for which a capital improvement rent adjustment was granted by the Department between February 13, 1981 and May 31, 1982, and for which a hardship exemption was granted pursuant to Section 151.07 A.4.a., said capital improvement rent adjustment shall terminate upon the effective date of this amendment. The landlord shall, within ten days of the effective date of this amendment, serve a written notice of termination of the capital improvement rent adjustment to all affected tenants setting forth the amount of increase which is to be terminated. (Added by Ord. No. 163,832, Eff. 8/25/88.)
5. The Department in accordance with such guidelines as the Commission may establish, shall have the authority to grant certificates of exemptions for luxury housing accommodations and substantial renovation work In processing an application for exemption, the Department shall afford both landlords and tenants notice and an opportunity to be heard prior to the issuance of a certificate of exemption. An application for a certificate of exemption shall be accompanied by a $25.00 filing fee. After August 31, 1982, no unit shall be exempt pursuant to Sections 151.02 M.7. or M.8. without first obtaining a certificate of exemption. Pending completion of the processing of an application for a certificate of exemption, the Department may issue a temporary certificate of exemption for housing accommodations. (Amended by Ord. No. 164,167, Eff. 12/12/88.)
6. (Subdiv. 6 Added by Ord. No. 159,908, Eff. 6/30/85, Oper. 7/1/85.) On or before May 30, of each year, the Department shall publish in a newspaper of general circulation the annual rent increase adjustment for any rent increase imposed pursuant to Section 151.06 D. of this chapter for the following twelve (12) month period beginning on July 1 and ending on June 30. The Department shall calculate this adjustment as follows:
The annual rent increase adjustment shall be based on the Consumer Price Index – All Urban Consumers for the Los Angeles-Long Beach-Anaheim-SMSA averaged for the previous twelve (12) month period ending September 30 of each year. It shall reflect the change in the Consumer Price Index over the previous consecutive twelve (12) month period expressed as a percentage and rounded off to the nearest whole number. If the calculated adjustment is three percent (3%) or less, the Department shall set the annual rent increase adjustment at three percent (3%) but, if the calculated adjustment is eight percent (8%) or greater, the Department shall set the annual rent increase adjustment at eight percent (8%).
7. Re-rental Certificates. (Repealed by Ord. No. 176,544, Eff. 5/2/05.)
8. The Commission shall promulgate regulations to establish the health, safety, and habitability standards which shall be followed for any Capital Improvement, Primary Renovation Work, Seismic Retrofit Work, Related Work, or Rehabilitation Work performed while a tenant is residing in the rental unit. These regulations shall include, but not be limited to, provisions regarding advanced notification, security, fire standards, pest control, the operation of dangerous equipment, utility interruptions, the use of potentially dangerous construction materials, and the protection of tenants and their property from exposure to natural elements. (Amended by Ord. No. 184,080, Eff. 2/19/16.)
9. The Commission shall have the authority to adopt any regulations necessary to implement this section. (Added by Ord. No. 184,080, Eff. 2/19/16.)
B. Authority of the Commission and Hearing Officers.
1. (Amended by Ord. No. 156,597, Eff. 5/20/82, Oper. 5/15/82.) A designated hearing officer shall have the authority, in accordance with such guidelines as the Commission may establish, to grant increases in the rent for a rental unit, or for two or more rental units located in the same housing complex, upon receipt of an application for adjustment filed by the landlord and after notice and hearing, if the hearing officer finds that such increase is in keeping with the purposes of this chapter and that the maximum rent or maximum adjusted rent otherwise permitted pursuant to this chapter does not constitute a just and reasonable return on the rental unit or units. The following are factors, among other relevant factors as the Commission may determine, which may be considered in determining whether a rental unit yields a just and reasonable return:
a. property taxes;
b. reasonable operating and maintenance expenses;
c. the extent of capital improvements made to the building in which the rental unit is located as distinguished from ordinary repair, replacement and maintenance;
d. living space, and the level of housing services;
e. substantial deterioration of the rental units other than as a result of ordinary wear and tear;
f. failure to perform ordinary repair, replacement and maintenance; and
g. financing costs on the property if such financing was obtained prior to June 1, 1978 and if it contains either a balloon payment or variable rate provision.
2. Anti-Speculation Provision. If the only justification offered for the requested rent increase on the landlord’s application is an assertion that the maximum rents or maximum adjusted rents permitted pursuant to this chapter do not allow the landlord a return sufficient to pay both the operating expenses and debt service on the rental unit or units or on the housing complex containing the rental unit or units, a rent adjustment will not be permitted pursuant to this subsection to a landlord who acquired an interest in the rental unit or units after October 1, 1978.
3. Procedures.
a. An application for rent adjustment shall be submitted on a form and with the number of copies prescribed by the Department and shall include among other things the addresses and unit numbers of the unit or units for which an adjustment is requested. Such application may include all rental units in a housing complex for which a rent increase is requested. Each application shall be accompanied by a $25.00 filing fee. An applicant shall produce at the request of the Department or hearing officer to whom the matter is assigned such records, receipts or reports as the Department or hearing officer may deem necessary to make a determination on the adjustment request. Failure to produce such requested items shall be sufficient basis for the Department or hearing officer to terminate the rent adjustment proceeding. All applications shall be accompanied by a declaration stating that the above information is true and correct. (Amended by Ord. No. 164,167, Eff. 12/12/88.)
b. Upon receipt of a completed application, the application shall be referred by the Department to a hearing officer for processing and determination. The Department shall notify by mail the tenant or tenants of the subject unit or units of the receipt of such application, the amount of the requested rent increase, the landlord’s justification for the request, and the place, date and time of the hearing on the adjustment request. The hearing shall be set no less than 10 days nor more than 45 days after the date of mailing such notice.
c. The hearing shall be conducted by a hearing officer designated by the Department. At the time of the hearing the landlord and/or any affected tenant may offer such documents, testimony, written declarations or evidence as may be pertinent to the proceedings.
d. A determination with written findings in support thereof shall be made by the assigned hearing officer within 75 days from the date of the filing of the application. A rent adjustment may be granted for less than, but for no more than the amount requested.
e. Copies of the findings and determination of the hearing officer shall be mailed by the Department to the applicant and all affected tenants. The determination shall become final 15 days from the date of mailing unless an appeal is filed with the Commission within such period. (Amended by Ord. No. 156,597, Eff. 5/20/82, Oper. 5/15/82.)
4. Appeals.
a. Time and Manner. An appeal to the Commission from the determination of a hearing officer may be filed by the applicant or any affected tenant pursuant to this subsection within 15 days after mailing of such determination. Such appeals shall be in writing and shall be filed in the office of the Department upon a form and with the number of copies required by the Commission. Each appeal shall be accompanied by a $50.00 filing fee. An appeal shall set forth specifically wherein the appellant believes there was an error or abuse of discretion by the hearing officer. Additionally, an appeal may be made based on new, relevant information which was not submitted to the hearing officer at the time of the initial determination due to mistake, surprise, inadvertence, or excusable neglect, and which information would have affected the determination of the hearing officer if it had been submitted earlier. The filing of an appeal will not stay the effect of the hearing officer’s determination. However, any rent increases collected by the landlord pursuant to the hearing officer’s determination but not approved on appeal shall be forthwith refunded to the tenant or tenants from whom such rent increases were collected or offset against the next legally due rental payment. (Amended by Ord. No. 164,167, Eff. 12/12/88.)
b. Record on Appeal. Upon receipt of an appeal, the entire administrative record of the matter, including the appeal, shall be filed with the Commission. At any time prior to action on the appeal, the hearing officer may submit to the Commission written comments pertaining to the appeal.
c. Hearing Date and Notice. Upon receipt of the appeal, the Commission shall cause the matter to be set for hearing before three or more Commissioners acting as an appeals board, and notice shall be given by mail of the date, time, place and purpose thereof to the applicant and all affected tenants. Such notice shall be in writing and mailed at least 10 days prior to said hearing. The appeals board shall make its determination within 60 days after the expiration of the appeal period or within such extended period of time as may be mutually agreed upon by the appellant and the designated appeals board. (Amended by Ord. No. 156,597, Eff. 5/20/82, Oper. 5/15/82.)
d. Determination. If the appeals board fails to act within the time limits specified in this section, the determination of the hearing officer shall become final. The decision on appeal shall be concurred in by a majority of the appeals board. The appeals board may affirm, modify or reverse the determination of the hearing officer. It may modify or reverse such determination only upon making written findings setting forth specifically either (i) wherein the action of the hearing officer was in error or constituted an abuse of discretion, or (ii) the new information not available at the time of the hearing upon which the appellant relies, and supporting its own determination. A copy of the findings and determination shall be mailed to the applicant and to affected tenants. (Amended by Ord. No. 156,597, Eff. 5/20/82, Oper. 5/15/82.)