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SEC. 151.28.  ELLIS ACT PROVISIONS - RENTAL OF REPLACEMENT UNITS.
   (Added by Ord. No. 178,848, Eff. 7/16/07.)
 
   A.   Replacement Units Subject to the Rent Stabilization Ordinance.  If a building containing a rental unit that was the subject of a Notice of Intent to Withdraw pursuant to the provisions of Subsection A. of Section 151.23 is demolished and rental units are constructed on the same property and offered for rent or lease within five years of the date the rental unit that was the subject of the Notice of Intent to Withdraw was withdrawn from rent or lease, the owner may establish the initial rental rate for the newly constructed rental units.  The provisions of the Rent Stabilization Ordinance, Section 151.00, et seq., and other provisions of this chapter shall apply to the newly constructed rental units.
 
   This section shall not apply to demolished buildings containing four or fewer rental units, if the owner of the building, whose name appears on legal title to the property, is a natural person and resided in the building for three consecutive years prior to demolition, or if the building is not yet demolished, for three consecutive years prior to filing an application for exemption.  To obtain this exemption, an owner must apply to the Department for exemption pursuant to the provisions of Subdivision 3. of Subsection C. of this section.
 
   Notwithstanding any provision to the contrary contained herein, if rental units subject to the Rent Stabilization Ordinance were demolished subsequent to September 29, 2006, the effective date of these provisions, without complying with the requirements of Sections 151.22 through 151.28, then all replacement rental units constructed on the same property shall be deemed subject to the Rent Stabilization Ordinance, Section 151.00, et seq., and other provisions of this chapter.  Additionally, any landlord who is found to have demolished a property subject to the Rent Stabilization Ordinance subsequent to September 29, 2006 without complying with the requirements of Sections 151.22 through 151.28 shall be subject to a penalty to be adopted by Council.  (Added by Ord. No. 184,873, Eff. 6/4/17.)
 
   B.   Exemption from the Rent Stabilization Ordinance with Replacement Affordable Units.  (Amended by Ord. No. 184,873, Eff. 6/4/17.)  An owner who replaces the number of demolished rental units with a number of affordable housing units at least equal to the number of withdrawn rental units subject to the Rent Stabilization Ordinance on a one-for-one basis or at least 20% of the total number of newly constructed rental units, whichever is greater, may apply to the Department for an exemption of the newly constructed rental units from the provisions of the Rent Stabilization Ordinance.  The affordable housing units must be located in the newly constructed accommodations.  The Department shall issue an exemption where it finds all of the following to exist:
 
   1.   The owner executed and recorded a covenant and agreement, in a form satisfactory to the Department, guaranteeing that the replacement affordable housing units, affordable for low or very low households with an income at or below 80% of Area Median Income as established by the California Department of Housing and Community Development or any successor agency, shall remain affordable for 55 years from the date the covenant and agreement is recorded.  The covenant and agreement must contain provisions as required by the Department to ensure the effective administration and enforcement of this subsection.
 
   2.   The replacement affordable housing units shall be reasonably dispersed throughout the newly constructed accommodations and shall not be segregated in a portion of the accommodations dedicated to affordable housing units.
 
   3.   The replacement affordable housing units shall be comparable to the market rate units and contain, on average, the same number of bedrooms, bathrooms and square footage as the market rate units.  The replacement affordable housing units shall be comparable in architectural style to the average of the market rate units.
 
   Units that are used to qualify for a density bonus pursuant to the provisions of either California Government Code Section 65915 or Los Angeles Municipal Code Section 12.22 A.25., or are used to satisfy any inclusionary zoning or replacement affordable housing requirement, or are used to qualify for any other public benefit or incentive, may be used to qualify as replacement affordable housing units pursuant to the provisions of this subsection.
 
   C.   Application for Exemption from the Rent Stabilization Ordinance.
 
   1.   Hardship Exemption.  (Amended by Ord. No. 186,455, Eff. 1/15/20.)  The Department shall have the authority to grant an exemption from the provisions of this section in cases of undue financial hardship arising from detrimental reliance upon the provisions of this article before enactment of this section.  An owner claiming a hardship exemption for their multi-family project (project) must file a written application on the form(s) provided by the Department which demonstrates to the satisfaction of the Department that the criteria of either Paragraph (a) or (b) have been met:
 
   (a)   The application was filed with the Department within 90 days of June 4, 2017 (the date Ordinance No. 184,873 was enacted), and demonstrates that the hardship to the project existed as of that date; or
 
   (b)   The application is filed with the Department within 60 days of the effective date of this Paragraph (b) and demonstrates that the owner received discretionary entitlements for the project before June 4, 2017, and that at least fifteen percent (15%) of the total number of units at the project are restricted for and affordable to Very Low Income households for a term of 55 years from the date of issuance of the certificate of occupancy and the number of Very Low Income restricted units is no less than the number of rental units subject to the Rent Stabilization Ordinance demolished for the project, if any.
 
   An owner who files an application for exemption pursuant to the provisions of this subdivision shall pay to the Department an administrative fee in the amount of $160.00 for each application.  The administrative fee shall be used to finance the costs of processing and investigating applications for exemption.
 
   2.   Replacement Affordable Housing Unit Exemption.  An owner may, at any time, apply for exemption pursuant to the provisions of Subsection B. of this section, but must do so by written application on a form provided by the Department.  If the Department issues an exemption while there are tenants residing in rental units that are subject to the provisions of the Rent Stabilization Ordinance, each of the units shall continue to be subject to the provisions of the Rent Stabilization Ordinance until all tenants in a unit voluntarily vacate the unit, or have their tenancies terminated pursuant to the provisions of Subdivisions 1., 2., 3., 4., 5., 6., 7., 9., 11., or 12. of Subsection A. of Section 151.09 of this article.
 
   An owner who files an application for exemption from the Rent Stabilization Ordinance pursuant to the provisions of this subdivision shall pay to the Department an administrative fee in the amount of $705.00 for each application, plus $75.00 for each replacement affordable housing unit.  The administrative fee shall be used to finance the costs of processing and investigating applications for exemption, and continued monitoring.
 
   3.   Owner Occupancy Exemption.  An owner, whose name appears on legal title to the property, may file an application for exemption from the Rent Stabilization Ordinance on the grounds that the owner is a natural person who occupied the demolished building, which consisted of four or fewer rental units, for three years prior to the demolition of the building.  If the building has not yet been demolished, an owner may file an application for exemption from Subsection A. of Section 151.28 on the grounds that the building to be demolished consists of four or fewer rental units, and that the owner occupied the building for three consecutive years prior to filing an application for exemption.  An owner may, at any time, apply for exemption, but must do so by written application on a form provided by the Department.  If the Department issues an exemption while there are tenants residing in units that are subject to the provisions of the Rent Stabilization Ordinance, each of the units shall continue to be subject to the provisions of the Rent Stabilization Ordinance until all tenants in a unit voluntarily vacate the unit, or have their tenancies terminated pursuant to the provisions of Subdivisions 1., 2., 3., 4., 5., 6., 7., 9., 11., or 12. of Subsection A. of Section 151.09 of this article.
 
   An owner who files an application for exemption from the Rent Stabilization Ordinance pursuant to the provisions of this subdivision shall pay to the Department an administrative fee in an amount to be determined by ordinance.  The administrative fee shall be used to finance the costs of processing and investigating applications for exemption.
 
   4.   Verification of Information.  Information submitted in any written application to the Department for any of the exemptions outlined in this section, will be subject to verification and approval by the Department.
 
   D.   Appeals.  An owner who is denied an exemption from the Rent Stabilization Ordinance for an application filed pursuant to the provisions of Subsection C. of this section may appeal the denial by requesting a hearing before the General Manager.  The appeal must be filed in writing and received by the Department within 15 calendar days of the date of mailing the denial decision.  The appeal must be on a form provided by the Department and identify the grounds for appeal.  If an appeal from a decision to deny an exemption is not received by the Department within the 15 day appeal period, the decision will be final.
 
   An owner who files an appeal from an application for exemption filed pursuant to the provisions of Subdivisions 1. or 2. of Subsection C. of this section shall pay to the Department an administrative fee in the amount of $290.00 for each appeal.  An owner who files an appeal from an application for exemption filed pursuant to the provisions of Subdivision 3. of Subsection C. of this section shall pay to the Department an administrative fee in an amount to be determined by ordinance.  The fee shall be used to finance the cost of the appeal process.
 
   The General Manager's hearing shall be held within 30 days of receiving the appeal and will follow the procedures set forth in Division 8 of Article 1 of Chapter XVI of this Code.  The owner may present proof at the hearing of entitlement to an exemption, and a Department representative shall explain the reason for the denial of the exemption application.
 
   The General Manager shall issue a written decision of the appeal and may affirm, modify, or reverse the determination of the Department.  The General Manager may grant a continuance of the hearing upon a showing of good cause or where further Department investigation is warranted.
 
   E.   Authority of Department.  The Department shall be responsible for carrying out the provisions of this section and shall have the authority to promulgate and administer policies, rules, and regulations to effectuate the purposes of this section.