SEC. 37.7. CERTIFICATION OF RENT INCREASES FOR CAPITAL IMPROVEMENTS, REHABILITATION WORK, ENERGY CONSERVATION IMPROVEMENTS, AND RENEWABLE ENERGY IMPROVEMENTS.

In addition to other powers and duties set forth in this Chapter 37, and in addition to powers under the Charter and under other City Codes, including powers and duties under Administrative Code Chapter 49 ("Interest Rates on Security Deposits"), the Board shall have the power to:

(a) Promulgate policies, rules, and regulations to effectuate the purposes of this Chapter 37, and of Administrative Code Chapters 37B and 41D;

(b) Hire such staff, including Administrative Law Judges, as may be reasonably necessary to perform its functions, and promulgate standards for all such staff, subject to the Civil Service provisions of the Charter;

(c) Conduct rental arbitration hearings and residential hotel visitor policy hearings, and administer oaths and affirmations in connection with such hearings, with respect to rental units covered by this Chapter 37 as well as Midtown Park Apartments units as set forth in Administrative Code Chapter 37B;

(d) Publish, on March 1st of each year, the increase in the CPI for the preceding 12 months, as made available by the U.S. Department of Labor;

(e) Make studies and surveys and conduct such hearings as necessary to perform its functions;

(f) Report biannually to the Mayor and the Board of Supervisors on its activities and on progress made towards the achievement of the purposes of the Chapter;

(g) Make available to the public, on request, policies, rules and regulations, reports and surveys in accordance with applicable State law;

(h) Issue rules and regulations for the conduct of its own affairs;

(i) Be empowered to request and, if granted, to receive funds appropriated by the Board of Supervisors through the Mayor;

(j) Maintain, on at least a monthly basis, statistics on the number of notices to vacate filed with the Board pursuant to Section 37.9(c) and statistics on the causes given in such notices or in any additional written documents as provided in Section 37.9(c). Statistics shall include available data on evictions involving school-age (kindergarten through grade twelve) children, including data on whether the evictions occurred during the school term. Said statistics shall be published in a report on March 1st every year, and copies of the report shall be submitted to the Mayor and Board of Supervisors;

(k) On a monthly basis starting January 1, 2018, compile copies at random of 10% of all statements of occupancy filed with the Rent Board pursuant to Section 37.9(a)(8)(vii), and compile a list of all units for which the required statement of occupancy was not filed with the Rent Board. Said copies and said list shall be transmitted to the District Attorney on a monthly basis for investigation. In cases where the District Attorney determines that Section 37.9(a)(8) has been violated, the District Attorney shall take whatever action he or she deems appropriate under this Chapter 37 or under State law.

(l) Periodically review the Uniform Visitor Policy for Residential Hotels and determine amendments as appropriate; and hear and determine hotel operator petitions for Supplemental Visitor Policies, consistent with Administrative Code Chapter 41D (Residential Hotel Visitor Policies).

(m) Hear and decide petitions from residential hotel occupants (whether or not an occupant qualifies as a "tenant" under this Chapter 37) who allege violation of Administrative Code Chapter 41D, including alleged violations of the Uniform Visitor Policy or any approved Supplemental Visitor Policy. Current or former hotel occupants may file such petitions. These petitions may require a determination whether, and to what extent, a residential hotel's policies are in compliance with Administrative Code Chapter 41D, including compliance with the Uniform Visitor Policy.

(n) As provided by Administrative Code Chapter 39, utilize Administrative Law Judges to review relocation claims from Current Households related to a Public Housing Development Project, and make advisory recommendations thereon to the San Francisco Housing Authority for its final determination.

(o) As provided by Administrative Code Chapter 47, utilize Administrative Law Judges to hear and decide petitions from persons who dispute the Mayor's Office of Housing and Community Development's determination that such person does not qualify as a "Displaced Tenant" or a "Neighborhood Resident" (each as defined in Administrative Code Chapter 47).

(Amended by Ord. 7-87, App. 1/15/87; Ord. 347-99, File No. 992197, App. 12/30/99; Ord. 62-02, File No. 020343, App. 5/3/2002; Ord. 107-02, File No. 020296, App. 7/5/2002; Ord. 251-06, File No. 061077, App. 10/11/2006; Ord. 227-12 , File No. 120812, App. 11/7/2012, Eff. 12/7/2012; Ord. 277-13 , File No. 130968, App. 12/18/2013, Eff. 1/17/2014; Ord. 204-15 , File No. 150622, App. 12/3/2015, Eff. 1/2/2016; Ord. 160-17, File No. 170349, App. 7/27/2017, Eff. 8/26/2017; Ord. 213-20, File No. 200518, App. 10/30/2020, Eff. 11/30/2020)

SEC. 37.7. CERTIFICATION OF RENT INCREASES FOR CAPITAL IMPROVEMENTS, REHABILITATION WORK, ENERGY CONSERVATION IMPROVEMENTS, AND RENEWABLE ENERGY IMPROVEMENTS.

(a) Authority. In accordance with such guidelines as the Board shall establish, the Board and designated Administrative Law Judges shall have the authority to conduct hearings in order to certify rental increases to the extent necessary to amortize the cost of capital improvements, rehabilitations, energy conservation improvements, and renewable energy improvements. Costs determined to be attributable to such work and improvements shall be amortized over a period which is fair and reasonable for the type and the extent of the work and improvements, and which will provide an incentive to landlords to maintain, improve and renovate their properties while at the same time protecting tenants from excessive rent increases. Costs attributable to routine repair and maintenance, or any costs attributable to legalizing an existing dwelling unit under Section 207.3 of the Planning Code, shall not be certified.

(b) Requirements for Certification. The Board and designated Administrative Law Judges may only certify the costs of capital improvements, rehabilitation, energy conservation improvements, and renewable energy improvements, where the following criteria are met:

(1) The landlord completed capital improvements or rehabilitation on or after April 15, 1979, or the landlord completed installation of energy conservation measures on or after July 24, 1982, and has filed a proof of compliance with the Bureau of Building Inspection in accordance with the requirements of Section 1207(d) of the Housing Code;

(2) The landlord has not yet increased the rent or rents to reflect the cost of said work;

(3) The landlord has not been compensated for the work by insurance proceeds;

(4) The building is not subject to a RAP loan in a RAP area designated prior to July 1, 1977;

(5) The landlord files the certification petition no later than five years after the work has been completed;

(6) The cost is not for work required to correct a code violation for which a notice of violation has been issued and remained unabated for 90 days unless the landlord made timely good faith efforts within that 90-day period to commence and complete the work but was not successful in doing so because of the nature of the work or circumstances beyond the control of the landlord. The landlord’s failure to abate within the original 90-day period raises a rebuttable presumption that the landlord did not exercise timely good faith efforts. Any costs attributable to the landlord’s compliance with a Fire Life Safety Notice and Order issued by the Building Official under Sections 107A.16.1 et seq. of the Building Code or the fire code official under Sections et seq. of the Fire Code shall not be certified.

(c) Amortization and Cost Allocation. The Board shall establish amortization periods and cost allocation formulas, in accordance with this Section 37.7. Costs shall be allocated to each unit according to the benefit of the work and improvements attributable to such unit.

(1) Application Filed Before [May 1, 2002 or 60 Days Prior to Passage of This Ordinance on Second Reading, Whichever is Later]. The following provisions shall apply to all applications filed before [May 1, 2002 or 60 days prior to passage of this Ordinance on Second Reading, whichever is later].

(A) Amortization Periods. Costs shall be amortized on a straight-line basis over a seven or ten-year period, depending upon which category described below most closely relates to the type of work or improvement and its estimated useful life.

(i) Schedule I – Seven-Year Amortization. The following shall be amortized over a seven-year period: Appliances, such as new stoves, disposals, washers, dryers and dishwashers; fixtures, such as garage door openers, locks, light fixtures, water heaters and blankets, shower heads, time clocks and hot water pumps; and other improvements, such as carpeting, linoleum, and exterior and interior painting of common areas. If the appliance is a replacement for which the tenant has already had the benefit, the cost will not be amortized as a capital improvement, but will be considered part of operating and maintenance expenses. Appliances may be amortized as capital improvements when: (1) part of a remodeled kitchen; (2) based upon an agreement between the tenant and landlord; and/or (3) it is a new service or appliance the tenant did not previously have.

(ii) Schedule II – Ten-Year Amortization. The following shall be amortized over a ten-year period: New foundation, new floor structure, new ceiling or walls-new sheetrock, new plumbing (new fixtures, or piping), weather stripping, ceiling insulation, seals and caulking, new furnaces and heaters, refrigerators, new electrical wiring, new stairs, new roof structure, new roof cover, new window, fire escapes, central smoke detection system, new wood or tile floor cover, new sprinkler system, boiler replacement, air conditioning-central system, exterior siding or stucco, elevator rebuild, elevator cables, additions such as patios or decks, central security system, new doors, new mail boxes, new kitchen or bathroom cabinets, and sinks.

(B) Allowable Increase. One hundred percent (100%) of the certified costs of capital improvements, rehabilitation, and energy conservation improvements may be passed through to the tenants who benefit from such work and improvements. However no increase under this Subsection 37.7(c)(1) shall exceed, in a twelve-month period, ten percent (10%) of the tenant's base rent at the time the petition was filed or $30.00, whichever is greater. A landlord may accumulate any certified increase which exceeds this amount and impose the increase in subsequent years, subject to this 10% or $30.00 limitation.

(2) Applications Filed On or After [May 1, 2002 or 60 Days Prior to Passage of This Ordinance on Second Reading, Whichever is Later], For Qualified Energy Conservation Improvements and Renewable Energy Improvements. For Applications filed on or after [May 1, 2002 or 60 days prior to passage of this Ordinance on Second Reading, whichever is later], the following provisions shall apply to certification of costs for qualified energy conservation improvements and renewable energy improvements.

(A) Amortization Periods. Costs shall be amortized on a straight-line basis over the period of time provided in 37.7(c)(2)(B)(i),or as determined pursuant to the procedure provided in 37.7(c) (2)(B)(ii).

(B) For purposes of this Subsection 37.7(c)(2), qualified energy conservation improvements and renewable energy improvements are:

(i) 100% of new EPA Energy-Star-compliant refrigerators where the refrigerator replaced is more than five years old and where the unit has separate metering, which costs shall be amortized on straight-line basis over a ten-year period; and,

(ii) Other improvements as may be approved by the Board of Supervisors upon recommendation of the Rent Board following hearings and recommendations by the Commission on the Environment in an Energy Conservation Improvements and Renewable Energy Improvements List (List), as follows:

(I) The Commission on the Environment shall hold hearings to develop a list of recommended energy conservation improvements and renewable energy improvements that demonstrably benefit tenants in units that have separate electrical and/or natural gas metering. Such recommendations shall include consideration of cost effectiveness for tenants, appropriate amortization schedules, and permissible passthrough amounts that will encourage landlords to make such improvements.

(II) The Commission shall also consider whether the certification for each such improvement should include the entire improvement, or only that portion of the improvement cost directly attributable to energy conservation or renewable energy.

(III) The List shall take into consideration the variety and conditions of housing in the City.

(IV) The Commission on the Environment shall adopt the List at a public meeting, and shall transmit the List to the Rent Board no later than [six months after the effective date of this Ordinance].

(V) The Commission on the Environment shall periodically review and amend the List as warranted by changes in technology or conditions in the electricity and natural gas markets. Any amended List shall be transmitted forthwith to the Rent Board.

(VI) The Rent Board shall consider any such List received from the Commission on the Environment, and recommend appropriate Subsection 37.7(c)(2) amendments to the Board of Supervisors.

(3) Applications Filed On or After [May 1, 2002 or 60 Days Prior to Passage of This Ordinance on Second Reading, Whichever is Later], For Seismic Work and Improvements Required by Law, and for Work and Improvements Required by Laws Enacted After [May 1, 2002 or 60 days prior to passage of this Ordinance on Second Reading, whichever is later].

For applications filed on or after [May 1, 2002 or 60 days prior to passage of this Ordinance on Second Reading, whichever is later]:

(A) This Subsection 37.7(c)(3) shall apply to certification of costs for seismic work and improvements required by law.

(B) This Subsection 37.7(c)(3) shall apply to certification of costs for capital improvement, rehabilitation, energy conservation, and renewable energy work and improvements required by federal, state, or local laws enacted on or after [May 1, 2002 or 60 days prior to passage of this Ordinance on Second Reading, whichever is later].

(D) Allowable Increase. One hundred percent (100%) of the certified costs of capital improvement, rehabilitation, energy conservation, and renewable energy work and improvements required by law may be passed through to the tenants who benefit from such work and improvements. Any rent increases under this Section 37.7(c)(3) shall not exceed, in a twelve-month period, a total of ten percent (10%) of the tenant's base rent at the time the petition was filed or $30.00, whichever is greater. A landlord may accumulate any certified increase which exceeds this amount and impose the increase in subsequent years, subject to this 10% or $30.00 limitation.

(4) Applications Filed On or After [May 1, 2002 or 60 days prior to passage of this Ordinance on Second Reading, whichever is later], for Other Work and Improvements On Properties With Five Residential Units or Less. For applications filed on or after [May 1, 2002 or 60 days prior to passage of this Ordinance on Second Reading, whichever is later], the following provisions shall apply to certification of all work and improvements for properties containing five residential units or less, with the exception of work and improvements costs certified for passthrough under Subsections 37.7(c)(2) or (3):

(A) Amortization Periods. Costs shall be amortized on a straight-line basis over a ten, fifteen or twenty-year period, depending upon which category described below most closely relates to the type of work or improvement and its estimated useful life.

(i) Schedule I – Ten-Year Amortization. The following shall be amortized over a ten-year period: New roof structure, new roof cover, electrical heaters, central security system, telephone entry systems, new wood frame windows, new mailboxes, weather-stripping, ceiling insulation, seals and caulking, central smoke detection system, new doors and skylights; appliances, such as new stoves, disposals, refrigerators, washers, dryers and dishwashers; fixtures, such as garage door openers, locks, light fixtures, water heaters and blankets, shower heads, time clocks and hot water pumps; and other improvements, such as carpeting, linoleum, and exterior and interior painting of common areas. If the appliance is a replacement for which the tenant has already had the benefit, the cost will not be amortized as a capital improvement but will be considered part of operating and maintenance expenses. Appliances may be amortized as capital improvements when: (1) part of a remodeled kitchen; (2) based upon an agreement between the tenant and landlord; and/or (3) it is a new service or appliance the tenant did not previously have,

(ii) Schedule II – Fifteen-Year Amortization. The following shall be amortized over a fifteen-year period: New floor structure, new ceiling or walls-new sheetrock, wood decks, new stairs, new furnaces and gas heaters, new thermal pane windows, new wood or tile floor cover, new sprinkler systems, air conditioning-central system, exterior siding or stucco, elevator rebuild, elevator cables, new kitchen or bathroom cabinets, and sinks.

(iii) Schedule III – Twenty-Year Amortization. The following shall be amortized over a twenty-year period: New foundation, new plumbing (new fixtures or piping), boiler replacement, new electrical wiring, fire escapes, concrete patios, iron gates, sidewalk replacement and chimneys.

(B) Allowable Increase. One hundred percent (100%) of the certified costs of capital improvement, rehabilitation, and energy conservation work and improvements may be passed through to the tenants who benefit from such work and improvements. However, no increase under this Subsection 37.7(c)(4) shall exceed, in a twelve-month period, five percent (5%) the tenant's base rent at the time the petition was filed or $30.00, whichever is greater. A landlord may accumulate any certified increase which exceeds this amount and impose the increase in subsequent years subject to this 5% or $30.00 limitation.

(5) For Applications Filed On or After [May 1, 2002 or 60 Days Prior to Passage of This Ordinance on Second Reading, Whichever is Later], for Other Work and Improvements for Properties with Six or more Residential Units. For applications filed on or after [May 1, 2002 or 60 days prior to passage of this Ordinance on Second Reading, whichever is later], the following provisions shall apply to certification of all work and improvements for properties containing six residential units or more, with the exception of work and improvements certified under Subsections 37.7(c)(2) or (3):

(ii) Schedule II – Ten-Year Amortization. The following shall be amortized over a ten year period: New foundation, new floor structure, new ceiling or walls sheetrock, new plumbing (new fixtures or piping), weather stripping, ceiling insulation, seals and caulking, new furnaces and heaters, refrigerators, new electrical wiring, new stairs, new roof structure, new roof cover; new window, fire escapes, central smoke detection system, new wood or tile floor cover, new sprinkler system, boiler replacement, air conditioning system, exterior siding or stucco, elevator rebuild, elevator cables, additions such as patios or decks, central security system, new doors, new mail boxes, new kitchen or bathroom cabinets, sinks, telephone entry system, skylights, iron gates, sidewalk replacement and chimneys.

(B) Allowable Increase.

(i) Only fifty percent (50%) of the costs certified under this Subsection 37.7(c)(5) may be passed through to the tenants who benefit from such work and improvements. However, no increase under this Subsection 37.7(c)(5) shall exceed, in a twelve-month period, ten percent (10%) of the tenant's base rent at the time the petition was filed or $30.00, whichever is greater. A landlord may accumulate any certified increase which exceeds this amount and impose the increase in subsequent years, subject to this 10% or $30.00 limitation.

(ii) In the alternative a tenant may elect to have one hundred percent (100%) of the costs certified under this Subsection 37.7(c)(5) passed through to the tenant. In that event no increase under this Subsection shall exceed, in a twelve-month period, five percent (5%) of the tenant's base rent at the time the application was filed, and over the life of the tenancy the total increase shall never exceed fifteen percent (15%) of the tenant's base rent at the time the application was filed. A tenant must elect this alternative by filing such an election with the Board on a form prescribed by the Board. An election may be filed at any time after the application is filed but no later than fifteen (15) calendar days after the Administrative Law Judge's decision on the application is mailed to the tenant. In a unit with multiple tenants, the election form must be signed by a majority (more than 50% ) in order for the election to be accepted. If a timely election is made after a decision has been issued, an addendum to the decision will be issued reflecting the tenant's election.

(6) Development of On-Line Programs. The Board, in conjunction with the Department of Telecommunications and Information Services, shall design and implement on-line programs by September 1, 2003 to allow landlords and tenants to perform calculations concerning allowable increases for capital improvement, rehabilitation, energy conservation, and renewable energy work, and to compare average costs for work certified in prior decisions.

(d) Estimator. The Board or its Executive Director may hire an estimator where an expert appraisal is required.

(e) Filing Fee. The Board shall establish a filing fee based upon the cost of the capital improvement, rehabilitation, energy conservation improvement, or renewable energy improvement being reviewed. Such fees will pay for the costs of an estimator. These fees shall be deposited in the Residential Rent Stabilization and Arbitration Fund pursuant to Section 10.117-88 of this Code.

(f) Application Procedures.

(1) Pre-Application Notice for Large Projects for Parcels or Buildings Containing Six or More Residential Units. If at any time prior to filing an application the landlord determines that the total cost of a project for a parcel or a building containing six or more residential units is reasonably expected to exceed $25,000 multiplied by the number of units on the parcel or in the building, the landlord shall immediately inform each tenant and the Rent Board in writing of the anticipated costs of the work. The landlord's notice must occur within 30 days after such determination by the landlord.

(2) Filing. Landlords who seek to pass through the costs of capital improvements, rehabilitation, energy conservation improvements, or renewable energy improvements, must file an application on a form prescribed by the Board. The application shall be accompanied by such supporting material as the Board shall prescribe. All applications must be submitted with the filing fee established by the Board.

For each petition totaling more than $25,000, in addition to the supporting material prescribed by the Board for all petitions, the applicant must either:

(A) Provide copies of competitive bids received for work and materials; or,

(B) Provide copies of time and materials billing for work performed by all contractors and subcontractors; or

(3) Filing Date. Applications must be filed prior to the mailing or delivery of legal notice of a rent increase to the tenants of units for which the landlord seeks certification and in no event more than five years after the work has been completed.

(4) Effect of Filing Application. Upon the filing of the application, the requested increase will be inoperative until such time as the Administrative Law Judge makes findings of fact at the conclusion of the certification hearing.

(5) Notice to Parties. The Board shall calendar the application for hearing before a designated Administrative Law Judge and shall give written notice of the date to the parties at least 10 days prior to the hearing.

(g) Certification Hearings.

(1) Time of Hearing. The hearing shall be held within 45 days of the filing of the application.

(2) Consolidation. To the greatest extent possible, certification hearings with respect to a given building shall be consolidated. Where a landlord and/or tenant has filed a petition for hearing based upon the grounds and under the procedure set forth in Section 37.8, the Board may, in its discretion, consolidate certification hearings with hearings on Section 37.8 petitions.

(3) Conduct of Hearing. The hearing shall be conducted by an Administrative Law Judge designated by the Board. Both parties may offer such documents, testimony, written declarations or other evidence as may be pertinent to the proceedings. Burden of proof is on the landlord. A record of the proceedings must be maintained for purposes of appeal.

(4) Determination of the Administrative Law Judge. In accordance with the Board's amortization schedules and cost allocation formulas, the Administrative Law Judge shall make findings as to whether or not the proposed rent increases are justified based upon the following considerations:

(A) The application and its supporting documentation.

(B) Evidence presented at the hearing establishing both the extent and the cost of the work performed.

(D) Any other such relevant factors as the Board shall specify in rules and regulations.

(5) Findings of Fact. The Administrative Law Judge shall make written findings of fact, copies of which shall be mailed within 30 days of the hearing.

(6) Payment or Refund of Rents to Implement Certification Decision. If the Administrative Law Judge finds that all or any portion of the heretofore inoperative rent increase is justified, the tenant shall be ordered to pay the landlord that amount. If the tenant has paid an amount to the landlord which the Administrative Law Judge finds unjustified, the Administrative Law Judge shall order the landlord to reimburse the tenant said amount.

(7) Finality of Administrative Law Judge's Decision. The decision of the Administrative Law Judge shall be final unless the Board vacates his or her decision on appeal.

(8) Appeals. Either party may file an appeal of the Administrative Law Judge's decision with the Board. Such appeals are governed by Section 37.8(f) below.

(h) Tenant Financial Hardship Applications.

(1) A tenant may file a hardship application at any time on grounds of financial hardship with respect to any rent increase based on certified costs of capital improvements, rehabilitation work, energy conservation improvements, or renewable energy improvements. Payment of such rent increases(s) set forth in the hardship application shall be stayed from the date of filing until a decision is made on the Tenant Financial Hardship Application.

(2) Hardship applications shall be available in multiple languages.

(3) Multilingual notice of hardship application procedures shall be mailed with each Administrative Law Judge or Board decision.

(4) Within six months after February 21, 2003 the Rent Board shall implement a process for direct outreach to landlords and tenants whose primary language is not English, regarding availability and use of the hardship application procedure. Within three months of implementation the Board shall provide a report to the Board of Supervisors regarding this outreach program, describing the implementation process and any known results.

(i) Tenant Financial Hardship Application Standards and Process.

(1) Standards for Establishing Financial Hardship. A tenant will qualify under Subsection 37.7(h) for relief from payment of a certified capital improvement passthrough, if the tenant demonstrates that one of the following financial hardship situations applies:

(A) Tenant is a recipient of means-tested public assistance, such as Social Security Supplemental Security Income (SSI), General Assistance (GA), Temporary Assistance for Needy Families (TANF), or California Work Opportunity and Responsibility to Kids (CalWORKS); or,

(B) Gross household income is less than 80% of the current Unadjusted Area Median Income (AMI) as published by the U.S. Department of Housing and Urban Development (HUD) for the "Metro Fair Market Rent Area" that includes San Francisco; and rent charged is greater than 33% of gross household income; and assets, excluding non-liquid assets and retirement accounts, do not exceed asset amounts permitted by the Mayor's Office of Housing when determining eligibility for below market rate (BMR) home ownership; or,

(2) Procedures for Filing. A Tenant Financial Hardship Application must be filed:

(A) By each occupant in the unit who is 18 years of age or older, except not by any subtenant who pays rent to the master tenant (the gross income of the master tenant must include the amount of the subtenant's rent payment);

(B) Under penalty of perjury, stating that the tenant qualifies under one of the standards in Subsection 37.7(i)(1)(A), (B), or (C);

(D) With an acknowledgment that the Rent Board will provide a copy of the Tenant Financial Hardship Application to the landlord.

(3) Stay of Payment. Payment of a certified capital improvement passthrough that is the subject of a Subsection 37.7(i)(1) Tenant Financial Hardship Application shall be stayed from the date of filing until a decision is made on the Tenant Financial Hardship Application.

(4) Hearing Options, Decision.

(A) A decision on the Application will be issued administratively by a Rent Board Administrative Law Judge unless a hearing is requested by the landlord within fifteen days of the date the completed Tenant Financial Hardship Application is mailed to the landlord by the Rent Board, or unless a Rent Board Administrative Law Judge otherwise determines, that a hearing is needed.

(B) Landlord Request for Hearing, Procedures.

(i) A landlord's request for a hearing on the Application shall specify the claim(s) in the Application that the landlord disputes, and attach any relevant documentation.

(ii) A Rent Board Administrative Law Judge will review any landlord request for hearing, to determine whether a hearing is necessary to resolve disputed facts.

(iii) If the landlord's request for a hearing is granted, it will be the landlord's burden to demonstrate that the tenant's financial hardship eligibility under Subsection 37.7(i)(1) criteria, as stated in the Application, has not been established.

(iv) If it is determined that a hearing as requested by the landlord is not needed to determine the facts, a decision on the Application will be issued administratively by a Rent Board Administrative Law Judge.

(5) Term of Relief. Relief from payment of a certified capital improvement passthrough may be for an indefinite period or for a limited period of time, all subject to the landlord's request to reopen the case if the landlord has information that the tenant is no longer eligible.

(6) Change in Tenant Eligibility Status. If a tenant is granted relief from payment of a certified capital improvement passthrough under Subsection 37.7(i)(1), and subsequently the tenant is no longer eligible for such relief:

(A) The tenant shall notify the Rent Board of this changed eligibility status in writing within 60 days, with a copy to the landlord.

(B) Whether or not the tenant notifies the Rent Board and landlord as provided in Subsection 37.7(i)(6)(A), the landlord may notify the Rent Board if the landlord has information that the tenant is no longer eligible, with a copy to the tenant.

(C) Upon receipt of notice under Subsection 37.7(i)(6)(A) or (B), a Rent Board Administrative Law Judge shall decide whether to grant or deny the previously granted relief. That decision may be made administratively by a Rent Board Administrative Law Judge without a hearing unless the Administrative Law Judge determines that a hearing is needed, or unless the landlord requests a hearing. Any such hearing shall be promptly scheduled.

(7) Any decision granting or denying the Tenant Financial Hardship Application, or any subsequent decision on a previously granted Tenant Financial Hardship Application, may be appealed to the Rent Board. The Rent Board's final decision will be subject to judicial review by writ of administrative mandamus in the San Francisco Superior Court.

(j) Notice to Tenants Regarding Tenant Financial Hardship Applications. The Rent Board shall provide written notice of the tenant financial hardship application procedures to each affected unit, with a copy of the landlord's petition for certification of capital improvement costs.

(Amended by Ord. 438-83, App. 9/2/83; Ord. 278-89, App. 8/2/89; Ord. 162-93, App. 5/28/93; Ord. 347-99, File No. 992197, App. 12/30/99; Ord. 2-03, File No. 020716, App, 1/21/2003; Ord. 203-13 , File No. 130706, App. 10/3/2013, Eff. 11/2/2013; Ord. 43-14 , File No. 131148, App. 4/17/2014, Eff. 5/17/2014; Ord. 267-18, File No. 180756, App. 11/9/2018, Eff. 12/10/2018)

SEC. 37.8. ARBITRATION OF RENTAL INCREASE ADJUSTMENTS.

(a) Authority of Board and Administrative Law Judge. In accordance with such guidelines as the Board shall establish, the Board and designated Administrative Law Judges shall have the authority to arbitrate rental increase adjustments, and to administer the rent increase protest procedures with respect to RAP rental units as set forth in Chapter 32 of the San Francisco Administrative Code.

(b) Request for Arbitration.

(1) Landlords. Landlords who seek to impose rent increases which exceed the limitations set forth in Section 37.3(a) above must request an arbitration hearing as set forth in this Section. The burden of proof is on the landlord. This Section 37.8(b)(1) applies, but is not limited, to Operating and Maintenance Expense petitions to increase base rent.

(A) Where a landlord Operating and Maintenance Expense petition to increase base rent is granted, based upon a petition pending or filed on or after October 28, 2003 for a property with six or more residential units, the same landlord shall not impose more than a total seven percent (7%) base rent increase on any unit in any five (5) year period due to increases in operating and maintenance costs.

(2) Tenants.

(A) Notwithstanding Section 37.3, tenants of non-RAP rental units and tenants of RAP rental units in areas designated on or after July 1, 1977, may request arbitration hearings where a landlord has substantially decreased services without a corresponding reduction in rent and/or has failed to perform ordinary repair and maintenance under State or local law and/or has failed to provide the tenant with a clear explanation of the current charges for gas and electricity or bond measure costs passed through to the tenant and/or imposed a nonconforming rent increase which is null and void. The burden of proof is on the tenant.

(B) Tenants of RAP rental units in areas designated prior to July 1, 1977, may petition for a hearing where the landlord has noticed an increase which exceeds the limitations set forth in Section 32.73 of the San Francisco Administrative Code. After a vacancy has occurred in a RAP rental unit in said areas, a new tenant of said unit may petition for a hearing where the landlord has demanded and/or received a rent for that unit which exceeds the rent increase limitations set forth in Section 32.73 of the San Francisco Administrative Code. The burden of proof is on the landlord.

(1) Filing. The request for arbitration must be filed on a petition form prescribed by the Board and shall be accompanied by such supporting material as the Board shall prescribe, including but not limited to, justification for the proposed rental increase.

(2) Filing Date. The petition must be filed prior to the mailing or delivering to the tenant or tenants legal notice of the rental increase exceeding the limitations as defined in Section 37.3.

(3) Effect of Timely Filing of Petition. Provided a completed petition is timely filed, that portion of the requested rental increase which exceeds the limitations set forth in Section 37.3 and has not been certified as a justifiable increase in accordance with Section 37.7 is inoperative until such time as the Administrative Law Judge makes findings of fact at the conclusion of the arbitration hearing.

(4) Notice to Parties. The Board shall calendar the petition for hearing before a designated Administrative Law Judge and shall give written notice of the date to the parties at least 10 days prior to the hearing.

(d) Procedure for Tenant Petitioners.

(1) Filing; Limitation. The request for arbitration must be filed on a petition form prescribed by the Board and must be accompanied by such supporting material as the Board shall prescribe, including but not limited to, a copy of the landlord's notice of rent increase. If the tenant petitioner has received certification findings regarding his rental unit in accordance with Section 37.7, such findings must accompany the petition. If the tenant petitioner has received a notification from the Chief Administrative Officer with respect to base rent and amortization of a RAP loan, such notification must accompany the petition. A tenant petition regarding a gas and electricity passthrough must be filed within one year of the effective date of the passthrough or within one year of the date the passthrough was required to be recalculated pursuant to rules and regulations promulgated by the Board. A tenant petition regarding a water revenue bond passthrough under Section 37.3(a)(5)(B) must be filed within one year of the effective date of the passthrough. A tenant petition regarding a general obligation bond cost passthrough under Section 37.3(a)(6) must be filed within one year of the effective date of the passthrough.

(2) Notice to Parties. The Board shall calendar the petition for hearing before a designated Administrative Law Judge and shall give written notice of the date to the parties at least 10 days prior to the hearing. Responses to a petition for hearing may be submitted in writing.

(e) Hearings.

(1) Time of Hearing. The hearing shall be held within 45 days of the filing of the petition. The level of housing services provided to tenants' rental units shall not be decreased during the period between the filing of the petition and the conclusion of the hearing.

(2) Consolidation. To the greatest extent possible, hearings with respect to a given building shall be consolidated.

(3) Conduct of Hearing. The hearing shall be conducted by an Administrative Law Judge designated by the Board. Both parties may offer such documents, testimony, written declarations or other evidence as may be pertinent to the proceedings. A record of the proceedings must be maintained for purposes of appeal.

(4) Determination of the Administrative Law Judge: Rental Units. Based upon the evidence presented at the hearing and upon such relevant factors as the Board shall determine, the Administrative Law Judge shall make findings as to whether the landlord’s proposed rental increase exceeding the limitations set forth in Section 37.3 is justified or whether the landlord has effected a rent increase through a reduction in services or has failed to perform ordinary repair and maintenance as required by State or local law; and provided further that, where a landlord has imposed a passthrough pursuant to this Chapter 37, the same costs shall not be included in the calculation of increased operating and maintenance expenses pursuant to this subsection (4). In making such findings, the Administrative Law Judge shall take into consideration the following factors:

(A) Increases or decreases in operating and maintenance expenses, including, but not limited to, water and sewer service charges; janitorial service; refuse removal; elevator service; security system; insurance for the property; debt service and real estate taxes as set forth in subsections (i) and (ii); reasonable and necessary management expenses as set forth in subsection (iii); and routine repairs and maintenance as set forth in subsection (iv).

(i) For petitions filed before December 11, 2017, the Rent Board may consider increased debt service and increased real estate taxes; provided, however, that if the property has been purchased within two years of the date of the previous purchase, consideration shall not be given to that portion of increased debt service which has resulted from a selling price which exceeds the seller’s purchase price by more than the percentage increase in the “Consumer Price Index for All Urban Consumers for the San Francisco-Oakland Metropolitan Area, U.S. Department of Labor” between the date of previous purchase and the date of the current sale, plus the cost of capital improvements or rehabilitation work made or performed by the seller.

(ii) For petitions filed on or after December 11, 2017, the Rent Board shall not consider any portion of increased debt service, or that portion of increased real estate taxes that has resulted from an increased assessment due to a change in ownership; provided, however, that the Rent Board may consider that portion of increased real estate taxes that has resulted from the completion of needed repairs or capital improvements with respect to any petition filed on or after December 11, 2017; and provided, further, that the Rent Board may consider increased debt service and increased real estate taxes in a petition filed on or after December 11, 2017 pursuant to Section 37.8(e)(4)(A)(i), if the landlord demonstrates that it had purchased the property on or before April 3, 2018 and that it had reasonably relied on its ability to pass through those costs at the time of the purchase.

(iii) For petitions filed on or after the effective date of the ordinance in Board of Supervisors File No. 180318, the Rent Board may consider management expenses only to the extent those expenses are reasonable and necessary, based on factors such as the need to provide day-to-day management of the building; the level of management services previously required for the building; the reasonable cost of the services in an arms-length transaction; whether any tenants have objected that the cost and quality of the services are not in keeping with the socioeconomic status of the building’s existing tenants; and other extraordinary circumstances.

(iv) The term routine repairs and maintenance shall not include any costs for installation or upgrade of a fire sprinkler system or fire alarm and/or detection system attributable to the landlord’s compliance with a Fire Life Safety Notice and Order issued by the Building Official under Sections .16.1 et seq. of the Building Code or the fire code official under Sections et seq. of the Fire Code.

(B) The past history of increases in the rent for the unit and the comparison of the rent for the unit with rents for comparable units in the same general area.

(D) Failure to perform ordinary repair, replacement, and maintenance in compliance with applicable State and local law.

(E) Any other such relevant factors as the Board shall specify in rules and regulations.

(5) Determination of the Administrative Law Judge: RAP Rental Units.

(A) RAP Rental Units in RAP Areas Designated Prior to July 1, 1977. The Administrative Law Judge shall make findings as to whether or not the noticed or proposed rental increase exceeds the rent increase limitations set forth in Section 32.73 of the San Francisco Administrative Code. In making such findings, the Administrative Law Judge shall apply the rent increase limitations set forth in Chapter 32 of the San Francisco Administrative Code and all rules and regulations promulgated pursuant thereto. The Administrative Law Judge shall consider the evidence presented at the hearing. The burden of proof shall be on the landlord.

(B) RAP Rental Units in RAP Areas Designated On or After July 1, 1977. The Administrative Law Judge shall make findings with respect to rent increases exceeding the limitations as set forth in Section 37.3 of this Chapter. In making such findings, the Administrative Law Judge shall take into consideration the factors set forth in Subsection (4) above and shall consider evidence presented at the hearing. The burden of proof is on the landlord.

(6) Findings of Fact. The Administrative Law Judge shall make written findings of fact, copies of which shall be mailed to the parties within 30 days of the hearing.

(7) Payment or Refund of Rents to Implement Arbitration Decision. Upon finding that all or any portion of the rent increase is or is not justified, or that any nonconforming rent increase is null and void, the Administrative Law Judge may order payment or refund of all or a portion of that cumulative amount within 15 days of the mailing of the findings of fact or may order the amount added to or offset against future rents; provided, however, that any such order shall be stayed if an appeal is timely filed by the aggrieved party. The Administrative Law Judge may order refunds of rent overpayments resulting from rent increases which are null and void for no more than the three-year period preceding the month of the filing of a landlord or tenant petition, plus the period between the month of filing and the date of the Administrative Law Judge's decision. In any case, calculation of rent overpayments and re-setting of the lawful base rent shall be based on a determination of the validity of all rent increases imposed since April 1, 1982, in accordance with Sections 37.3(b)(5) and 37.3(a)(2) above.

(8) Finality of Administrative Law Judge's Decision. The decision of the Administrative Law Judge shall be final unless the Board vacates his decision on appeal.

(f) Appeals.

(1) Time and Manner. Any appeal to the Board from the determination of the Administrative Law Judge must be made within 15 calendar days of the mailing of the findings of fact unless such time limit is extended by the Board upon a showing of good cause. If the fifteenth day falls on a Saturday, Sunday or legal holiday, the appeal may be filed with the Board on the next business day. The appeal shall be in writing and must state why appellant believes there was either error or abuse of discretion on the part of the Administrative Law Judge. The filing of an appeal will stay only that portion of any Administrative Law Judge's decision which permits payment, refund, offsetting or adding rent.

(2) Record on Appeal. Upon receipt of an appeal, the entire administrative record of the matter, including the appeal, shall be filed with the Board.

(3) Appeals. The Board shall, in its discretion, hear appeals. In deciding whether or not to hear a given appeal, the Board shall consider, among other factors, fairness to the parties, hardship to either party, and promoting the policies and purposes of this Chapter, in addition to any written comments submitted by the Administrative Law Judge whose decision is being challenged. The Board may also review other material from the administrative record of the matter as it deems necessary. A vote of three members shall be required in order for an appeal to be heard.

(4) Remand to Administrative Law Judge Without Appeal Hearing. In those cases where the Board is able to determine on the basis of the documents before it that the Administrative Law Judge has erred, the Board may remand the case for further hearing in accordance with its instructions without conducting an appeal hearing. Both parties shall be notified as to the time of the re-hearing, which shall be conducted within 30 days of remanding by the Board. In those cases where the Board is able to determine on the basis of the documents before it that the Administrative Law Judge's findings contain numerical or clerical inaccuracies, or require clarification, the Board may continue the hearing for purposes of re-referring the case to said Administrative Law Judge in order to correct the findings.

(5) Time of Appeal Hearing; Notice to Parties. Appeals accepted by the Board shall be heard within 45 days of the filing of an appeal. Within 30 days of the filing of an appeal, both parties shall be notified in writing as to whether or not the appeal has been accepted. If the appeal has been accepted, the notice shall state the time of the hearing and the nature of the hearing. Such notice must be mailed at least 10 days prior to the hearing.

(6) Appeal Hearing; Decision of the Board. At the appeal hearing, both appellant and respondent shall have an opportunity to present oral testimony and written documents in support of their positions. After such hearing and after any further investigation which the Board may deem necessary the Board may, upon hearing the appeal, affirm, reverse or modify the Administrative Law Judge's decision or may remand the case for further hearing in accordance with its findings. The Board's decision must be rendered within 45 days of the hearing and the parties must be notified of such decision.

(7) Notification of the Parties. In accordance with item (6) above, parties shall receive written notice of the decision. The notice shall state that this decision is final.

(8) Effective Date of Appeal Decisions. Appeal decisions are effective on the date mailed to the parties; provided, however, that that portion of any decision which orders payment, refund, offsetting or adding rent shall become effective 30 calendar days after it is mailed to the parties unless a stay of execution is granted by a court of competent jurisdiction.

(9) Limitation of Actions. A landlord or tenant aggrieved by any decision of the Board must seek judicial review within 90 calendar days of the date of mailing of the decision.

(Amended by Ord. 435-86, App. 11/10/86; Ord. 278-89, App. 8/2/89; Ord. 127-91, App. 4/2/91; Ord. 132-92, App. 5/21/92; Ord. 179-92, App. 6/22/92; Ord. 162-93, App. 5/28/93; Ord. 363-93, App. 11/18/93; Ord. 179-98, App. 5/29/98; Ord. 347-99, File No. 992197, App. 12/30/99; Ord. 107-03, File No. 030689, App. 5/23/2003; Ord. 5-04, File No. 031792, App. 1/16/2004; Ord. 132-18, File No. 180318, App. 6/14/2018, Eff. 7/15/2018; Ord. 267-18, File No. 180756, App. 11/9/2018, Eff. 12/10/2018)

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