LANDLORD UNABLE TO INCREASE RENT ON TENANT

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The Appellate Court in the First District struck another ruling in favor of rent control this week.  The residential landlord was surely displeased with this pro-tenant ruling.

Mosser Companies (landlord) owns a nine-unit residential apartment building in San Francisco. The apartment at issue in this case is subject to rent control under the San Francisco Residential Rent Stabilization and Arbitration Ordinance (S.F. Admin. Code, § 37.1 et seq.; ordinance), which limits rent increases to tenants in occupancy (id., § 37.3(a)). Under Civil Code section 1954.53, which provides that “an owner of residential real property may establish the initial rental rate for a dwelling or unit,” local jurisdictions are authorized to impose rent control limiting rate increases until “the original occupant or occupants who took possession of the dwelling or unit pursuant to the rental agreement with the owner no longer permanently reside there.”

The question before the Court of Appeal here was whether the son of tenant parents who years before rented a unit in landlord’s building, and who with landlord’s consent resided with his parents when their rental agreement was entered, is an “original occupant” within the meaning of the statute.  If so, the landlord would be precluded from establishing a new unrestricted rental rate for the apartment when the son remained in the apartment after the parents  departed. The San Francisco Rent Stabilization and Arbitration Board (rent board) and the trial court concluded that the son, although a minor when the rental agreement was entered and not a signatory to the rental agreement, is nonetheless an “original occupant” entitled to the continued protection of the rent control provision.

The Court of Appeal sided with the Rent Control Board on this, protecting the right of the tenant to claim the benefits of the rent restriction when he became an adult.  The Court did seem to question the law on this issue though.  It expressly stated that it had to follow it, but wondered whether the legislature should not take another look at it.  In its concluding paragraphs, the Court writes: “Whether the application of rent control protection to occupants who begin their residency as minors is wise economic policy is a question for legislative, not judicial, determination. Local and state legislators are free to make these public policy determinations provided the rent regulation does not deprive property owners of a fair return on their investment.”  That is not a mere adoption and application of the rent control law; rather, it is a suggestion about action that might be taken in the legislative branch.  The Court was under no obligation to even mention the legislature in this opinion.  Lobbyists for landlords should take note!

Stephen Hammers
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