(Prior code § 6411.1; Ord. 90-276 § 1, 1990; Ord. 19-1066 § 1, 2019)
It shall be presumed that accounting records, monthly rent logs, invoices, vendor receipts, sales records and cancelled checks for the services and/or materials required are business records created contemporaneously with the transaction and are the complete, accurate and actual records for the base year and current year periods, unless reasonable doubt is raised on the credibility of these documents.
(Prior code § 6411.3; Ord. 90-276 § 1, 1990; Ord. 19-1066 § 1, 2019)
a.
It shall be presumed that expenses incurred in performing earthquake hazard reduction and seismic strengthening are reasonable and necessary and benefit all residential units on the property equally.
b.
It shall be presumed that the contract valuations approved by the city's Community Development Department are complete and actual records of the reasonable cost of performing earthquake hazard reduction and seismic strengthening work.
(Prior code § 6411.4; Ord. 90-276 § 1, 1990; Ord. 19-1066 § 1, 2019; Ord. 24-16, 6/24/2024)
a.
A rent adjustment application filed pursuant to this chapter shall be approved in order to provide a just and reasonable return and maintain net operating income in accordance with the following criteria:
1.
Fair Net Operating Income. Fair return applications shall be considered according to the following guidelines:
A.
Net operating income equals gross income minus operating expenses.
B.
Gross income equals the following:
i.
Gross rents, computed as gross rental income at one hundred percent occupancy, plus
ii.
Interest from security and cleaning deposits (except to the extent that said interest is payable to the tenants), plus
iii.
Income from services, garage and parking fees, plus
iv.
All other income or consideration received or receivable for or in connection with the use or occupancy of rental units and housing services, minus
v.
Uncollected rents due to vacancy and bad debts to the extent the same are beyond the landlord's control. Uncollected rents in excess of three percent of gross rents shall be presumed to be unreasonable unless established otherwise.
b.
Base Year. "Base year" for the purpose of this chapter shall be 1999. In the event that an owner for good cause cannot produce base year income and expense information, the Hearing Examiner may use a different base period or estimate base year income and expenses.
c.
Presumption of Fair Base Year Net Operating Income. Except as provided in subsection (d) of this section, it shall be presumed that the net operating income produced by the property during the base year provided a fair return (fair net operating income). Landlords shall be entitled to earn a just and reasonable return and to maintain and increase their base year net operating income in accordance with subsection (e) of this section.
d.
Rebutting the Presumption. It may be determined that the base year net operating income yielded other than a fair return, in which case, the base year net operating income may be adjusted accordingly. In order to make such a determination, the Hearing Examiner must make at least one of the following findings:
1.
The landlord's operating and maintenance expenses in the base year were unusually high or low in comparison to other years. In such instances, adjustments may be made in calculating such expenses so that the base year operating expenses reflect average expenses for the property over a reasonable period of time. In considering whether the base year net operating yielded more or less than a fair operating income the Hearing Examiner shall consider the following factors:
A.
The landlord made substantial capital improvements during the base year, which were not reflected in the base year rent levels.
B.
Substantial repairs were made due to damage caused by uninsured disaster or vandalism.
C.
Maintenance and repair were below accepted standards or were intentionally deferred so as to cause significant deterioration of housing services, the building or individual units. If the time since the work was performed significantly exceeds the amortization periods established by the rent stabilization regulations, it shall be presumed that maintenance or repair was intentionally deferred.
D.
Other expenses were unreasonably high or low, notwithstanding prudent business practice.
2.
The rent on the base date was disproportionately low due to the fact that it was not established in an arms-length transaction or other peculiar circumstances.
e.
Fair Net Operating Income. The Hearing Examiner shall permit rent increases in the MAR such that the landlord's net operating income shall be increased by sixty percent of the percentage increase in the Consumer Price Index, over the base year. (For example, if the Consumer Price Index has increased by ten percent since the base year, the landlord shall be entitled to a net operating income which is six percent above the base year level.) Unless the Hearing Examiner selects a base period other than the year 1999, the base year CPI shall be 166.2. For the purposes of this section, the current CPI shall be the CPI last reported as of the date of the application. A rent increase granted pursuant to this section shall not exceed the increase requested in the application.
The MAR for a unit shall be increased by a maximum of twelve percent during the first twelve months and by an additional twelve percent during the second twelve months after the date of the final decision of the Hearing Examiner or Commission on appeal. If the final decision of the Hearing Examiner or Commission on appeal determines that the landlord is entitled to an increase in the MAR which is greater than twelve percent in the first year and an additional twelve percent in the second year, then the MAR for the unit shall be increased by only those percentages and the remainder of the increase shall be granted during the third year. In addition, during the second year, the landlord is entitled to ten percent interest on the amount over twelve percent which was not charged during the first twelve months, plus any other adjustments to which the landlord is entitled under this title. During the third year, the landlord is entitled to ten percent interest on the amount which could not be charged during the second twelve months, plus any other adjustments to which the landlord is entitled under this title. Each year's ten percent interest shall remain in effect for one year after it was imposed and shall not be considered rent for purposes of calculating the annual general adjustment.
(Prior code § 6411.5; Ord. 90-276 § 1, 1990; Ord. 19-1066 § 1, 2019)
The Hearing Examiner or Commission on appeal may approve a rent adjustment under subsection (1)(a) of Section 17.44.040 if it determines that required maintenance has not been performed and/or there has been a discontinuance or a substantial reduction of housing services without a corresponding reduction in rent and provided that such reduction and discontinuance was not caused by an intentional act of the tenant. If the grounds for the application, however, are due to earthquake hazard reduction or seismic strengthening, the Hearing Examiner or Commission on appeal may postpone the enforcement of that portion of the decision concerning maintenance or services which have been affected by earthquake hazard reduction or seismic strengthening for a reasonable time to allow for completion of the earthquake hazard reduction or seismic strengthening work.
(Prior code § 6411.6; Ord. 90-276 § 1, 1990; Ord. 19-1066 § 1, 2019)