While San Francisco is known as one of the most liberal places in the country, it can be quite restrictive for landlords. A rent controlled city, for certain types of rent increases, property owners must petition the Rent Board before serving the tenants with a notice of the increase. This is chief among the issues San Francisco landlords need to be aware of.
Most residential rental units constructed in San Francisco before June 13, 1979 are covered by San Francisco’s Rent Ordinance. Let’s say for example you purchased a home in The City back in the 1970s when you could find a nice place for around $60,000. If you have a tenant who has been living there for nine or 10 years, they’re paying a fraction of today’s market value of the property. Further, there are very strict rules in place to ensure landlords do not evict longtime tenants to take advantage of the contemporary valuation. What’s more, if an individual buys a property and the previous landlord is subsequently found to be in violation of the ordinance, the new owner can be made to refund rent increases improperly collected by the previous landlord.
There are certain circumstances under which landlords can enact rent increases. These include recovering tax increases from general obligation bond measures, and water revenue bond measures. However the Rent Board must approve increases to cover any expenses incurred by making capital improvements, operating and/or maintenance expense increases, or utility rate increases. Landlords must file a petition with the board, which must be approved before tenants are required to pay the increase.
In response to multi-unit residential landlords moving into their units to evict longstanding tenants, San Francisco restricted the practice in 1998. Predictably, this led to litigation. While some court rulings have found in favor of landlords in this regard, it hasn’t been absolute. Factors such as these can make property management in San Francisco a tricky proposition, which is where working with a property management company specializing in San Francisco like Onerent, or consulting with a qualified real estate attorney knowledgeable of The City’s real estate issues is a smart thing to do.
It should be noted certain types of property are exempt from the ordinance. These include units in hotels, motels, inns, tourist houses, as well as rooming and boarding houses. Exemptions also apply where the unit has not been occupied by the same tenant for 32 or more continuous days, provided the landlord has not recovered possession of the unit from the tenant in order to avoid the application of the Rent Ordinance. Commercial real estate is also exempt. However, even if exempt, certain types of property still fall under the just cause eviction provisions.
Another big one among issues San Francisco landlords need to be aware of is the requirement to pay interest on security deposits. Chapter 49 of the San Francisco Administrative Code requires landlords to pay interest annually on deposits held on residential property. This is waived if the tenant vacates the property before one full year of occupancy. One of the few cities in the country to impose this requirement, the interest can be paid directly, or applied as a credit against the rent.
While San Francisco is indeed one of the hottest rental markets in the US, there are a number of restrictive policies in place designed to protect its tenants. Prospective landlords would do well to consider them before investing in San Francisco real estate to ensure they are in compliance with the law.
Under no circumstances should the contents of this article (or any article found on the internet for that matter) be considered legal advice. If you have specific legal questions regarding any information presented here, consult a competent San Francisco real estate attorney.
