A relocation fee is obligated whenever a tenancy in Beverly Hills is involuntarily terminated by the landlord. That can include major remodeling, demolition for redevelopment, condominium conversion or landlord use. Relocation fees are owed when a property is taken off the rental market. A relocation fee is not owed when a tenancy is terminated for cause (including the new ‘disruptive tenant’ termination). Here we explain the origin, purpose and limitations of the relocation fee.
Relocation Fees: A Brief History
Beverly Hills has long mandated a relocation fee for ‘Chapter 5’ households that were terminated for no-cause. For tenants who started at $600 or less, the city extended certain protections under Chapter 5 of the rent stabilization ordinance. Landlords could not evict for no-just-cause so any no-fault involuntary termination obligated the fee. For decades it topped out at $5,000 as it was not adjusted for inflation.
In addition to the fee, Chapter 5 households were accorded other protections. For example when a landlord undertook major remodeling, the tenant could choose to be temporarily relocated or choose to later return. Also extended noticing provisions kicked-in in any involuntary termination.
Chapter 6 households had no such protection. Until October of 2018 those tenants could be evicted for no-just-cause with only 60 days notice. When City Council extended relocation fees to Chapter 6 in January of 2017 the rationale seemed to be that a relocation fee would discourage a no-just-cause termination. However the rent stabilization ordinance is silent on the purpose of the fee. (A staff report in January of 2017 said only, “If utilized, relocation fees increase the tenant’s ability to identify and secure their next apartment lease.”)
Indeed many tenants did get a 60-day notice anyway. That’s no surprise: a fee that averages about $10,000 is a minor consideration to a landlord who sees a vacant unit as worth many times that amount.
When is a Relocation Fee Required?
The rent stabilization ordinance enumerates the no-fault reasons that allow a landlord to involuntarily terminate a tenancy:
- Use by landlords (a parent, child, or sibling will move in subject to some restrictions);
- Demolition for redevelopment (and otherwise removing the property from the rental market);
- Condominium conversion of the property;
- Major remodeling (subject to a certain minimum expenditure threshold);
- Removal of a building manager (subject to certain restrictions).
The ordinance also identifies at-fault reasons for termination for which NO fee is obligated:
- Nonpayment of rent, unapproved (sub)tenants, and other violations of the rental agreement;
- Refusal to Execute Leases;
- Refusal to provide access.
- Illegal uses;
- Maintaining a nuisance or exhibiting ‘disruptive tenant’ behavior.
Many no-fault and at-fault provisions flow directly from state statutes. However the ‘disruptive tenant’ provision is unique to the Beverly Hills rent stabilization ordinance. And it is a locally-adjudicated process that uses a lower bar for termination than the state’s ‘nuisance’ standard. When terminated for cause as a ‘disruptive’ tenant there is no relocation fee payable.
How is the Fee Paid?
The rent stabilization ordinance section 4–6–9 is clear on the basics:
The relocation fee shall be due and payable to the tenant, regardless of whether the landlord actually utilizes the apartment unit for the purposes stated in the notice of eviction, unless the landlord notifies the tenant in writing of the withdrawal of the notice of eviction prior to such time as the tenant has given the landlord notice of his or her last date of occupancy, or has vacated the unit, if a notice of the last date of occupancy is not given by the tenant…The relocation fee or pro rata share thereof shall be paid to any tenant who vacates the apartment unit at the time he or she vacates it.
The important points:
- ‘Pro rata’ is a reminder that all authorized tenants have a claim to the relocation fee (that may include roommates or any other occupant named on the lease exclusive of unauthorized occupants);
- The fee is payable to tenant(s) on the date the tenant(s) vacates the apartment;
- The fee would will be obligated if the landlord rescinds the notice of termination before the tenant informs the landlord of her departure date OR the day she actually vacates the apartment;
- The rent stabilization ordinance is silent on penalties for landlord non-payment or bad-faith which may deprive the tenant of her fee on the day it is obligated.
There is an escrow option for the relocation fee as explained (or obfuscated!) in section 4–6–6 (D) of the rent stabilization ordinance:
When the apartment unit has not been vacated, the relocation fee shall be deposited in escrow if the tenant has furnished the landlord with the tenant’s notarized stipulation to judgment in favor of the landlord for the repossession of the apartment unit by the landlord within sixty (60) days after the payment of the relocation fee to such tenant. The fee shall be released from escrow to the tenant on the day the tenant vacates the apartment unit. Nothing in this subsection shall be deemed to require any tenant to vacate any apartment unit before the expiration of the full notice time to which such tenant is entitled. The sixty (60) day period referred to in this subsection D1 shall not apply to any eviction where the eviction notice was given by the landlord to the tenant on or before January 20, 2017.
In layman’s terms this provision appears to allow a tenant an option to demand the relocation fee be paid into escrow 60 days prior to departure contingent on the tenant providing the landlord with a stipulation to turn over the apartment on a date certain. Frankly we’re not sure if this applies only when a court has adjudicated (stipulations are common) or if it is open to any tenant who knows to make the request. (We have requested clarification.)
How Much is the Relocation Fee?
The relocation fee schedule for the current fiscal year is as follows:
|Unit Type||Relocation Fee||Add $2000 for any senior, disabled or minor occupant|
|Two bedrooms and larger||$12,902.15||$14,902.15|
The current figures are also available on the Rent Stabilization Program’s website.
Is the Relocation Fee Sufficient?
The relocation fee schedule was calculated to reflect the actual cost of moving house. City staff considered prevailing rents, added a security deposit, then also moving costs and certain utility set-up charges. That back-of-the-envelope accounting sufficed when City Council was hurriedly revisiting the rent stabilization ordinance in April of 2017.
Today we have data from the rental unit registry on actual rents that may better inform a revised fee schedule. City Council has handed the new Rent Stabilization Commission the task of recommending changes to the relocation fees.
We see a few problems with the current fee schedule.
The current relocation fee schedule also disadvantages larger families. The relocation fee schedule tops out at the 2-bedroom category. But 3-bedroom units rent for considerably more — as much as $4,000 on average according to rental unit registry data. On average a 3-bedroom apartments rent at a 33% premium compared to a 2-bedroom unit. In fact all of the costs for a 3-bedroom move will be higher too. The fee schedule will not begin to cover the costs of a 3-bedroom family looking for replacement housing.
Moreover, there is a $2000 supplement payable for any child, senior, or disabled occupant in a household when a tenancy is involuntarily terminated. But that flat supplement applies no matter how many children or seniors are present. This too disadvantages larger families that may have multiple children or senior dependents in the home and compounds the harm to larger families from a relocation benefit that tops out at 2-bedrooms.
The relocation fee is incremented upward each year but it will not keep pace with the rise in the cost of replacement housing. The fees are adjusted according to the percentage increase (if any) in the Consumer Price Index (CPI). However that modest bump-up does not reflect the real cost of rental housing in today’s market. Today, asking rents are rising at a near double-digit rate annually and the fee schedule should be recalculated using current market data to keep pace.
The $2,000 supplement for a child, senior or disabled resident in the household does not rise with inflation. Because the supplement is not tied to the change in consumer prices, the supplement will lose value over time.
The extension of relocation fees to all households under the rent stabilization ordinance is a major step forward for the city. However some landlords may search for an at-fault reason to terminate in lieu of paying the fee. Anecdotally we see 3-day notices for non-payment posted the very next day. We also see tenants hastily terminated for short-term leasing (which is arguably a violation of both the subtenant and illegal uses clauses). And in general we worry that a tenant who refuses access to the landlord for some reason has unwittingly opened the door to termination.
In fact any lease clause could be a termination tripwire for the tenant when her landlord is disinclined to pay a relocation fee.
Do you have a story about relocation fees? Please get in touch with Renters Alliance.