Every rental property owner in Beverly Hills must register their rental units with the city’s registry. It comes around every year in January. The city then sends every renting household a notice of the rent amount as reported by the landlord. If correct no action is needed. If incorrect the tenant should appeal. Here’s what you need to know.
The Registration and Appeals Process
The ‘Rent Amount Reported by Your Landlord’ notice that comes to every rent-stabilized household shortly after January each year makes the registration process from the tenant’s perspective seem like a bureaucratic formality. Well, it is! Yet the registration process is important because it is the backbone of the Rent Stabilization Program.
The process begins with the landlord reporting the base rent for each occupied unit. From there the process is three-step:
- The tenant is informed of the rent reported and within 15 days can ‘appeal’ (challenge or correct) the reported rent amount.
- Rent stabilization program staff will resolve minor errors and, if necessary, help the tenant understand the difference between the base rent (as stipulated in the lease plus any subsequent increases) and any other charges (like utilities) that may add to the monthly rent.
- If an appeal is warranted then the discrepancy is referred to an administrative hearing where the correct base rent is determined and (subsequently) certified.
A tenant can appeal the reported rent by using an online form or by mailing a paper appeal form (with documentation) to the rent stabilization office. Direct questions to the office at (310) 285-1031.
If the tenant does not appeal, the reported rent will be ‘certified’ as the lawful rent. Future rent increases will build on that base rent amount so we want it to be accurate.
Reviewing the Reported Rent for Accuracy
The ‘Notice of Rent Amount Reported by Your Landlord’ is an important document because it establishes the proper rent for the apartment in the landlord’s eyes. However that may not be the actual lawful rent! The current lawful rent is a product of 1) the starting rent for the tenancy; and 2) any allowed increases in the intervening years. The lawful rent does not include any pass-through or other charge. The lawful rent is the base rent for the apartment.
How might the reported rent differ from the lawful rent? Perhaps an error in arithmetic increased the rent more than the maximum allowed. Maybe an increase sooner than 12 months before the last one. Maybe some other charge found its way into the base rent, inflating it (which compounds over time).
If any error found its way into the rent record then the lawful rent for the apartment may not match either the landlord-reported rent amount or the amount on the most recent rent check. Keep in mind these points:
- Rent increases are allowed only once every 12 months. Once the landlord raises the rent and the tenant pays the raised rent, the rent amount cannot be increased again for 12 months. Bring to the attention of the rent stabilization program any notice of rent increase that came fewer than 12 months since the prior increase.
- Every rent increase must be properly noticed. This is very important! Verbal or text notices do not suffice. It must be in writing and delivered either personally or by mail. Bring to the attention of the rent stabilization program any notice that was not properly noticed, or was served fewer than 30 days before it was to take effect. (If the landlord mailed the notice then it must come 35 days before.
- Rent increases cannot exceed the amount specified by the city when the increase would take effect. The city long allowed 10% for Chapter 6 tenants but Chapter 5 allowed increases were much lower — on par with inflation. (Find those amounts on the rent stabilization program webpage or contact the program for Chapter 5 past allowed increases.)
- Rent increases for Chapter 6 tenants that took effect on February 1st or February 15th of 2017 should have been no more than the 3%. That was the allowed increase as of January 24, 2017 when the city reduced the maximum allowed annual rent increase to 3%. But that lower cap was retroactive and applied to any rent increase above 3% that had not yet been paid by a tenant by that date. In July of 2018 the maximum allowed Chapter 6 increase followed inflation up to 4.1% .
Again, if the landlord-reported rent matches the current rent AND the tenant is sure that the current rent was properly calculated over successive years, then a tenant need take no action at all. The reported amount will then become the ‘certified’ rent for the unit (until and unless it is subsequently appealed by the tenant).
When the Reported Rent Does Not Reflect the Rental Record
Does the landlord-reported rent not match the rent either as paid or according to what the rental record shows it to be? There are three likely scenarios:
The reported rent may vary by a only small amount. This could be the result of a simple error in arithmetic. The situation will be resolved administratively with little effort on the part of the tenant. Several rent receipts or cancelled checks, or perhaps the tenant’s rental history, is all that is necessary to correct it.
The reported rent varies by a more significant amount. Here the discrepancy could also reflect a landlord’s sloppy bookkeeping. It could be a miscalculated rent increase years back that, after compounding, resultß in a substantially higher rent today than is actually lawful.
And more problematic, the reported rent is known to both the tenant and landlord not to be correct. Yet the incorrect amount is reported and perhaps accepted by the tenant (by not appealing it). Why would a tenant go along with an unlawful rent? Perhaps she is or was wary of being evicted by an eviction-happy landlord. Or maybe she is undocumented and is afraid to rock the boat. Perhaps the tenant is simply intimidated by the landlord or by the process.
There is another reason too and that’s why we put together this explainer: The tenant may not know that the landlord cannot collect rent in amount other than the lawful rent amount. If the landlord years ago had bullied a tenant into accepting a higher-than-allowed rent amount (and we know of one landlord who has), even today the tenant is entitled to that money back. By producing the rent record she can substantiate an appeal and recover unlawful back rent.
Reviewing the Rent Record for Other Charges
The registration-and-appeals process is an excellent opportunity to sharpen the pencil and see whether the landlord is properly calculating any other costs over and above the base rent. The lease will specify any other charges like shared utilities or parking. Is the monthly charge what is in the lease?It is worth taking a look. Keep in mind:
- Be sure that utility fees or any other cost is not rolled into the base rent amount. The ‘base rent’ is the rent noted on the original lease or rental agreement plus any properly noticed, lawful increases levied in the intervening years. It does not include any additional charge or cost like parking or utilities. Thus any rent increase should not be applied to the ‘total’ rent payable — just the base rent.
- Verify any charge for utilities or other housing service cost that is added to the base rent. This will be specified in the lease and would not change throughout the tenancy (until and unless properly noticed as a change-in-terms of tenancy). Check to make sure that any such charge is what was included in the lease. Again, any additional fee subsequent to what was originally agreed must be formally noticed as a change-in-terms (or it is not lawful and can be recovered by the tenant).
- Check for improper pass-through charges. A pass-through is different than an added charge. The latter may be specified in the lease for some purpose. But a pass-through is a city-allowed cost and must be properly documented by the landlord. Moreover, the landlord cannot call a charge a pass-through if it is not permitted by city ordinance. For example, the city allows Chapter 6 tenants to pay a refuse fee. Chapter 5 tenants can pay the refuse fee plus certain capital costs. The landlord can chose whether or not to pass such costs through to the tenant, but he cannot call water service a pass-through or otherwise ‘ballpark’ a legitimate pass-through cost (there must be a rationale). If a legitimate pass-through cost appears questionable, ask the landlord to document it. Or bring it to the attention of the rent stabilization program.
- Improperly billed utilities. For each utility metered separately, the tenant should be billed directly by the provider. In some cases a landlord may use a third party billing provider if the individual meter is under the landlord’s account. For the latter, a tenant should verify the billing: does it reflect the cost billed to the landlord? Shared meters is a different story. Neither state law nor state regulators offer any guidance as to shared-meter costs should be apportioned to tenants. Often the landlord will simply assess a charge (and it would be specified in the lease). But when a unit’s individual meter also meters another unit, or meters house utility usage, then the landlord has an obligation to notify the tenant and take some responsibility for properly assessing to the tenant the actual cost of her utility usage. In sum, no tenant should pay for the house lights or water. But some smaller sloppy operators do conduct business this way. This is a good time to review every aspect of the rent payment including how utilities are billed.
Any concern about improper pass-through costs or suspected improper shared-utility billing should be brought to the attention of the city’s rent stabilization office immediately. Make sure that a case is opened and get a case number. Reach the office at (310) 285-1031.
Filing an Appeal of the Reported Rent
- Cancelled checks or rent receipts:
- Change-of-terms notices and rent increase notices;
- Correspondence with the landlord; and,
- A timeline if a narrative of events would make the situation more understandable for rent stabilization staff.
Have you received a ‘Notice of Rent Amount Reported by Your Landlord’ and found your rent varied considerably from what you’re paying? Drop us a line! We are looking for examples where the appeal process uncovers improper practices or rent overcharges.
Beware: Do Not Enter Into Informal Agreements Concerning the Rent
Consider the cash discounted rent arrangement. The tenant’s incentive is to save a few bucks on rent. Don’t do it: an informal arrangement in the shadow of an enforceable rental agreement can come back to bite the tenant. The unscrupulous landlord can later allege that the rent was not paid in full, for example. And if the tenant cannot show a formal agreement that allows the discount for cash, or worse, does not have a solid record of payment receipts, she will have a difficult time persuading a hearing officer that she paid the lawful rent.
Consider a worse arrangement: the cash kickback. A landlord inflates the rent to show his lender or potential buyer a higher net income, and he gets the tenant to sign-off on it. The tenant gets a cash-kickback envelope under his door each month. Why would a tenant enter into such an arrangement? Perhaps to stay in the landlord’s good graces.
We know of one such arrangement that came to light only because the landlord had to report the actual rent amount to the city as part of the registration process. Lest he get caught out with his lender, perhaps, he reported not the actual rent but the inflated figure. From that point forward the tenant was obligated to pay the higher rent amount in contravention of the actual rental agreement because the city certified the higher rent as the lawful base rent. Why? It had no choice: the hearing officer ruled for the landlord after the tenant appealed. The landlord had documentation showing a higher rent was paid all along.
The moral of these stories: there should be no part of the landlord-tenant relationship that is not lawful and fully documented. The informal arrangement is a penny-wise but pound-foolish trick that could mean a quick trip to court (if not the street) for the tenant.
- Over time a rent increase on charges over-and-above the base rent can add up. For example the average Chapter 6 rent: $2,427. Let’s say utilities or other costs add $150 to the base rent. The bad landlord could roll the charges into the base rent and use the total ($2,577) for calculating the rent increase. The good landlord applies the increase increase only to the base rent ($2,427) and counts the $150 utilities charge separately. The difference is significant! In the 10th year of a tenancy the bad landlord would collect $65 per month more than the good landlord. And because annual rent increases compound, at the end of that 10-year hypothetical tenancy the bad landlord would have collected a cumulative $3,711 in unlawful overcharges over the period if he demanded the maximum 4.1% increase each year and applied that increase annually to the total (base rent + charges) rather than the base rent only. ↩
- The tenant who paid a rent increase of more than 3% on or after January 24, 2017 should appeal the landlord-reported rent. For example, a 5% increase that was served on January 1st or 15th but that had not taken effect until February 1st or 15th would be unlawful. The maximum allowed increase then was 3%. Some landlords that had raised more than 3% simply rescinded the notice and then properly noticed the increase at 3%. If al landlord told a tenant verbally to simply disregard the notice and pay a 3% increase instead should alert the rent stabilization office that the increase was improperly noticed and is unlawful. ↩
- For example, some Chapter 6 tenants see the city’s refuse fee passed-through to them. Any city-allowed pass-through must be properly documented. ↩