Next Up at the RSO Commission: Relocation Fees

Beverly Hills City council tasked the Rent Stabilization Commission with discussing the relocation fee that is currently required when a tenancy is involuntarily terminated. What is an appropriate fee? Should mom-and-pop landlords or owner-occupiers be exempt from having to pay the relocation fee? The many questions continue as the Rent Stabilization Commission debates relocation fees for a third time at the next meeting. Here’s what you need to know.

The relocation fee is intended to compensate a tenant who is involuntarily terminated due to no fault of the tenant. According to the city’s rent stabilization ordinance a tenancy can be lawfully and involuntarily terminated in any of these instances:

  • Demolition or condominium conversion (90 days notice and additional conditions apply);
  • Permanent withdrawal of the rental property from the rental market (120 days notice but one year notice for seniors);
  • Major remodeling (one year notice & conditions apply);
  • Landlord use of one unit per property (90 days notice & conditions apply);
  • Refusal to execute a lease on the same terms if the landlord demands it at least one month prior to expiration (chapter 6 tenants only);
  • Termination pursuant to a change in resident building managers (chapter 6 tenants).

When is a fee not obligated? When the tenant is evicted for some fault of the tenant. For example, alleged failure to pay rent, maintenance of a nuisance or any violation of the rental agreement (like denying the landlord lawful access to the unit or subletting) is grounds to terminate the tenancy without a fee.

Non-correctable violations that could result in tenancy termination without a relocation fee include illegal use of premises, domestic assault, or damage to the premises. Additionally, a tenant who is owed a fee but who does not vacate on the specified date will not be due a relocation fee. There is little penalty for a landlord who delays in paying the fee, however.

City council tossed the relocation fee issue to the Rent Stabilization Commission to make recommendations to council: Should anything about the relocation fee change?

What’s to Talk About?

The current fee schedule was adopted in April of 2017 by city council and reflects an elementary formula: three times the current prevailing asking rent for a comparably-sized unit (up to 2 bedrooms) plus ‘local’ moving expenses and a few hundred bucks for re-starting utilities at the new place. (Note: the fee schedule is not calculated according to the tenant’s actual rent but was established as a multiple of the average rent asked by landlords.) It is adjusted for inflation each year.

Studio 1-bedroom 2-bedroom
Beverly Hills Relocation Fees $6,726.53 $9,936.10 $13,461.75
Households that include a senior, disabled person, or a minor shall be entitled to an additional relocation fee in the amount of $2,000

There wasn’t much discussion with the formula was adopted. The local moving estimate ($1,116) did not take into account the size of the unit, for example, and the fee schedule tops out at the 2-bedroom size. So households living in larger apartments will likely find it impossible to secure replacement housing given the current relocation fee.

This will be the Rent Stabilization Commission’s third time discussing relocation fees. And it may not even be the last time! We have listened to hours of meandering and digressive discussion to boil down this short recap.

We heard commissioners come to the issue with various concerns. Landlords of course are concerned about cost while tenants are concerned with the toll of displacement. But there was also some measure of consensus on some aspect of the issue…and that itself was concerning!

Here is what the commission discussed in two prior sessions and found some preliminary consensus.

Neutral reps Landlord reps Tenant reps Alternates
Milkowski Tryfman Baseman Maden Jacoby Owens Bronte Gurman Miller
3-BR tier Yes Yes Yes Yes, maybe Yes Yes Yes Yes Yes
City model TBA Culver city Culver city Culver city Not culver city SM/Weho Not Culver city Culver city Culver city
Dependent on tenure TBA Yes, 1 year Yes 1 year Yes No Yes TBA Yes No
Mom-pop exception TBA TBA No No No No No No No

The staff report includes a list of additional aspects of the relocation fee that have not been discussed and some of them will be taken up at the Wednesday evening meeting. For example:

  • Should relocation amounts be tied to the tenant’s financial circumstances?
  • Should additional fees be required for low-income households?
  • If relocation fee amounts are tied to length of residence, should they be prorated (for example 10% of the fee for each year of occupancy)?
  • Should there be an exemption (or a reduction in the fee) if a tenant is evicted when the landlord provides the apartment to a relative?
  • Should relocation fees be established in the rent stabilization ordinance or be determined by the Rent Stabilization Commission or a mediator?
  • Should there be a fee mandated for a temporary relocation for a repair, say?

Renters Alliance provided a detailed set of recommendations to the commission in December. Do you have an opinion on any of these issues? Read our comment and refer to the detailed staff reports from November and December and consider submitting your comment to the commissioners before the meeting or at the meeting just before the relocation fee item is heard (at approximately 6:15 pm). Gluttons for punishment can tune into the video for the November and December meetings.

Our Take

The relocation fee in our view is necessary compensation whenever a rent-stabilized tenant is involuntarily terminated due to no fault of their own. The fee should: consider the up-front expense associated with securing replacement housing; make up for the tenant paying market-rate rent after forgoing the financial benefit of the likely below-market rent of a rent-stabilized tenancy; and compensate for any out-of-pocket costs to move.

As we observed in our December comment to the commission, “There is value to home and stability.” That is an intangible cost to the tenant for which a fee cannot compensate!

The current relocation fee schedule offers less compensation than some of our neighboring cities. Tenant representatives on the commissioner pointed to Santa Monica and West Hollywood where fees are significantly higher. Commissioners overall agreed that the relocation fee schedule needed to add a 3-bedroom tier. We agree. (Refer to the city comparison from the December staff report.)

While Renters Alliance finds the current fee schedule on the thrifty side, we would rather see no change to the fee schedule rather than tinker with it in the ways that some commissioners suggested.

Landlord representatives, for example, leaned toward recommending the Beverly Hills fee be calculated according to the Culver City formula: three months’ rent plus $1,000. That would disadvantage longer-term tenants with lower rents who would not only receive a lower fee relative to more recent tenants but also have to pay more each month for replacement housing than they pay today. That could force longtime tenants out of Beverly Hills when they are involuntarily terminated.

One important consideration is that longtime tenants may be unable to even qualify for comparable replacement housing — something the commission did not discuss.

Tenant representatives (and one of the two alternate commission members) did not like the Culver City formula though. And tenant representatives were split on whether the length of residency in the apartment (known as tenure) should in some way determine the size of the fee. A tenure-dependent fee could compensate longer-term tenants but it would likely shortchange newer recent even though they would bear many of the same costs of relocating.

Indeed any one-size-fits-all formula would likely advantage some tenants and disadvantage others. In general, the commissioners were seeking a “balanced” approach they said: to recognize that displacement entails a financial and emotional cost for tenants while sparing landlords from egregious costs when they lawfully terminate a tenancy. Like most tenant-landlord issues, ‘balance’ is tough to find.

Another option is to establish a framework and then let the commission (or a mediator) decide compensation on a case-by-case basis. But that invites a whole host of practical challenges: the commission is already busy with tenants appealing landlord denial of rent forbearance; and commissioners agreed that they didn’t want to dig into tenant and landlord finances. Without a ‘means test’ to guide commissioner deliberation, though, the advantage to departing from a fixed formula is not clear.

Which brings us back to the current relocation fee schedule. In our view it’s not enough. But compared to Culver City’s three-times-the-rent formula, or other tweaks suggested by commissioners, for example a lower fee when the landlord gives your apartment to a relative, we support keeping the current fee schedule. If the commission can recommend a 3-bedroom tier, and support a bump-up in the current extra payment for kids or disabled residents, our relocation fee would be much improved. (Read our December recommendations to the commission.)

Public comment is welcomed by the commission for the February 3rd 6pm meeting. Write-in to the commission secretary at commentRSC@beverlyhills.org (subject: ‘Relocation fees agenda item #2’) or call-in before the item is heard at 310–285–1020 and tell the staffer that you want to comment. Our advice: on a complex issue like this, choose a few priorities and succinctly communicate to the commission you want to see those priorities in the commission’s recommendation to city council.