Relocation Fees Up for Discussion at RSO Commission AGAIN

Our newly reconstituted Rent Stabilization Commission will discuss the relocation fee again. Pursuant to direction from city council, the commission is to make a recommendation to council concerning the fee schedule. Today it ranges from $7,000 to $16,000 depending on the size of the unit and the tenant. The fee is paid compensation to Beverly Hills rent-stabilized tenants when they are involuntarily terminated for reasons described in our rent stabilization ordinance. Are the fees too little, too much, or about right?

It seems there is no simple answer to the question of what an appropriate fee schedule should be or even what the relocation fee should accomplish. Most rent stabilization jurisdictions have adopted a relocation fee to compensate a tenant for the involuntary loss of a tenancy where the tenant was not at fault. (Relocation fees are never obligated when a tenant is evicted for fault.) State law has historically not required a fee. However the imposition of state rent control (pursuant to the Tenant Protection Act of 2019) does require a relocation fee but only for properties subject to the Act.

In Beverly Hills our rent stabilization ordinance prevails. The current relocation fee schedule is posted to the city’s website and also included in Municipal Code section 4–6–9. As of mid–2021 those amounts are:

Unit Type Relocation Fee Senior, disabled, or minor
Bachelor or Single $ 6,988.87 $ 8,988.87
One Bedroom $ 10,323.61 $ 12,323.61
Two or More Bedrooms $ 13,986.75 $ 15,986.75

This fee schedule was adopted by city council in 2017 with the fees adjusted incrementally according to inflation each year. By way of background, a relocation fee was always on the books for Chapter 5 rent-stabilized tenants (those ‘grandfathered’ under the original rent stabilization ordinance) because no-just-cause eviction was not allowed and any lawful termination required compensation.

Chapter 6 tenants had weaker protections. However city council harmonized many protections across both chapters 5 and 6 of the rent stabilization ordinance in 2018 and fees are now required for any involuntary termination of tenancy.

The issue of relocation fees is now back before the Rent Stabilization Commission. Again the key questions are: Is the current schedule of fees too little, about right, or too much? And does Beverly Hills even need a relocation fee? Potentially everything is on the table for the commission.

Not the Commission’s First Rodeo

This is not the Beverly Hills Rent Stabilization Commission’s first rodeo. Commissioners first discussed relocation fees in November of 2020 as the commission was just getting on its feet. The discussion was continued to the December meeting where commissioners raised many additional questions about state law, local ordinance and the character of our local rental housing market.

Answers to commissioner questions came back for the February discussion. The February meeting synopsis reads:

The Commission discussed several sub-topics of modifying relocation fees including rental data from the City’s rental registry and outside jurisdictions, vesting for long term tenants, and additional consideration for elderly and disabled residents. The Commission agreed to continue the item to the March 3, 2021 meeting for further discussion.

That is quite an understatement. The terse synopsis belies the 90 minute discussion that devolved into a testy debate about tenant-landlord partisanship among commissioners. Watch the video.

In the end the February discussion produced far more heat than light. And then shortly before the next meeting in March, where the relocation discussion was to be continued, two tenant representatives resigned. That put the brake on commission business entirely because two tenant representatives are required for a commission quorum and the one remaining tenant (alternate) representative, Kathy Bronte, wasn’t sufficient.

We briefly review the history of the commission discussions because that is essential to understand how the relocation fee issue is presented to commissioners for this August 4th meeting. The format of the relocation fees staff report alone is bewildering: there are incorporated four prior staff reports plus a city consultant report and public comment going back to 2017. It’s a lot for this commission to digest.

RSO Commission’s Task: Understand the Concept!

The August 4th relocation fee discussion is likely to begin with ground already covered in past discussions. That is necessary to introduce the issue to the two new commissioners. But it must go much deeper into substance if this commission is to produce an effective recommendation. (City council in the future will have final say when it amends the rent stabilization ordinance.)

The relocation fee staff report explains the considerations that went into calculating the existing relocation fee schedule: average rental market rate for comparable housing by unit size multiplied by three to cover first and last month’s rent and a security deposit plus estimated moving expenses and utility start-up costs. (It is an indication of the complexity of the staff report that the principle appears first on page 8 of the document.)

Earlier commission discussions focused on the dollars — was the current fee schedule too little, too much or just right — rather than discuss the concept behind the fee.

For example the majority of the commission seemed prepared to recommend to city council that the relocation fee should be equal to 3 months rent plus $1,000. The current average rent for a 1-bedroom Beverly Hills apartment is $2,206 meaning the recommended relocation fee would total $8,824 — which is $1,500 less than the city’s current relocation fee for a 1-bedroom unit according to posted information.

The problem isn’t only the reduced relocation fee amount; it is the arbitrary choice of a simple formula of three months plus $1,000. How did the majority of the commission arrive at that amount? By simply following the lead of Culver City which adopted that formula last year. We don’t know why Culver City chose that formula and our commissioners didn’t ask. It just seemed like an easy-to-follow formula. Incidentally, we might look to a more experienced city for guidance. Culver City is a relative latecomer to rent control having adopted its ordinance only last year.

This chart provided in the staff report compares some surrounding jurisdictions.

Relocation Fees comparison table

Bottom Line

We hope that the commission’s renewed relocation fee discussion will produce more light than heat this time around. That should include a discussion of about the concept behind the fee and reference to authoritative examples (Santa Monica and West Hollywood come to mind) prior to setting on what seems like an easy-to-administer formula.

Why is the relocation fee so important? We expect to see many tenant dislocations over the coming decade as rental properties are redeveloped or, in a limited number of instances, converted to condominiums. We need those tenants to depart with a fee sufficient to cover their cost of replacement housing relative to existing housing and the variety of other costs incurred. We can’t make displaced tenants whole but by the same token we can choose not to cheat them out of their fair fee.