City Council Extends Local Moratorium to April

City Council has agreed to extend the Beverly Hills local moratoriums on evictions and rent increases to April 1, 2022. In a nod to the continuing uncertainty and economic impacts of COVID–19, council also agreed that tenants should not face a double rent increase this year. That means rent-stabilized tenants will see only a 3.9% rent increase once the moratorium expires. That is a win for tenants and particularly those who might be displaced but for moratorium protections while we ride-out the long tail of this pandemic.

Councilmembers thanked the Rent Stabilization Commission for its work but quickly set aside the commission’s resolution to recommend City Council immediately end pandemic tenant protections. (Read more in our post about the commission’s recommendation.

City Council’s extension of our local moratorium represents a win for tenants affected by COVID–19 hardship. But it has a protection that will benefit every rent-stabilized tenant: a prohibition on no-fault eviction and rent increases. Beverly Hills is one of the few localities that has continued such protections; other cities’ moratoriums have already expired along with the state moratorium on September 30th.

Let’s look at each moratorium protection separately.

Moratorium on Eviction for Nonpayment

City Council’s decision to extend our local moratorium means that those who have delayed the payment of full rent under our local ordinance can continue to delay paying the full rent through March of next year. Tenants who experience hardship for the first time can begin to delay the payment of full rent by filing the necessary forms available on the rent stabilization division website.

Extending the moratorium to April also allows tenants five additional months to repay rent if that rent was delayed using our local moratorium. Now all back rent must be repaid within one year after after the local moratorium expires or April 1, 2023. Had City Council hewed to the Rent Stabilization Commission’s recommendation the back rent repayment deadline would have been five months earlier (as soon as October 2022).

(Note: this provision does not repayment for tenants who delayed rent under the state moratorium. Means-qualified tenants should access the California COVID rent relief program for help and to stave off eviction. Tenants who don’t qualify for the program can see their back rent converted to consumer debt in small claims court.)

How did we get to an April extension? Councilmembers Les Friedman and Julian Gold first February 1st as an expiration date for our moratorium. That was a sign that council was not likely to summarily end the moratorium. Helen Morales, deputy director of the rent stabilization division, then acknowledged that Sacramento rent relief was slow in coming for some tenants. So after additional discussion Vice-Mayor Lili Bosse pressed for a later date: April 1st. That won agreement from Mayor Bob Wunderlich and councilmembers Friedman and Gold.

Notably Councilmember Mirisch didn’t think the city should put a date certain on the expiration of the moratorium. He gestured to the city’s ongoing support for businesses that has no end date. “We just extended the medical use ordinance because we’re still in the pandemic,” he said, referring to relaxed restrictions on commercial space leased for medical uses. “That’s for office landlords — why wouldn’t we afford consideration to our residents?”

Moratorium on No Fault Eviction

Extension of the local moratorium to April 1st also means a reprieve for households who have been served with notice of a tenancy termination for redevelopment pursuant to the state’s Ellis Act. The notice period ranges from 120 days to one year however the moratorium stopped the clock last March. Had council accepted the Rent Stabilization Commission’s recommendation the clock would have started ticking again on those evictions already in progress.

Also spared are some unknown number of households who would see eviction proceedings initiated for redevelopment but for the moratorium. We know that several projects are in the redevelopment pipeline but the clock has not yet started ticking for households that would be displaced. The moratorium extension puts a hold on those eviction notices until at least April.

Renters Alliance has been contacted by tenants at those properties because they have been presented with an offer of a buyout to leave voluntarily. Some have accepted the offer but perhaps without understand what they have signed away. Eviction for redevelopment comes with restrictions intended to protect tenants. A voluntary agreement removes those restrictions.

Because buyouts are are not regulated in Beverly Hills. In fact last year the Rent Stabilization Commission agreed not to recommend that buyouts be regulated. (Renters Alliance disagreed!) So now we are urging City Council to consider ‘bookending’ our moratorium protection against no-fault eviction with new protections for tenants who would take a buyout. (Read our comment to council.)

Please get in touch with Renters Alliance if you are offered a buyout so we can review your options and opportunities. The local moratorium provides tenants some margin of additional leverage to negotiate!

Moratorium on Rent Increases

The local moratorium protection that will affect all* rent-stabilized tenants in Beverly Hills is the prohibition on rent increases. The maximum allowable annual rent increase was paused by City Council in March of 2020. That provision included an notable caveat:

This moratorium on rent increases shall be applied to any rent increase scheduled to take effect on or after March 15,2020. Nothing in this Ordinance shall alter the date of annual rent increases in future years. — Urgency ordinance 20-O–2818.

It was unclear what that highlighted passage means because it is ambiguous. The city seems to interpret it as allowing a second, subsequent rent increase on the customary annual date. But that’s not how it works in the real world; many tenants don’t pay annual increases like clockwork.

Long before the city acknowledged the implication of it, though, Renters Alliance reported that tenants could see a double rent increase as the moratorium stretched into year two. If the landlord raises the rent by 3.9% once the moratorium expires, the interpretation says, when the annual date of increase comes around again in August, say, the landlord could demand a second rent increase. That’s only a few months after the first post-moratorium rent increase.

The implications of this potential double rent increase troubled the Rent Stabilization commissioners. It actually tanked a few preliminary votes to recommend an end to the moratorium. But the commissioners set aside the concern and the implication of the provision wasn’t highlighted to City Council in the staff report.

We called it out in our note to subscribers and almost half of the public comments to council flagged the issue as a concern.

Helen Morales, deputy director of the rent stabilization division, acknowledged that tenants could face two 3.9% increases under the current moratorium wording. That caught the attention of councilmembers. “On the rent increase we need to be mindful to not have two of them very quickly,” said Councilmember Gold. “I see one rent increase in 2022 — not 10% in a year. I could talk about amortizing the difference over time but I think only a single rent increase for 2022.”

Vice-Mayor Bosse agreed. “The potential for a rent increase to about 8% horrifies me,” she said. “That’s taking ten steps back. Several years ago we put a rent ordinance [3% cap] in place because the landlords were taking 10% while saying that they had no intention of taking 8% or 10%.”

City Council deferred a final decision on how to deal with the rent increase issue until a future date. But not before some enlightening commentary on the issue.

Must We Give Landlords Two Rent Increases?

As councilmembers discussed whether to allow landlords to demand a second rent increase, City Attorney Larry Wiener spoke up. “We have to let landlords recoup the 3% increase over time,” he said. “They are constitutionally required to make a fair return.” (Helen Morales from rent stabilization told the Rent Stabilization Commission the same thing during the commission’s discussions. “We have to let them have their fair return,” she said then.)

Vice-Mayor Bosse twice asked if the law “legally required” the city to allow the landlords to carry forward the missed 3% increase. The city attorney though so.

We dare to disagree. We will look at this in more detail in an upcoming post, but suffice to say that there is not necessarily any connection between carry-over of a 3% rent increase denied by the moratorium and the ‘fair return’ standard under the law. That is simply a misapplication of the statute. We knew that back when Morales suggested it to the Rent Stabilization Commission; and we knew it when we heard it again from the city attorney.

As it happens, Mayor Bob Wunderlich is an economist. He drilled down on the city attorney’s claim. He asked whether the city needed to provide a means for the landlord to recoup the lost annual rent increase(s) — or did the city only need to ensure that the landlord achieves a fair return? “Those are not the same thing,” he added, and the city attorney was taken off guard.

As there was already agreement to extend the Beverly Hills moratoriums until April 1, 2022 the issue could be deferred. The city attorney agreed to come back to City Council with more information. One option is to carry forward the lost rent increase but spread it over three years. Some councilmembers warmed to that idea.

Renters Alliance proposed a different approach to balance the landlords’ entitlement to a statutory fair return and the city’s interest to protect tenants from egregious rent increases: deny landlords the lost rent increase and if any landlord can demonstrate hardship — earning less than a fair return — then the landlord can use the established city process to appeal to a hearing officer for the forgone rent increase. (Read more in our August post.)

Renters Alliance will make this argument to City Council when it next convenes on the question. We do need landlords to make a fair return, after all, but we need them to plow some of that return into upkeep.

Thanks!

We want to thank the dozen tenants who phoned-in or emailed a comment to City Council to oppose the Rent Stabilization Commission’s recommendation. They underscored our collective concerns very effectively! “We’ve heard from our residents who are very concerned and I see no reason to discontinue the protections,” said Councilmember John Mirisch. “We need to ensure the stability of our residents — that’s the #1 concern…I want to make sure that our residents are protected against eviction.” Watch the video.

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