Landlord Registration of Rental Units is Badly Lagging

City of Beverly Hills every year requires each owner of a multifamily property to register his rental units with the city’s rental unit registry. The registry identifies the property owner and keeps track of the lawful rent and much more. It is the backbone of our rent stabilization program because it helps the city hold landlords to account for unlawful rent increases and other malfeasance. Landlords strongly opposed it and even filed two lawsuits to stop it without success. Now some landlords simply resist registration. How many failed to comply?

Registration Requirement

The city’s rent stabilization ordinance is clear about the obligation to register:

A landlord must register every rental unit that is subject to the provisions of this chapter within thirty (30) days of receipt of notice from the City that registration is required, unless the rental unit is specifically exempt under this chapter. Registration is complete only when all required information has been provided to the City and all outstanding fees and penalties have been paid. – B.H.M.C. 4–6–10(A)

The requirement is no surprise to multifamily property owners. Annual registration begins each January and has occurred annually since 2018. It must be completed no later than 35 days after the mailing of the registration notice. This year the notice went out to every Beverly Hills landlord with a rent-stabilized property owner on January 9, 2023. The registration deadline passed on February 6th.

The city makes online registration easy and much of the information is already pre-filled. The city will even assist a landlord in person. This should be a regular practice too because the rent stabilization ordinance requires the landlord to re-register a unit within 30 days after a new tenancy is created following a vacancy (4–6–10 subsection C). The landlord must also update the property registration record within 30 days after a change in ownership or management (subsection D) according to the rent stabilization program website.

Registration Progress

In response to a query to the rent stabilization office, we are informed that owners “fully registered” only 624 out of 1,097 rent-stabilized properties — which is only 57% and this is five weeks after the registration period concluded.  This should not be a tall order. The information required by registration is neither proprietary nor complicated.  Virtually all landlords have registered units before. This is round six of the annual registration.

Nevertheless the registration period has been held open for laggard landlords as it has been done every year.

‘Fully registered’ means that all information was provided for a registration. But an additional 1-in-5 rent-stabilized properties (209) have incomplete registrations. There is no excuse for an incomplete registration: many of the form’s fields are pre-filled and landlords must already be keeping track of tenants and rents, right? We can give a pass to new owners who are unfamiliar with the process but that account for more than two hundred properties not fully registered.

The real eyebrow-raiser is that owners of 264 properties have not even begun to register their rental units, according to the rent stabilization office. That represents 24% of all rent-stabilized properties. We could expect 2% or 3% of properties not to be registered but one-quarter of them? Surely there is a penalty for not registering a rental unit. Doesn’t the landlord slap a tenant with a late fee only two or three days after the rent is due?

No Real Penalty

There is no real penalty for landlords who don’t register because city council didn’t include in the rent stabilization ordinance a financial penalty for a landlord that refuses to register. Instead city charges it as an ordinary violation of the code. That means there can be a long time from violation to compliance. A recalcitrant landlord can play the city for time or step up with a fix in the unlikely event the city takes the landlord to court.

The ordinance, though, only provides two weak sanctions. Pursuant to subsection 4–6–11(A)(1) the city can refuse a landlord’s application for a rent adjustment if the unit is not registered. (Adjustment is a complicated process for which no landlord applies anyway.) Pursuant to subsection 4–6–12(A)(3) the city can prevent the landlord from collecting a rent increase if the unit is not registered. The increase is not to be confused with the base rent. The landlord can still collect the rent; it’s the increment of the increase in the rent that he can’t collect.

Back in 2017 we urged the city to include a fine when it amended the ordinance to require registration. Council didn’t take that advice. As a result we have a registration process that proceeds slowly. Only in April will a Notice of Non-Compliance be sent to owners who haven’t registered.

Tenants have a role in this process too: we verify the amount of rent reported by the landlord before it is ‘certified.’ Our part in the process gets pushed back deep into the year too. If the city were strict about the timeline, then both the registration and the verification could wrap-up by March with just a few outliers unregistered. It seems more like the process is out of the city’s control. What’s notable is that city council doesn’t even get a heads-up about it.

Scofflaw Landlords

Why do some landlords avoid registering their units? We can only surmise but none of these reasons really makes sense.

Perhaps the landlord wants to avoid the $63 annual rent-stabilization fee. It’s not clear that the landlord can escape the assessment by not registering; and in any case it is small change if you’re a landlord. That it is less than the fee charged to a tenant when she is a few days late with the rent.

Perhaps some landlords avoid registering their rental units to express opposition to the requirement. Supporting this reason is the legal action that landlords brought against Beverly Hills to thwart the registry. Take for example local landlord Dan Yukelson who is also the executive director of the Apartment Association of Greater Los Angeles. He views any kind of regulation as the handiwork of Lenin.

Perhaps landlords don’t have the apartment leasing business license that is required by the city — and which is a prerequisite to register rental units. It’s plausible: six weeks after the window closed to license a business (January 31st) there are still 70 rent-stabilized properties without a license. Another 30 rental properties haven’t yet renewed their business license from last year. Presumably none is paying the business tax.

We have repeatedly asked the city’s finance office how a landlord can operate without obtaining a business license and without paying the required business tax. We get a variety of reasons but remain unconvinced by any of them because when we identify, and report, an unlicensed rental property the city will follow up and that business will get the license. The city pays a contractor very good money to ensure the city receives its business tax due. We provide that service for free.

Our Take

For whatever reason our city is not motivating landlords to register their rental properties. That suggests the need for a different approach. Make landlords pay a late fee. Each month after the close of the registration period they should be billed $63 per unregistered unit — just like the late fee that they charge tenants. That’s only fair.

Perhaps the city should put the brake on all building permits when the landlord has not fully registered the property. Some landlords won’t make repairs when a tenant is behind on the rent. It’s the same principle but in reverse.

Whatever the approach there needs to be a remedy for the culture of noncompliance and impunity that city hall let fester among landlords for far too long.