The city has mailed out a ‘Notice of Reported Rent’ to each tenant in Beverly Hills but a systems error caused an incorrect rent to be provided on every notice. A new notice will be mailed to each household on our about February 25th.
Every landlord of rental properties in Beverly Hills just register each property with the city’s rental unit registry once every year (January) and again whenever a unit is rented again after a vacancy. Details such as ownership, management, and even aspects of tenancy (including the current rent) are recorded and updated within 30 days of any change. The rental unit registry is the backbone of our rent stabilization program.
Shortly after, in February, each household renting an apartment subject to rent stabilization will be contacted by the city to verify the rent that was recently reported by the landlord. If the reported rent is correct then a tenant need take no action. However if the rent amount is incorrect it should not be left to stand because the city will ‘certify’ it as the lawful rent and then future rent increases are applied to that ‘base rent.’ Those increases compound annually (like interest). It should be correct!
The registration process is much more than a bureaucratic formality. It is a tenant’s opportunity to hold the landlord to account for any miscalculation or impropriety. Take advantage of this opportunity! But act quickly because tenants have only fifteen days to appeal the reported rent amount once we receive the ‘Notice of Rent Amount Reported by Your Landlord.’
Brief Overview of the Process
The process for certifying a rent amount begins with the landlord registering the property and reporting the rents for all units except vacancies. Then the appeals process is three-step:
- The tenant is informed of the rent reported by the landlord and has an opportunity to contest (‘appeal’) the reported rent within 15 days.
- If any discrepancy is reported, rent stabilization staff will try to resolve minor errors or correct any misunderstanding about the base rent (as it is separate from pass-throughs or utility charges). If resolved, the city will certify the base rent in about two weeks.
- If the discrepancy remains, then the appeal is referred to a city-provided hearing officer for an administrative hearing in order to establish the certifiable rent amount. (The determination is appealable to the Superior Court.)
A tenant can appeal her reported rent by using a simple online form or by mailing a paper appeal form and documentation to the RSO office. There was an online portal but the city seems to now favor the forms.
Reviewing the Landlord-Reported Rent for Accuracy
The registration process for the tenant begins when a ‘Notice of Rent Amount Reported by Your Landlord’ comes in the mail. This is an important document! The landlord has reported the rent and the city gives the tenant has fifteen days (half as long as the 30 days allowed the landlord) to appeal a reported rent that is incorrect. Does it match? There are two likely scenarios.
The reported rent matches the rent paid most recently. No appeal is needed if the reported rent amount matches our recent rent payment AND we are confident that the current rent is lawful. The current rent is the original contract (lease) rent plus any allowed increases in the intervening years. 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. He may have rescinded the increase and then noticed a higher one, but once the tenant pays it cannot be increased again.
- 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 commenced 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.
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 she need take no action at all. The reported amount will become the ‘certified’ rent for the unit.
Or, the reported rent varies by a small amount from the rent paid most recently. 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. May a few rent receipts or cancelled checks is all that is necessary. But a discrepancy could reflect a landlord’s sloppy bookkeeping. A miscalculated rent increase years back could result in a substantially higher rent than is lawful today, for example. Take this opportunity to review past rent increases and the formal notice that is required. Are the increases all lawful? Were they noticed properly? A tenant should bring any problematic notice to the attention of the rent stabilization program when the reported rent amount is appealed.
The third scenario is more problematic: your reported rent is accurate but is known to both tenant and landlord to be unlawful.
Consider a situation where a tenant is paying an unlawfully-high rent because the landlord knowingly increased the rent more than was allowed by the law. But the tenant agreed to pay because she was afraid to be evicted by her eviction-happy landlord. Other reasons to comply may be because the tenant is undocumented, or is simply intimidated by the landlord. Perhaps she may not readily qualify for replacement housing if she is evicted.
Consider a situation where some part of a tenant’s rent is discounted when that tenant pays cash. The tenant’s incentive to go along is to save on the rent. But that is penny-wise but pound-foolish: the landlord could later allege that the certified rent was not paid in full. If a receipt is provided it may be casual and not meet the standard for evidence in a hearing (unlike a cancelled check).
Consider a third situation: the cash kickback. The landlord claims a higher rent to his lender or to potential buyer with the assent of the tenant, who gets an envelope of cash under his door every month (the kickback). Why would a tenant enter into such an arrangement? Perhaps to stay in the landlord’s good graces. We know one such arrangement and it only came to light because the city was certifying the rent. When the landlord provided the city with the higher rent amount the tenant appealed. Then the cat was out of the bag. Who prevailed in the hearing? We’ll have more on that later!
The moral of these stories: when it comes to rent there should be no part of the landlord-tenant relationship that is not formally documented. A lease is a contract and cash-back and kickbacks have no place in it.
Filing an Appeal of the Reported Rent
The city seems to be favoring a form for this process and we’ve asked for more information. In the meantime, follow instructions in the notice from the city and we will update our guidance when we know more.
The process for registration and appeals is similar: visit the online portal and log in. You may already have a valid login if you have created a ‘My Beverly Hills’ account (used for receiving e-notices) so try that login first. If not, then create an account.
Next, choose the appropriate role (tenant or landlord) and follow the instructions to appeal the rent amount reported by the landlord. (The same screen allows for the request of a rent certificate, which is the first step in verifying the rent on record after, or outside of, the registration and appeals process.)
The city helpfully explains rental unit registration and tenant appeals on the rent stabilization program homepage and in an accompanying 120-page user guide. That user guide is a real slog! So we’ve abridged it to focus only on the information of concern to tenants. Find our abridged guide here. (An alternative to the registration portal, the online form and the paper appeal form.)
Tip: When appealing the reported rent be prepared to support your appeal with documentation. That could include:
- 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 filed an appeal? Drop us a line! We are looking for examples where the appeal process uncovers improper practices or rent overcharges.
Reviewing the Rent Record for Other Charges
The registration-and-appeals process is an excellent opportunity to sharpen the pencil and slip on the green eyeshade after verifying the reported rent amount. The city allows some costs to be passed-through to tenants. Is the landlord properly calculating these costs and are they properly documented? Each lease specifies the rent amount and any other charges that may apply, like utilities, parking, etc. Are the charged properly? It is worth taking another look!
- Utility or other costs should not be 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. Sometimes such ‘housing services’ are included with the tenancy; in other cases there is an additional charge. But in no circumstance should any additional charge be rolled into the rent amount because only the ‘base rent’ is ‘certified’ by the city. Again, the lease is specific about additional charges (if any).
- Improper pass-through charges inflate the rent paid. While not strictly part of the rent appeal process, some pass-through costs are not lawful. The city allows Chapter 6 tenants to pay a refuse fee; Chapter 5 tenants can pay the refuse fee plus certain capital costs and even a fee for an additional tenant. However a landlord cannot ‘ballpark’ these charges or otherwise divide them inequitably across tenants. There must be a rationale, and the shared-cost must be documented. If a pass-through charge appears questionable, ask the landlord or bring it to the attention of the rent stabilization program regardless of any rent amount appeal.
- Improperly calculated utilities . The original lease will specify which utilities the tenant will pay (if any). (The month-to-month tenancy simply continues the same terms unless changed formally later.) The utility charges apportioned to tenants according to the lease must be formally calculated. For example, the cost of gas and/or water (if NOT metered individually) may be shared among tenants if the lease says so. But that doesn’t mean that such costs are calculated properly. While the law is not specific on how such costs are shared there must be a rationale — and the landlord must be able to justify it. Again, no ‘ballpark’ charges! Ask for documentation if something fishy is suspected.
- Improperly billed utilities. The lease will specify what utility charges a tenant is obligated to pay, but we have seen instances where one tenant is paying the landlord for another tenant’s gas meter. There exist unpermitted units which of course have no meter in an otherwise individually-metered building. We’ve seen such a tenant paying the landlord for electricity per the building’s meter. It is generally the smaller, sloppy operators who conduct business this way. Tenants know who these landlords are and, again, this is an opportune time to review every aspect of the rent payment.
Any concern about improper pass-through costs or suspect 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.
Be sure to watch the mailbox for the ‘Notice of Rent Amount Reported by Your Landlord.’ Then carefully review your rent record for any unlawful rent increase(s) or overcharge(s). And act fast: the window for a timely appeal of the reported rent is only fifteen days from the date of the notice!
- Why is this so important? Because the rent increase compounds annually (like bank interest). Over time an excessive increase really adds up! Take for example the average Chapter 6 rent: $2,427. Let’s say shared utilities add $150 to that. The bad landlord would roll the rent and utilities into a single number ($2,577) upon which a rent increase of 4.1% is levied each year. But the good landlord applies the 4.1% increase only to the base rent ($2,427) and each year collects the $150 utilities charge separately (and fully documented!). The difference is very significant over the life of a tenancy: in the 10th year the bad landlord collects $65 per month more than the good landlord who collects the base rent and the utility charge separately. That’s because each annual increase compounds. At the end of the 10-year hypothetical tenancy the bad landlord would have collected a whopping $3,711 (the cumulative monthly overcharge) more than would have the good landlord. The lesson: never allow any extra charge to be rolled into the base rent! ↩
- 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: Chapter 6 tenants may find the city’s refuse fee passed-through, but it may not be rolled into the base rent. It must always be added as a separate charge. For Chapter 5 tenants, the refuse fee, utility surcharge, and capital improvement costs may be passed-through, but cannot be included in the base rent. All charges apart from the base rent must be identified and documented separately. ↩