Tenants also have a legal duty to report repair issues to their landlord or property manager. If a pipe bursts or the heater fails to work, for example, the tenant should report this issue to their landlord. If the report is made verbally, tenants should also follow the request in writing (an email will do).
Renter’s insurance is a good idea, and may actually be requirement of a lease agreement. And some insurance companies will include an add-on policy to cover damages caused by water damage due to burst pipes or sewar backups which may be helpful in an old building.
But, what if the landlord decides to replace an outdated furnace with a new, energy efficient furnace? Or, to paint the building exterior or hire a structural engineer to upgrade the building balconies? In certain rent controlled jurisdictions like San Francisco, Berkeley, and Oakland, the landlord can pass the cost of these improvements on to the tenant in the form of a rent increase. If the landlord had to borrow money to pay for these improvements, the interest cost of the loan may be added to the total cost of improvements and amortized over a period of years.
The San Francisco rent board describes a capital improvement as, “. . .one that materially adds to the value of the property, appreciably prolongs its useful life, or adapts it to new uses, and which may be amortized over the useful life of the improvement of the building.”
Before passing certain capital improvement costs onto the tenant, the landlord must petition the local rent board, serve a copy of the petition on each of the tenants, and wait for a hearing in which tenants can attend and object. Supporting documentation to the petition may include labor and material costs, costs of engineering or architectural consulting, loan costs, and other relevant costs. After the hearing, the rent board hearing officer considers all documentation and testimony and issues an official decision to the landlord and the tenants. If the petition is approved, a specific cost – in the form or a “temporary” rent increase – can be passed along to each tenant for a period of months or years.
For example, in Oakland, 70% of the costs to paint the building exterior can be passed along to the tenants as a rent increase for 60 months or 5 years, after which the landlord or his agent should notify affected tenants that the rent increase related to this capital improvement is satisfied and the rent should decrease by the amount approved by the hearing officer.
In Oakland, capital improvements must “benefit the tenant,” however, what benefits the tenant is arguable. If the exterior paint of a building is in good condition, does applying a new color benefit the tenant or increase the property value for the landlord?
Each jurisdiction has their own requirements; there doesn’t seem to be a “standard” approach relating to capital improvements and the rent increase that the rent board may allow the landlord to pass along to their tenants or for how long.
It is important for the tenant to keep good records concerning the landlord’s petition, the hearing decision, and the Notice of Rent Increase related to these capital improvements and to create a calendar reminder about when this “temporary” increase should be suspended. The landlord or the landlord’s agent may not be as diligent at suspending this rent increase as they are at requiring it.
Renter’s insurance is a good idea, and may actually be requirement of a lease agreement. And some insurance companies will include an add-on policy to cover damages caused by water damage due to burst pipes or sewar backups which may be helpful in an old building.
But, what if the landlord decides to replace an outdated furnace with a new, energy efficient furnace? Or, to paint the building exterior or hire a structural engineer to upgrade the building balconies? In certain rent controlled jurisdictions like San Francisco, Berkeley, and Oakland, the landlord can pass the cost of these improvements on to the tenant in the form of a rent increase. If the landlord had to borrow money to pay for these improvements, the interest cost of the loan may be added to the total cost of improvements and amortized over a period of years.
The San Francisco rent board describes a capital improvement as, “. . .one that materially adds to the value of the property, appreciably prolongs its useful life, or adapts it to new uses, and which may be amortized over the useful life of the improvement of the building.”
Before passing certain capital improvement costs onto the tenant, the landlord must petition the local rent board, serve a copy of the petition on each of the tenants, and wait for a hearing in which tenants can attend and object. Supporting documentation to the petition may include labor and material costs, costs of engineering or architectural consulting, loan costs, and other relevant costs. After the hearing, the rent board hearing officer considers all documentation and testimony and issues an official decision to the landlord and the tenants. If the petition is approved, a specific cost – in the form or a “temporary” rent increase – can be passed along to each tenant for a period of months or years.
For example, in Oakland, 70% of the costs to paint the building exterior can be passed along to the tenants as a rent increase for 60 months or 5 years, after which the landlord or his agent should notify affected tenants that the rent increase related to this capital improvement is satisfied and the rent should decrease by the amount approved by the hearing officer.
In Oakland, capital improvements must “benefit the tenant,” however, what benefits the tenant is arguable. If the exterior paint of a building is in good condition, does applying a new color benefit the tenant or increase the property value for the landlord?
Each jurisdiction has their own requirements; there doesn’t seem to be a “standard” approach relating to capital improvements and the rent increase that the rent board may allow the landlord to pass along to their tenants or for how long.
It is important for the tenant to keep good records concerning the landlord’s petition, the hearing decision, and the Notice of Rent Increase related to these capital improvements and to create a calendar reminder about when this “temporary” increase should be suspended. The landlord or the landlord’s agent may not be as diligent at suspending this rent increase as they are at requiring it.
No comments:
Post a Comment