Raising the Rent Doesn't Hinge on Providing Improvements

Raising the Rent Doesn't Hinge on Providing Improvements

Robert S. Griswold | Steven R. Kellman | Ted Smith
30-May-1999 Sunday

This column on issues confronting renters and landlords is written by Counselor of Real Estate and Certified Property Manager Robert Griswold, host of Real Estate Today! with Robert Griswold (10 a.m. Saturdays on AM1130 - KSDO radio, or on the Internet at www.retodayradio.com), and by attorneys Steven R. Kellman, director of the Tenants' Legal Center, and Ted Smith, principal in a law firm representing landlords.

Q: I have lived for several years at a nice property that has not experienced any significant crime, vandalism or graffiti.

Six months ago the owner installed a security gate and a telephone intercom. The system was second-hand and has been repaired numerous times.

After the installation, the owner raised rents significantly and is justifying the increases on the non-mandatory improvements.

I am sure that this is some sort of tax write-off. Isn't this an act of fraud since the rent increase collected from all the units is well beyond the cost of the security system?

A: Smith: The law is very clear. The landlord has every right to raise the
rent. The landlord has exercised his right as a property owner to enhance
his investment by making improvements.

The fact is that your landlord has decided to improve the property to
enhance his investment. For month-to-month tenancies, there is no legal
limit on either the amount or frequency of a rental increase, so long as a
proper 30-day written notice is given. The gates and telephone system are
"perks" which tenants will be able to enjoy, but they do not relate to the
rental increase.

The fact that the landlord can take tax credits based on these costs is not
a matter for you to be involved with.

Kellman: Well, Ted, the law is clear that a landlord may raise the rent
except when that raise is illegal. In some cities in California, there are
rent control laws that limit the amount and frequency a landlord can raise
the rent.

Although not a rent control city, San Diego has some laws that limit rent
increases. These apply to some subsidized housing and certain mobile home parks. Of course, the vast majority of rentals in San Diego will not be
affected by these limited exceptions.

So, can the landlord raise the rent without legal limits as to amount and
frequency as Ted suggests? Maybe.

In your case, you may have a claim based on the representations of the
landlord. If he truly justified the raise on certain improvements, which
did not happen, you may claim he is barred from raising the rent until the
improvements are made.

Unfortunately he can easily avoid this problem by simply raising the rent
without an explanation since one may not be necessary. The motive may be
simply to increase profits on his investment, which is not illegal in the
absence of rent control. There are other laws that protect California
tenants from certain rent increases. One such law prohibits increases in
rent that are retaliatory. This means that the landlord is not allowed to
raise the rent in retaliation for certain protected activities of the tenant.

These include: complaining about serious or dangerous defects in the
rental, participating in a tenants organization, calling the police about
suspected illegal activities, withholding rent when the unit is truly
uninhabitable, repairing defects and deducting the cost from the rent or
refusing to do something demanded of you that is somehow wrong or illegal. These are only some examples of the grounds for an illegal rent raise.

If your landlord is found to have violated this law, the rent raise will
not be valid and he may be ordered to pay you a fine of between $100 and
$1,000 for the retaliatory rent raise attempt.

Truly the law can offer some protection from rent increases to those who
learn and stand up for their rights.

Griswold: Time for a reality check.

When you cut through all of the legal posturing about legal vs. illegal
rent increases, the bottom line is fairly simple.

While no one likes to pay more, at least your owner is attempting to put
some of the extra rent collected back into the property. But he does not
have to make any improvements at all.

Many tenants would be very appreciative if the owner installed an access
control gate and phone system whether it is new or used.

The good news for owners and renters is that the rental market is becoming
more balanced and while vacancies are still very low, rent increases should be much more moderate in the next couple of years.

While every area of the county has different dynamics and there is a
softening of the high-end rental market, generally speaking I would
anticipate three- to five-percent rent increases should be expected over
the next 12 months.

Q: We are leasing a rental home until the end of the year for $1,100 per
month. It is a great deal for the area, yet we are finding out that there
is in fact "no free lunch." The owner is trying to sell the property and
real estate agents and potential buyers are hounding us at all hours.

Is there a legal precedent for a rent reduction based on the increasing
frequency of showing the house? From what I have been able to glean from
Web surfing, it looks like any new owner will be required to buy us out of
our lease. Am I right?

A: Griswold: Watch out for erroneous information on the Web. I would advise not to pack your bags yet. The new owner will buy the home subject to your lease, unless the current owner or the new owner makes you an offer you cannot refuse.

So you can either stay through the balance of the term (knowing that they
will most likely not renew or extend your lease) or cut your best deal.

Regarding the rent reduction, there is no legal precedent to do so.
However, I would strongly advise the owner to offer a reduction.

See what you can negotiate on both accounts.

Smith: From the perspective of the landlord's attorney, let me remind you
that this lease is binding. It cannot legally be changed.

You're stuck with the stated rent until the end of the lease term. There is
no legal precedent for a rental reduction, unless the landlord agrees in
writing. If the house is sold, you could be bought out if the buyer wants
to occupy it.

Robert correctly points out that both seller and buyer must honor your
lease until it expires. Your landlord has the legal right to show the house
to prospective buyers. But he must give you advance notice and enter during normal business hours. You are not entitled to a rental reduction just
because you might be inconvenienced. It is not an invasion of privacy so
long as the landlord meets the notice requirements.

IF YOU'RE A TENANT OR LANDLORD, the authors stand ready to answer your questions in this column, although letters cannot be answered individually. Write them at: Rental Roundtable, Homes Section, San Diego Union-Tribune, P.O. Box 120191, San Diego, CA, 92112-0191. Or you may e-mail them at rgriswold.sdut@retodayradio.com

Copyright Union-Tribune Publishing Co.

Back to 1999 Rental Roundtable Index

Robert Griswold and the Real Estate Today! radio show strongly support the intent and the letter of all federal and state fair housing laws. As a reminder to all owners and managers of real estate, note that all real estate advertised is subject to the Federal Fair Housing Act, which makes it illegal to advertise "any preference, limitation, discrimination because of race, color, national origin or ancestry, religion, sex, physical disability, or familial status, or intention to make any such preference, limitation or discrimination." Additional state and/or local fair housing laws may also apply. Be sure to inform all persons that all dwellings offered or advertised are on an equal opportunity basis.

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Revised and Updated - Wednesday, April 26, 2006

Robert S. Griswold, CRE, CPM, CCIM, PCAM, GRI, ARM
Griswold Corporate Center
Griswold Real Estate Management, Inc.
5703 Oberlin Drive, Suite 300
San Diego, CA 92121-1743
Phone: (858) 597-6100
Fax: (858) 597-6161
Email: rgriswold.ret@retodayradio.com