Legal Corner Q & A

Reduction of Services: Transferring Heating Costs

By Various Authors

Q. I have converted most of my units to electrical heat. Can I make a deal with the remaining tenants to reduce the rent, and in exchange, have them pay their own heating costs (which is now included as part of the rent)? Do I have to go through the Rent Board? Is there a precedent for a fair cost of heat as a percentage of total rent?

A. You can make a deal, but as with any other voluntary arrangement made with a tenant, it is not necessarily enforceable if the tenant goes to the Rent Board. As you know, the situation you are describing is a reduction in service, which justifies a reduction in base rent. The landlord and tenant can make an agreement on what the reasonable value of the reduced service is, but if the tenant is dissatisfied and goes to the Rent Board, the Rent Board will not be bound by the agreement.

In determining the appropriate rent reduction, the Rent Board uses a formula available from PG&E which is posted on their Web site under “Save Energy and Money.” Once you launch the PG&E site select “Residential” from the drop-down menu. Go about halfway down the page and on the right side click on “Energy Calculator.” Then, under “Appliance Type” select “Heating, Electric,” and voila! You have your calculator. Be sure to insert the average kilowatts per hour for your particular heaters into the calculation—you need to know the figure if it’s different than what is shown.

PG&E’s formula involves a calculation of the wattage of the individual heaters in the unit, times the number of heaters, times the required 13 hours of heat to be provided in the day, times 30 days per month, and the average rate per kilowatt hour. The Rent Board will use this formula to calculate the value of the service withdrawn. Individual consideration may be given to people who are not present in the rental unit during the full 13 hours on a regular basis (e.g., they are away at work outside the home), thus lessening the amount of the rent reduction. The full reduction would be granted to someone who is homebound or works at home.

Once the calculation is completed, it will not be re-figured in subsequent years based on increases in energy costs. The base rent is reduced for the withdrawal of the service on a one-time basis only, regardless of fluctuations in the price of energy in the future. (The Rent Board rarely looks at the building’s actual PG&E bill itself, because they don’t find it particularly reliable or helpful.)

By using the computations available on the PG&E Web site, the landlord can usually work out an agreement with the tenant and avoid Rent Board involvement. If the tenant chooses to go to the Rent Board with a reduction in service petition, the result obtained should be similar, although the Rent Board is not bound by the agreement between landlord and tenant.
– Saul M. Ferster

Q. Does a minor have specific rights as a tenant under the Rent Ordinance?

A. Subject to a few exceptions, minors lack the capacity to enter into a rental agreement. Therefore, minors generally cannot be tenants.

In San Francisco, issues regarding minors generally arise when a landlord is seeking to recover possession of a unit from a family in order to owner-occupy the unit (owner move-in). In these situations, the landlord must decide whether to name the minor children in the owner move-in eviction notice and whether the minor children are entitled to statutory relocation payments, if applicable. Because minors are not tenants, the landlord does not need to name them in the owner move-in eviction notice and is not required to pay them any statutory relocation payments. If there is a lack of clarity about whether or not children are minors, then they should be named in the eviction notice. It is better to be safe than sorry.

If the landlord is renting directly to minor(s) only, without parents or other adults in the unit, then the landlord should consult an attorney before evicting them because the landlord may need just cause to do so.
– Steve Williams

Q. If a tenant lives in an illegal apartment and refuses to pay his/her rent can the owner give the tenant a Three-Day Notice for non-payment of rent?

A. If you gave a Three-Day Notice and the tenant was persuaded to pay it, your (short-term) problem is solved. However, if the tenant did not pay or move out, and you filed an unlawful detainer action, you would probably lose in court because the rental agreement is technically unenforceable and an owner cannot legally collect rent for a unit without a certificate of occupancy. Even as an “illegal” unit, it is still a “rental unit” under the SF Rent Ordinance and Regulations, subject to all of the requirements and procedures for evictions, for example. The good news is that even in San Francisco, under court decisions, the tenant cannot both stay in the illegal unit and fail to pay rent. Here in our city the usual ground for eviction is Section 37.9(a)(10), which provides for the owner to seek to recover possession in good faith in order to “demolish or otherwise permanently remove” the rental unit from housing use. It also requires that the owner’s intent for possession is honest and not based on ulterior reasons.

The usual situation occurs when the City cites the owner for having an illegal unit. In most cases the unit will have to be removed because it cannot be brought up to code due to zoning and/or building code requirements. Section 37.9(a)(10) also requires that the owner have permits before serving the notice. An eviction is usually justified in cases such as converting an illegal garage unit to a legal garage that will be used for parking or storage. However, tenant advocates would argue that this approach does not apply in situations where an owner is attempting to merge illegal units into a (legal) single family house, for the unit is not being removed from “housing use.” Tenants can also cause problems by appealing the permit (to remove the illegal unit) to the Board of Permit Appeals. This appeal may result in the City taking action to force the owner, at great expense, to create an up-to-date unit. Some owners have been sued for wrongful eviction, which includes claims of fraud/misrepresentation – i.e., that the owner did not disclose the legality of the unit when they moved in. For all these reasons, renting illegal units is risky. In my experience, there is usually a history of problems with the tenant that complicates the situation. Consult experienced counsel before taking action.
– Lawrence M. Scancarelli

Q. After a lease has expired, can I require the tenant to sign a new lease so I am not left with a month-to-month holdover tenancy?

A. Yes, you can require the signing of a new lease. However, in rent-controlled jurisdictions like San Francisco, you can only compel a tenant to sign a new lease that contains “such terms which are materially the same as in the previous agreement.” See, for example, SF Rent Ordinance section 37.9(a)(5). This section indicates that the new lease must have the same covenants and requirements of the old one. Moreover, in rent-controlled jurisdictions, the amount of rent stated in the new lease cannot exceed that which is lawfully permissible. Sometimes landlords think that a new lease means a new rental amount. However, no lease covenant can conflict with any provision of the Rent Ordinance. Consequently, even if the tenant agrees to sign a new rental agreement, make sure the rental amount remains in compliance with local law.

In my experience, attempting to evict a rent-controlled tenant for failing to sign a new lease is almost impossible. While the San Francisco Rent Ordinance states that the refusal to sign a new lease constitutes grounds for the termination of the tenancy, practicality suggests otherwise. Unless the new lease is exactly the same as the old one, do not attempt an eviction on this basis. Thus, if the new lease mirrors the expired agreement, why even bother with a demand to re-execute the rental agreement? The tenancy will simply continue on a month-to-month basis under the provisions of the original rental agreement.

An interesting situation arises in San Francisco when you buy a building and inherit an earlier tenancy that was based on an oral agreement. You now prudently want to compel the tenants to sign a new written lease. (Please do not even consider making an oral lease with your tenants!) Unfortunately, unless the tenants voluntarily agree to sign a written contract, you are probably stuck with the oral arrangement for the tenants will certainly complain that the proposed lease contains different terms. The courts generally do not look favorably on a forcible attempt to make a tenant who had an oral agreement with the previous landlord sign a PPMA lease with the new owner.

In certain circumstances, especially when the tenants have counsel, I have suggested that the tenants modify and edit the PPMA lease to ensure that the new agreement complies with the previous one. I have been successful with this approach. I often employ it, because if the changes are not overly detrimental to the owner, the tenants will at least sign a written contract with precise terms and conditions that can be more easily enforced.
– David Wasserman

The opinions expressed in this article are those of the authors and do not necessarily reflect the viewpoint of the SFAA or the SF Apartment Magazine. Theinformation contained in this article is general in nature. Consult the advice of an attorney for any specific problem.Saul M. Ferster can be reached at 863-2678. Steve Williams is with Wiegal & Fried, LLP (415) 552-8230. Lawrence M. Scancarellican be reached at 398-1644. David Wasserman is with Wasserman & Taxman, 567-9600. © Copyright 2002.