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Tips for Preparing an Operating And Maintenance Petition

by The SF Rent Board

Select two consecutive twelve-month periods for comparison of operating and maintenance costs. You may either use the two immediately preceding calendar years or any recent two-year period (twenty-four months), provided that the two-year period is not selected in order to create “exaggerated results.”
Make a separate file for each twelve-month period. The first twelve-month period is referred to as “Year 1,” and the second twelve-month period is referred to as “Year 2.” Clearly mark each file as Year 1 and Year 2.
Within each file, make a separate section for each category of operating and maintenance expenses. Clearly mark each section with the name of the category. Typical operating and maintenance categories include: water/sewer, garbage, debt service, property taxes, insurance, management, business license/fees, elevator service, repairs, maintenance and security. (Rent Board fees, capital improvements, vacant unit preparation costs and legal fees are not considered part of a landlord's routine operating and maintenance costs.)
Within each section, include proof of cost and proof of payment for each claimed expense in that category. Proof of cost can be documented by a bill, invoice, contract, receipt, statement, etc. Proof of payment is best documented with a copy of a cancelled check.

Shortcut

Some regular or periodic bills, such as water/sewer and garbage bills reflect payment of the prior bill. Submission of such bills that cover the entire period when the services were provided are acceptable as proof of payment. Cancelled checks are not required. On the other hand, a handwritten “paid in full” notation on an invoice is generally not considered adequate proof of payment. A cancelled check would be required to prove payment in such circumstances.
Organize your documents in chronological order, with the earliest document first. Then move on to the next billing period and do the same. For example, provide a copy of the mortgage statement for January and attach a copy of the cancelled check reflecting January’s payment if the shortcut discussed above does not apply. Follow this with a copy of the mortgage statement for February and the cancelled check for February’s payment. And so on.
Provide a written explanation of any unusual or extraordinary costs or transactions and attach it to the front of the section for that category. Likewise, provide a written explanation for any documentation which is missing, incomplete or difficult to understand. It is also helpful to attach to the front of each section the calculator tape listing all of the claimed costs for that category.

Other Helpful Hints

For owners or managers of more than one property, get separate bills, invoices, contracts, receipts, statements, etc. for each expense at each property. Alternatively, make sure that the costs attributable to separate properties are kept separate and can be identified as pertaining to a particular property. Likewise, make payments for each property separately so that cancelled checks pertain to one property only.
Ask the contractor or service provider to clearly describe the exact nature of the work or service provided and to clearly identify the location of the property where the work or service is performed. Additionally, an itemization of costs for multiple improvements, repairs or services listed on a single bill, contract or invoice should be provided. This is particularly helpful if the expenses are challenged.
At the time that checks are prepared, make a notation on the memo line to identify the expense. For example, write “exterior painting - 25 Van Ness.” Or, identify the invoice number that corresponds with the payment.
Keep your records organized and accessible. You will find this makes compiling the documentation required by the Rent Board easier. While the work and charges might be clear to you at the time of the work, they get less so as time passes. Remember, even though all this may be familiar to you, the Rent Board staff is not familiar with your records. Well-organized documents and lucid explanations will facilitate approval of your petition.
Make all payments by check or credit card. Cash payments are difficult to document.
At the time of the purchase of a property, require documentation of capital improvement costs and operating and maintenance expenses as a condition of closing escrow if you are anticipating filing a petition. Often, there is difficulty in obtaining these records from the prior owner after the transaction is completed.