Legal Corner Q & A
by Various Authors
Q. Does my resident manager's agreement or salary need to be adjusted to reflect the new requirements of San Francisco's minimum-wage law?
A. To meet these new requirements, your resident manager's agreement depends on the following variables: (1) how much you are paying your resident manager; (2) what is the agreement pertaining to the duties and the number of hours you expect the resident manager to work; (3) whether you employ more than 10 employees in your business; and (4) whether there is a written agreement that credits lodging to meet part of the minimum-wage obligation.
The San Francisco Minimum-Wage Ordinance is broad and far reaching. It became effective on February 24, 2004. This ordinance requires that employees who perform work within the geographic boundaries of the city must be paid a minimum wage of $8.50 per hour. (Each year the city will adjust the amount of the minimum wage based on the increases in the regional consumer price index or CPI).
The minimum-wage requirement would apply to employees who work two or more hours per week. This amount is the same for both adult and minor employees. All workers in San Francisco, whether or not they are legally authorized to work in the United States, are protected.
However, if you qualify as a small business, effective January 1, 2005, you will be required to pay a minimum wage of $7.75 per hour. Starting January 1, 2006, all small businesses will be required to pay the minimum wage of $8.50 per hour (as adjusted by the regional CPI). A small business is defined as an employer for which fewer than 10 persons perform work for compensation during a given week, including persons who work on a part-time and/or temporary basis.
The city's minimum-wage ordinance permits employers to offset a portion of the minimum wage for housing costs. However, the offsets will only be recognized if there is a prior voluntary written agreement. Under the state minimum-wage law, the offset for an apartment is two-thirds of the ordinary rental value and, in no event, no more than $381.20 per month.
In order to comply with the maze of minimum-wage requirements, you may want to prepare a written agreement with the resident manager (providing a credit in the amount of $381.20 for the rental unit) and require the resident manager to keep time records that show when he/she begins and ends each day of work. Based on the reported hours worked, you can pay the minimum wage reported per hour.
You should consult an experienced attorney regarding this new ordinance because employees who assert their right to receive San Francisco's minimum wage are protected from retaliation. Employees may file a lawsuit against their employers for any violation of the ordinance. The city can investigate possible violations and enforce the minimum-wage requirements by ordering the reinstatement of employees and payment of back wages and penalties.
— Eunice Chang
Q. Are pet deposits counted as part of the maximum amount permitted under law for security deposits?
A. Yes. A security deposit is defined by law as any “payment, fee, deposit or charge…that is imposed at the beginning of the tenancy to be used to reimburse the landlord for costs associated with processing a new tenant or that is imposed as an advance payment of rent…” to be used for the following: (1) to compensate the owner for defaults in the payment of rent; (2) to repair damages to the premises, caused by the tenants or their guests, in excess of ordinary wear and tear; (3) to clean the premises at the end of the tenancy to the same level of cleanliness that existed at the inception of the tenancy; or (4) to restore or replace the landlord's furnishings exclusive of normal wear and tear, if the rental agreement so provides.
A security deposit includes all prepayments of money, no matter how labeled. Thus, pet deposits, cleaning deposits and the last month's rent are all considered security deposits and subject to the security-deposit law. (The only exception is the first month's rent, which is applied to the rent due for first month of the tenancy.)
In addition to collecting the first month's rent, the owner may collect up to two months' rent for unfurnished units and three months' rent for furnished units, as a security deposit. Tenants who have waterbeds may also be charged an additional one-half of one month's rent. No other security may be charged.
Please note that disabled tenants who bring in a seeing-eye dog or a comfort animal cannot be charged an extra deposit. These animals are akin to a wheelchair or other accommodation alteration. By law, landlords must allow tenants, at the tenants' expense, to make reasonable modifications to their rental units, provided that the tenants agree to restore the premises to the original condition at the end of the tenancy. However, no additional security deposit can be charged for the alterations or the animal.
In San Francisco, all residential tenancies, including tenancies in non-rent-controlled buildings, are subject to the “annual interest on security deposit” legislation. This law states that in the case of a tenancy that exceeds 12 months and a security deposit has been collected, the landlord must, on each anniversary date, pay simple interest on the entire deposit. The rate of interest was 5% per annum until 2002, when legislation was enacted that made the yearly rate dependent on the Federal Reserve rate. This year, in 2005, the rate is 1.7%. For rent-controlled units, annual interest payments to tenants can be credited against the tenant's share of the Rent Board's Rental Unit Fee (currently $11 per residential unit).
Therefore, when renting a unit to someone with pets, you may want to charge the maximum deposit allowed in order to ensure the availability of funds necessary to repair pet damage at the end of the tenancy. Finally, please remember that the law requires you to itemize all security-deposit expenditures and to provide documentation to the tenant within 21 days after departure. When the combined repairs and cleaning charges exceed $125, the owner must also provide copies of all receipts to the tenant. The tenant's itemization and documentation, along with any refund, should be mailed to any forwarding address provided by the tenant. If none is provided, the mailing should be sent to the vacated unit (and the post office will forward the letter to the new address).
—David Wasserman
The opinions expressed in this article are those of the authors and do not necessarily reflect the viewpoint of SFAA or the San Francisco Apartment Magazine. The information contained in this article is general in nature. Consult the advice of an attorney for any specific problem. Eunice Chang is with Colombatto, Klimenko & Rosse, 415-391-6182 x 132. David Wasserman is with Wasserman-Taxman, 415-567-9600 x 12. Copyright © 2005 by the San Francisco Apartment Magazine. All rights reserved.