In Oakland, CA our landlord bumps rent 8% citing banked rents and capital improvements. Wowsers.

July 31, 2012 8:29 AM

Off lease in Oakland, CA. Our landlord bumps rent 8% citing banked rents and capital improvements. Legal justification provided but how can this be challenged to lesser amount without getting courts involved?

We've (gf+me) been very happy residents of a lovely building in Oakland, CA since early 2010. Our 12 month lease expired in early 2011 and we've been month to month since. Just recently the building owner painted the building then delivered a letter to all tenants noting an 8% increase in rent justified by "banked rents and capital improvements performed within the past two years." Included in his letter is a 30 day notice as well as legalese from City of Oakland Rent Adjustment.

All of this appears to be perfectly legal. We've had a great relationship with the owner and all tenants. We are well aware rents have increased dramatically in the area and we have no desire to move.

My question then is a) if you're familiar with this area can you reality check --is it in fact legal? b) 8% is quite a bump. We can afford it but we'd rather it not be so high and so sudden. Other than going the way of the courts, filing a petition, etc. is there something we could tell the owner to negotiate or reconsider?

Thank you.

posted by ezekieldas to law & government (6 answers total)

I lived in Oakland and loved every minute of it.

See if you can negotiate a lower increase by signing a longer lease. 18 or 24 months might tempt the landlord, espcially if you've been good tenants.

I think there's 311 in the bay area. You can call and confirm with the city that 8% is within the realm of normal and that it's legal. What's the regular rate for rent stabilization in Oakland?

Here's a link to the Housing and Community page for the city of Oakland.
posted by Ruthless Bunny at 8:37 AM on July 31, 2012

Oh, here's what I found about what the standard, allowable increases are:

The annual CPI increase rate effective July 1, 2012 through June 30, 2013 is 3.0% and can not be implemented earlier than July 1, 2012. Tenants may only be given one increase in any 12-month period, and the rent increase cannot take effect earlier than the tenant's Anniversary Date. In addition, California law requires that tenants be provided with either 30 days (for increases 10% or less) or 60 days (for increases greater than 10%) written advance notice of a rent increase.

•July 1, 2012: 3.0%
•July 1, 2011: 2.0%
•July 1, 2010: 2.7%
•July 1, 2009: 0.7%
•July 1, 2008: 3.2%
•July 1, 2007: 3.3%
•May 1, 2006: 3.3%
•May 1, 2005: 1.9%
•May 1, 2004: 0.7%
•May 1, 2003: 3.6%
•July 1, 2002: 0.6%
•March 1, 1995 - June 30, 2002: 3% per year
posted by Ruthless Bunny at 8:39 AM on July 31, 2012

Thanks Ruthless Bunny. We saw that page and initially thought the increase was out of bounds. However, there's this reference to "Increases are limited to [amount defined by city] unless the landlord can justify a higher amount." When we turn to justifications we see this:

http://www2.oaklandnet.com/Government/o/hcd/s/LandlordResources/DOWD008760

This notes capital improvements must primarily benefit the tenant (painting the building?) and must be distributed over 5 years (do I understand that correctly?). Then this issue of banked rent seems nearly undefined.

I intentionally left these details out of my initial post to avoid spiraling into the details. This unfortunately gets more complicated the more we look at it.
posted by ezekieldas at 9:01 AM on July 31, 2012

The site defines banking as, "allowable annual rent increases not given to tenants in prior years. Assuming you had no rent increase in the whole time you've lived there, he's easily got 5% just for July 2011 and July 2012. I don't know whether he can include July 2010, since you had a lease at that time, but if he can then that would bring it to 7.7%, and the paint hardly matters at that point.

If it's legal (or if you don't want to pursue legal remedies) then your only leverage is the threat that you'll leave. How dramatically have rents increased in the area? Are they so high that your place would still be a good deal even after the 8% increase? If so then you're easily replaceable as tenants, and you've got no leverage at all.
posted by jon1270 at 9:19 AM on July 31, 2012 [1 favorite]

Moving always costs more than the rent increase. The cost of the truck and guys (or pizza and beer), the hassle and heartache of moving the utilities (especially internet and cable) the possible destruction of a favorite item, the inevitable $100 for thumbtacks, the loss of parts of the security deposit, and the pain of the actual move. No, I'd do pretty much anything to stay put if I could.

I'd see if I could negotiate so that it's not such a big increase, but based upon what I've read (and I'd for sure still call 311 to get more insight) 8% isn't all that terrible.

As we know, rents in the Bay Area are crazy and with a 100% occupancy rate, you may not even be able to find a place to rent!

If you're happy (and it sounds like you are) see if you can mitigate the increase and if not, I guess just suck it up.
posted by Ruthless Bunny at 9:34 AM on July 31, 2012

This notes capital improvements must primarily benefit the tenant (painting the building?) and must be distributed over 5 years (do I understand that correctly?). Then this issue of banked rent seems nearly undefined.

I'm pretty sure the landlord has to summarize all the capital improvements + banked increases if you request it in writing (though I can't find a source to link ATM). You also need to contest any increases within 30 days of the rent increase notice. I think the most he can increase you rent via CPI is 4.7%, because it can only be done every twelve months. The first twelve months you were covered by a lease; he could have increased by 2.7% in early 2011 when your lease ended, then 2% another 12 months later in early 2012. Just because it's July now he can't add another 3%, he's got to wait to the third anniversary of your lease ending:

4. Effective Date of CPI Rent Adjustments. An owner may notice a Rent increase for a CPI Rent Adjustment is effective during the period from July 1following the Rent Adjustment Program’s announcement of the annual CPI Rent Adjustment through June 30 of the next year. The Rent increase notice must comply with state law and take effect on or after the Tenant’s Anniversary Date.

(from Rent Adjustment Ordinance and Regulations on this page)

So then the rest is capital improvements, which the owner can't just determine willy-nilly. It's the difference in service costs between the last two years averaged by month and the gross operating income per month per unit (or something like that). It's pretty complicated once you factor in what can and can't be counted as capital improvements, and your landlord should be able to show you where the numbers come from.

Landlords are happy not to be challenged on this stuff- most people don't bother, they just pay up or move. So landlords get away with illegal increases. I'm not saying they are evil people, but the majority of landlords I have had have preferred their tenants to remain ignorant and/or passive. I think 8% is a lot for a rent controlled apartment unless major work has gone on around the place and/or your landlord's insurance has suddenly ballooned. As a data point, our rent was increased by 6% after living here since 2005- maintenance costs have gone down due to recession, and the most a CPI rent increase in Oakland can be is 3X that year's rent, no matter how many years have been "banked". So ask questions, your landlord is required to play by the rules.

BTW, courts in Oakland don't deal with these disputes, there's a board for arbitration. He also can't kick you out in response to your investigating this issue. Dig into those .pdfs on Oakland's site, and if they aren't making any sense the people at Just Cause Oakland may be able to help you sort it out.
posted by oneirodynia at 4:26 PM on July 31, 2012