October 21, 2011
By With House Rules To Effect An Eviction
From the Bay Citizen with respect to the recent eviction of Ernesto Hernandez from the six-room apartment at 558 Green Street in which he had resided since 1982 and paid $650 a month in rent controlled rent to landlord Paul Marino who bought the building in 2005:
Under state law, owners of apartments governed by month-to-month agreements are free to institute new house rules, and tenants must comply within 30 days. A San Francisco ordinance conflicts with this, saying all parties must agree to the rules.
In June 2009, Mr. Marino instituted house rules that banned subletting the apartment to others. But Mr. Hernandez, who lives on Social Security payments of $600 per month, rented out space in the flat, violating those rules.
“Subletting in a rent-control jurisdiction is a huge offense,” said Karen Uchiyama, Mr. Marino’s lawyer.
Mr. Marino tried to evict Mr. Hernandez, who was defended by Legal Assistance to the Elderly, a local nonprofit that aids seniors.
The court sided with state laws over the city ordinance, ruling for the landlord. Mr. Hernandez also lost on appeal.
According to Ted Gullicksen, executive director of the San Francisco Tenants Union, evictions based on similar lease breaches tripled in the months following the ruling. The director of the San Francisco Apartment Association questions the correlation.
∙ A Dent in San Francisco's Ironclad Tenant Protections [baycitizen.org]
First Published: October 21, 2011 10:30 AM
Comments from "Plugged In" Readers
I'm all for tennant rights, but subletting in a rent controled apt. is extremely unfair to the landlord and not in the spirit of the rent control ordinance.
Posted by: Rodrego at October 21, 2011 10:46 AM
finally a ruling against the BS tenants union!
Posted by: mikey woodz at October 21, 2011 10:57 AM
I'm surprised by the ruling. I would agree if Hernandez had been subletting the entire apartment, but in this case Hernandez maintained his residence.
Posted by: CH at October 21, 2011 10:59 AM
can you sublet at a higher rate than what you pay the landlord? That certainly would be awesome!
Posted by: wrath at October 21, 2011 11:06 AM
Wow! Didn't see this losing an appeal. A once in a decade bone for landlords. How long 'til certain communist Stupervisors introduce legislation to block?
Posted by: jimmy at October 21, 2011 11:08 AM
When some future glib socketsite commenter says that based on a cut-and-dried "rent vs. buy calculation", that housing for purchase is too high in S.F., and that "you should JUST rent", I'll make sure to link to this post.
NOT having to deal with a landlord's rules…priceless!
Posted by: Brahma (incensed renter) at October 21, 2011 11:10 AM
I believe it's due to the fact he was making a profit off of the rented rooms which the court regarded as a taking from the landlord. It's one thing to share a rent controlled apartment and split the low rent, but quite another to use the rent control ordinance to create an income to live off of in the eyes of the law.
I wonder if the Tenants' Union ever thinks about the trend of landlords just taking units off the market. Thanks to rent control and the difficulties of being a landlord in SF, no one in their right mind rents out a unit long term if they can avoid it by having a family member live there, vacation rental, or just leaving it empty. Eventually rent control will be repealed through sheer entropy - the population it applies to will be so small that everyone else will want to get rid of the sweetheart deals. Of course, since the population will have dropped, our schools and city services will be godawful and renters will be desperate for anything to rent..
Posted by: 94123 Native at October 21, 2011 11:12 AM
I think the point is that local ordinances can't "block" state law. And it seems to me any attempt to change state law in this case would have tough sledding since the concept of subletting a rent-controlled apartment seems so dubious.
Good decision by the court IMHO.
Posted by: BT at October 21, 2011 11:13 AM
"When some future glib socketsite commenter says that based on a cut-and-dried... "
Except that I'd presume that the main reason for wanting to get rid of this tenant was the far below market rent he was paying.
Not that I support rent control, but if you get such a lopsided deal that the other party will do anything to terminate it that hardly argues for wanting to be on the other side. (i.e. nothing in the above story makes me want to be in the landlord's shoes having to take a legal gamble to avoid being stuck with a $650/month tenant)
Posted by: tc_sf at October 21, 2011 11:38 AM
Just to add to what BT wrote…if the Board of Supervisors had the ability to pass local legislation to trump state law, they'd have done it years ago with regard to The Ellis Act.
Posted by: Brahma (incensed renter) at October 21, 2011 11:45 AM
Sounds like the tenant could have ended the sublet within 30 days and remained with no issues. Sounds like he couldn't afford to live there without the sublet income. He should have had his lawyer fight for his subletor's rights to not be evicted. In any event, I don't see any issue with what transpired in this situation. Rent control laws should be phased out along with Prop 13.
Posted by: eddy at October 21, 2011 11:47 AM
This is interesting, but the article is poorly written in its lack of detail on the ruling itself. I can't find the actual appellate court decision -- tried searching on both parties' names and both attorneys' names. I'm curious if this is really some potential big stick landlords might wield, or if this was a narrow ruling based on this tenant's egregious gaming of the system.
Posted by: A.T. at October 21, 2011 11:55 AM
tc_sf, it seems you missed my point.
The point is, your options aren't limited to being either the landlord or the tenant. If you buy your unit and owner-occupy it, you get to opt out of all of this ludicrousness and don't have to "want to be in the landlord's shoes". You also don't have to be in the tenant's shoes, trying to make the market system work for you buy subletting a unit you only have limited rights over.
And by the way, it really takes a whole lot of chutzpah to sublet a unit that you don't have a fixed-term lease on. Even overlooking the amount of money involved, it was Karma acting on Mr. Hernandez here.
Posted by: Brahma (incensed renter) at October 21, 2011 11:59 AM
Congrats to the courts for sending a message to SF.
The rent control policies in SF are insane and counter-productive. If they would get rid of rent control, the supply of market-rate rentals would skyrocket, thereby lowering market-rate rents and allowing them to find equilibrium. The private sector (building owners) shouldn't be required to subsidize the BMR market. If SF thinks there should be more affordable rentals, they should build city-sponsored low-cost housing.
Posted by: JBG at October 21, 2011 12:06 PM
"The point is, your options aren't limited to being either the landlord or the tenant. "
Sure, there are other options. But buying and/or renting a non-rent controlled unit doesn't seem to have anything to do with the story central to this post.
Nor does the story in the post seem to invalidate a buy vs rent analysis. Especially since as eddy indicated the tenant could have just terminated the sublet and kept paying the low rent.
Posted by: tc_sf at October 21, 2011 12:18 PM
Boy, most of you didn't even read the story before offering an opinion.
Posted by: EH at October 21, 2011 12:57 PM
Good news for most renters in the city. Overall, my gut says that affordability for middle class folks would be greatly enhanced if we got rid of rent control, BMR requirements, and Prop 13. But what are the stats on these? e.g.:
Total # of housing units in the city
# of housing units under current rent control
# of housing units occupied by pre-prop 13 owners
Posted by: Adam at October 21, 2011 1:20 PM
A simple case of someone taking advantage of the system, and not really the landlord's fault that tenant lives on a (purported) $600 per month. If the BOS and Rent Board want to insure a six-room flat in North Beach for every senior, they should start guaranteeing the rent, like HUD does. At least with Section 8 the landlord has the opportunity to apply for periodic rent adjustments.
Posted by: gh at October 21, 2011 1:24 PM
I had to kick out a tenant (not SF) not long ago to put a family member in free of charge (no choice, it's a family duty).
This was a 9-year tenant underpaying by 30% (rent control at work). When he started renting he could have afforded to buy a similar unit. But now he's priced out because prices have more than doubled. He hasn't even saved anything just in case despite the low rent. He was very distressed and found all of this very unfair.
I didn't event try to get my point across. I just said "I am so sorry..."
What rent control creates is a whole class of tenants who live off the regular gravity that we're all supposed to share. They just think the gravy train is an entitlement because they've been pampered too long and it has become ingrained.
Just like an astronaut won't be able to walk after a 6-month stint in space, a tenant who's been off market gravity will likely not have developed any housing survival skills.
Rent control does a great disservice to everyone, including tenants themselves.
Posted by: lol at October 21, 2011 1:49 PM
Being able to restrict subletting is a completely reasonable request. The amount of risk involved with allowing subletting can be staggering depending on the insurance issues involved.
Many multi-residential-unit insurance policies will NOT cover loss due to short-term rentals (meaning < 30 days/hotel definition). In fact, many insurers will invalidate the policy for the entire building even if only one unit is rented short-term.
I know this because my spouse and I own a legal 2-unit building, (actually zoned RH3, built in 1980 so NOT rent controlled), we live in the upstairs unit and had wanted to rent the downstairs as a short-term vacation rental but we couldn't get insurance coverage and we would have lost our existing coverage if we had rented it short-term. So it's rented to a close friend who is like family to us for below market rent.
We know she'll want to move out eventually at which point it will only be rented to people we know and trust or occupied by visiting family. Or maybe we'll get a permit change to use it for business purposes. But we'll never rent it long-term, it will never become part of the regular rental stock in San Francisco even though it's not rent controlled because the eviction controls are way too onerous.
Back to the article - I have to wonder how someone rents a super cheap place for 30 years and has NO money saved?
Posted by: geekgrrl at October 21, 2011 2:01 PM
"This was a 9-year tenant underpaying by 30% (rent control at work). When he started renting he could have afforded to buy a similar unit. But now he's priced out because prices have more than doubled."
Perhaps your tenant has other issues, but this is unlikely to be true.
Using the July Case Shiller data, the low tier for 2011 is about 27% below the 2002 (9-year ago), mid tier 2011 is about 8% below 2002 and top tier 2011 is about 8% above 2002.
Posted by: tc_sf at October 21, 2011 2:08 PM
"this is unlikely to be true"
lol. You don't even know one thing about my unit, where it is, how much I was renting it, how much prices have increased in this location. when the termination happened (not 2011).
Look around. You'll find many areas all around the country still more than double 2000 prices (when I bought and rented out the place).
I am not sharing all details because everything written on the Interwebs sticks forever. Just ask one of the regulars here how he feels about another site spilling his name along with his handle...
Posted by: lol at October 21, 2011 2:18 PM
These guys are jerks. The editor abets them. Welcome to rational, involved people's understanding.
Posted by: [anon.ed] at October 21, 2011 2:26 PM
"lol. You don't even know one thing about my unit, where it is, how much I was renting it, how much prices have increased in this location."
True, but why would that person need to buy at that location?
People truly were priced out when *everything* was selling for a high price. Maybe this person can't buy everywhere, but realistically someone who is just scraping by paying rent is not going to be able to live wherever they please. But they only need some places available at much lower prices to avoid being "priced out".
And given that CS is an average, for all the places doing better then average there are corresponding places doing worse then average.
Posted by: tc_sf at October 21, 2011 2:30 PM
tc_sf, yes, actually the story does invalidate a cut-and-dried buy vs rent analysis. At least in every buy vs. rent analysis that everybody keeps posting in these comment threads whenever someone wants to say that some buyer of a home paid too much because a similar rental is available for less as advertised on cl.
That's because, if you want to talk economics, that the common rent-vs-buy calculations don't take into account the substantial negative utility value of having to deal with a landlord.
Having to deal with a landlord who can impose "new house rules" on you at will (which STILL would have been the case in the story above had Mr. Hernandez taken the tactic you and eddy suggest and terminated the sublease situation in order to maintain his tenancy; the landlord could just have made up and imposed some other new house rule not related to subleasing) implies substantial negative utility which owners/buyers don't have to suffer.
Put another way and using the above story as an example, had Hernandez bought his unit, there would be no other party with the ability to impose "new house rules" on him at the whim of that other party. What this tells you is that the positive utility of owning your own home isn't fully impounded by the price of renting a similar unit. This fact complicates rent-vs-buy calculations of the simpleminded kind commonly posted to socketsite comment threads.
Posted by: Brahma (incensed renter) at October 21, 2011 2:30 PM
"Having to deal with a landlord who can impose "new house rules" on you at will..."
In the abstract, yes if landlords could and did impose arbitrary house rules that would represent a non-economic negative utility. But in this case its pretty straightforward to look at the economic value of the loss of sublet. And even without the sublet the rent seems to me to be substantially below market.
There's definatly some non-economic value to owning, but in cases like this or the often cited "painting the walls" case (i.e. can you not just paint the walls and take whatever security deposit hit thereby giving it an economic value) I think the issue actually is an economic one.
Also, if you believe that owning will free you from others "house rules" you should consider the effects of neighbors and city regulations. Here state law triumphed, but if the BoS had its way they'd saddle the landlord with even more of their rules. They can't change state law but with Ellis evictions they showed that they can penalize you in other ways for exercising your rights under state law.
Posted by: tc_sf at October 21, 2011 2:44 PM
The reality of these past 10 years is that regular paychecks have been almost flat but rents everywhere have likely increased faster. If you're lucky/unlucky enough to rent in an attractive city with a basic administrative job (like my former tenant), you might have not been scraping by in 2K, but in 2K11 you do. Time to move out to cheaper pastures for him.
I wouldn't call them single-minded. The best way to learn is to do. Then you see the 3rd dimension.
Posted by: lol at October 21, 2011 2:54 PM
A few thoughts. First, the point about "house rules" is just bad journalism. I did find a bit more on the case, and the statute at issue, Cal. Civil Code § 827 says nothing about "house rules." It simply permits the landlord to change the lease terms where there is a short-term lease (inc. month-to-month) starting at the end of the current (short) lease period): ". . .in all leases of lands or tenements, or of any interest therein, from week to week, month to month, or other period less than a month, the landlord may, upon giving notice in writing to the tenant, in the manner prescribed by Section 1162 of the Code of Civil Procedure, change the terms of the lease to take effect . . ."
This is no different from any other lease - when the term is up, the landlord and tenant negotiate a new lease, and the tenant can always leave if he/she does not like the terms. This does not permit rent increases in rent-control jurisdictions. It does sound like it could be a good tool for landlords with tenants paying way below market rent, but only if the tenant is doing something that could be reasonably be prohibited with a new lease term like subletting, having multiple roommates, numerous pets, operating a business, etc. And even then the tenant can just comply and keep paying the low rent.
On the rent/buy/landlord nuisance issue, I've always said there are a lot of intangible reasons why buying makes sense even if it makes no financial sense. Brahma mentions a good one. But there are also a lot of intangible reasons favoring renting - ability to quickly pull up stakes and move to a new job is a big one these days. Avoiding landlord whims is certainly a relevant factor. But on the pro-rent side, so is being able to address any little problem (leaky roof, broken toilet) with a single call to the landlord and saying "handle it please, quickly, at your expense." There are lots of others on both sides of the equation. Brahma is absolutely right that these complicate the analysis, but these are also completely subjective with each individual. That's why I've always stuck to the objective, financial assessment, which anyone is free to modify based on subjective criteria.
Posted by: A.T. at October 21, 2011 2:58 PM
[anon.ed], I'm curious.
Who are you referring to as "jerks", the landlords in these situations, or the tenants in rent-controlled units who are getting over/overly taking advantage of the situation? Or are other commenters here "jerks"?
Posted by: Brahma (incensed renter) at October 21, 2011 3:04 PM
Other commenters. Three or four of them. They get to dominate this website, and it's too bad for everybody. But hey, they click on stuff.
Posted by: [anon.ed] at October 21, 2011 3:23 PM
"The reality of these past 10 years is that regular paychecks have been almost flat but rents everywhere have likely increased faster."
Not really on average. Over the past 10 years urban rents are up ~30%. Wage & Salary income ~28%.
Obviously some people got pinched by lower then average wage increase and higher then average rent increases.
Posted by: tc_sf at October 21, 2011 4:16 PM
"When repaired, he said, he will let only his family live there. No more renters."
This made me smile. Glad this guy fought the good fight against the SF special interests and got a good result, and wonderful that he got to rub their faces in it too.
Posted by: sfrenegade at October 21, 2011 4:25 PM
Why, after so many years, did it just now occur to me that we could break the stupid condo conversion lottery open by passing a state law that supersedes it?
It's a little bit strange that some property owner rights come by way of the state and some come by way of the county/city. It creates this perverse system where, by you say, one jurisdiction can penalize you for using rules set forth by another. Though I find the rules in SF insane and ridiculous, and often onerous, I still think, in theory, that the rights should be set forth locally.
Posted by: rr at October 21, 2011 4:28 PM
"Why, after so many years, did it just now occur to me that we could break the stupid condo conversion lottery open by passing a state law that supersedes it?"
My thinking on this is that it could be a difficult case to get legislators in other areas to vote for this. From their POV there wouldn't be much upside for their constituents and as a downside there would surely be articles showing grannies being evicted because of a law they voted for.
Plus as you point out it would need to be done in such a way so that the city couldn't find a workaround.
I do agree that in theory these should be local decisions.
Posted by: tc_sf at October 21, 2011 4:38 PM
I think it's generally better if most property-use regulation is done at the state level. That way there is a uniform process and it lowers the costs for anyone who deals with multiple jurisdictions (architects, builders, realtors). It also avoids a race-to-the-bottom where one locale can pander to one group or another to steal business/residents from a neighboring locale.
Prop 98 (C.A.R. was the biggest donor) a couple years ago tried to snuff out rent control. But it was shot down big.
Posted by: A.T. at October 21, 2011 4:49 PM
"Whalen died three years ago, passing the tenancy to Hernandez"
Even in SF you cant pass a tenancy on to a roommate, so Hernandez must have been on the lease. right?
If Hernandez was on the lease wouldn't he be entitled to replace his roommate?
replacing a roommate doesn't constitute subletting. so what exactly happened here?
Posted by: EsEfGerard at October 22, 2011 2:27 PM
petty socketsite arguments aside, this is a HUGE deal for SF property owners with long-term tenants without written leases. previously these people could practically get away with murder...well, not anymore. there's going to be a lot of house rules going out this month.
Posted by: anon$random at October 24, 2011 12:03 PM
re: EsEfGerard - One party (the tenants) to the contract (the lease) can decide unilaterally to change who is or is not party to the contract?
Posted by: Brian at October 25, 2011 12:04 PM