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Ord 1597 - URGENCY ORDINANCE AMENDING CHAPTER 24 OF THE TOWN CODE RELATING TO THE AMOUNT OF ANNUAL RENT INCREASE AND TO FACTORS OF REASONABLENESS IN DETERMINING RENT INCREASES010INANCE NO. 1597 URGENCY ORDT14ANCE AYENDING CHAPTER 24 OF THE TCVN CODS RELATING TO THE AMOUNT OF ANNUAL RENT INCREASE AND TO FACTORS OF REASONABLENESS IN DETE MINING RENT INCREASES The To n Council of Los Gatos hereby ORDAINS: gvrwrTr)N7 1 Section 24.07.015 of Chapter 24 is hereby amended to read as follows: " 24.70.015. Specific Standards (1) Exemptions The first rent increase after the following events shall be exempt from this chapter: (a) Construction of a new unit. (b) A voluntary vacancy. (c) Eviction of a tenant by a court for non - payment or other violaticn of a written rental agreement. (2) Frequency of Rent Increases Rent should not ordinarily be increased more frequently than wally, but it may be increased: (a) When the fee imposed under Part 6 hereof is paid, it may be passed through at the rate of no more than 1 /12th of the fee per month. (b) At any tine, with the written consent of all affected tenants, which shall be sought through conciliation or mediation: (3) Amamt of Annual Increase Annual rent increases shall not exceed the 707. CPI ceiling or 570, whichever is greater, unless the Hearing Officer determines that other factors render a larger increase reasonable. CPI is the Consumer Price Index -- All Urban Consumers for the San Francisco - Oakland Area. The most recent CPI is the R "bimonthly figure most recently available fran the Bureau of Labor Statistics. The 70% CPI ceiling is an amount arrived at by adjusting the current rent to reflect 70/0 of the most recent annual average change in the CPI. SECTION 2. Section 24.70.020 of Chapter 24 is hereby amended to read as follows: " 24.70.020. Other Factors of Reasonableness. (1) Increases Deemed. Reasonable Where the amount-of the proposed rental increase consists only of passing through one or more of the. following: (a) the fee imposed under Part 6 hereof, (b) costs of capital improvements, (c) increased costs of maintenance and operation, or (d) costs. of rehabilitation; plus no more than 57. of the monthly rent, they shall be ordinarily deemed reasonable, provided that: (i) Cost figures have been established to the reasonable satis- faction of the Hearing Officer. (ii) The costs of capital improvements if any are averaged on a per unit basis and are amortized over a period of not less than 60-months. (iii) The costs of rehabilitation if any are averaged on a per unit basis and are amortized over not less than 36 months. (iv) Each of the costs proposed to be passed through to tenants, whether it be costs of capital improvements, increased costs of operation and maintenance, or costs of rehabilitation, bears a reasonable relationship to the purpose for which such costs were incurred and the value of the real property to which they are applied; or (2) When Costs of Debt Service Deemed To Be Reasonable The Hearing Officer shall deem as reasonable and allowable to be passed through to tenants the costs of debt service where he finds the debt is a secured, arms- length transaction in the following instances: -2- i. "(a) In the case of increased costs of debt service by new owners, shall be limited to 80% of the increased costs of debt service arising from that proportion of the aggregate amount of debt not exceeding 70% of the value of the property as established by a lender's appraisal. where no lender's appraisal is available, the Hearing Officer may secure such appraisal to be paid for by the landlord as a cost of maintenance and operation. (b) In the case of increased cost of debt service refinance by an existing owner, shall be limited to costs of debt service generated by the amount reinvested in the property, including liquidation of existing debt; or (3) Standards Applicable to Rent Increases Which Exceed the Foregoing When the amount of any rent increase or portion thereof exceeds any of the foregoing standards under sub- sectims 1 or 2 of this Section, the Hearing Officer shall detezmine what is reasonable under the circumstances taking into account any of the following factors on which he has received information: (a) In the case of increased costs of debt service due to a sale or refinancing of the rental units or the building or property of which the units are a part within 12 months of the increase; (i) the arms- length nature of the transaction, (ii) the landlord's rate of return on the investment, (iii) the fre- quency of past resale or refinances, and (iv) the extent to which prior rental increases have made provisions for appreciation of asset value. (b) The rental history of the unit or the complex of which it is a part, including, (i) the presence or absence of past increases, (ii) the fre- quency of past rent increases, (iii) the landlord's response to Proposition. 13 savings, and (iv) the occupancy rate of the complex in comparison to comparable units in the same general area. (c) The physical condition of the rental unit or complex of which it is a part, including the quantity and quality of maintenance and repairs per- -3- "formed during the last 12 months. (d) Any increases or reductions of housing services since the last rental increase before the effective date of this ordinance. (e) Other financial information which the landlord is willing to provide. (f) Existing market value of rents for units similarly situated." SECTION 3. It is necessary for the insmediate preservation of the public peace, health and safety of the citizens of the. Town that this ordinance take effect immediately because of the following facts: 1. Numerous tenants have been given rent increases in which refinancing of the property by the existing landlord has occurred. 2. Said rent increases are pending conciliation subject to the Town's *Rental Dispute Mediation and Arbitration Ordinance. 3. At the October 17, 1983 meeting of the Town Council, the Council deter- mined that the standard of reasonableness for rent increases based on debt service finance by an existing property owner shall be limited to costs of debt service generated by the amount reinvested in the property, including liquidation of existing debt; 4. Said notices of rent increase were issued October 31, 1983 after Council's determination but before this ordinance was presented to Council; and 5. In fairness to the parties involved in the current conciliation, mediation, and arbitration processes, this ordinance should take effect immediately instead of waiting thirty days until a normal ordinance would became final. -4- This ordinance was adopted as an urgency ordinance of the Town. of Los Gatos at a regular meeting of the Town Council of the Town of Los Gatos on November 21, 1983, by the following votes: AYES: COUNCILM MBERS Joanne Benjamin, Eric D. Carlson, Terrence J Daily and Mayor Thomas J. Ferrito NOES: COUNCUMMERS lone ABSTAIN: COUNCI EROERS Brent N. Ventura ABSENT: COUNCHM MBERS Hone SIGNED: ATTEST: 5.2