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1983-061-Adopting Los Gatos Rental Mediation RegulationsRESOLUTION NO. 1983 -61 RESOLUTION ADOPTING LOS GATOS RENTAL MEDIATION REGULATIONS Pursuant to Section 24.10.025 of the Town Code, the Town Council hereby RESOLVES that the attached "Los Gatos Rental Mediation Regulations" are adopted as regulations to assist in implementing Chapter 24. PASSED at a regular meeting of the Town Council of the Town of Los Gatos held an the 21st day of March 1983, by the following vote: AYES: COUNCILIEMBERS Joanne Benjamin, Terrence J. Daily, NOES: Thomas J. Ferrite, and Mayor Brent N. Ventura COUNCITMFMRFRS None ABSTAIN: COUNCILMEMBERS Mayor Brent N. Ventura ABSENT: COUNCILNEIBERS None X11 ATTEST: Cler o the Town of Los tos TOWN OF LOS GATOS, CALIFORNIA RENTAL DISPUTE MEDIATION AND ARBITRATION Bobbie Crafford William Errico REGULATIONS* RENT ADVISORY COMMITTEE Donni Grotte Harryette Shuell Sandy Nusink Randy Grimes Rollin Rose *The Town Manager, Director of Community Programs, and their designees shall have the responsibility of implementing these regulations unless otherwise indicated. Table of Contents Chapter Page No. 1. LIMITS AND ELIGIBILITY . ............................... 1 Part 1. Eligibility ... ............................... 1 Part2. Limits ........ ............................... 2 Part 3. Petitions ..... ............................... 3 Part 4. Confidentiality and Proof .................... 4 2. HEARING PROCESS AND DECISION MAKING ................... 5 Part 1. Conduct of Hearing ........................... 5 Part 2. The Amount of an Increase .................... 6 Computation of 70% CPI Service Reductions Cost Increase Computations Part 3. The Timing of an Increase .................... 19 Part 4. Decisions and Agreements ..................... 20 Part 5. Failure to Appear and Rescheduling ........... 21 3. THE CONCILIATION PHASE . ............................... 23 4. THE MEDIATION PHASE .... ............................... 24 5. THE ARBITRATION PHASE .. ............................... 27 6. HEARING OFFICERS ....... ............................... 31 7. MISDEMEANORS AND ENFORCEMENT .......................... 34 8. APPEAL OF ADMINISTRATIVE ACTIONS ...................... 35 9. DEFINITIONS ............ ............................... 36 -i- LOS GATOS RENTAL MEDIATION REGULATIONS Chapter 1 LIMITS AND ELIGIBILITY This portion of the regulations covers the general limits set by the Ordinance: eligibility, filing of petitions, limits on frequency and amount of increases, and confidentiality. Part 1 ELIGIBILITY 1.01 Rental Units Subject to Review Any rental unit in a complex of 6 or more units on the same parcel of land or mobile home spaces shall be covered by Chapter 24 of the Los Gatos Town Code. 1.02 Rental Increases Subject to Review 1.02.01 Exceptions of Frequency Limit Rent should not ordinarily be increased more frequently than annually, but it may be increased: a. to pass through the annual regulatory fee at no more than 1 /12th thereof per month. b. when a new owner takes title. c. with the written consent of all affected tenants after concilation or mediation. d. at the time of a voluntary vacancy. e. at the time of a court - ordered eviction for violation of a rental agreement. 1.02.02 Increases in Excess of 70% CPI Ceiling Increases which are in excess of 70% CPI ceiling are subject to review with some exceptions. An increase may be subject to review because the dollar amount has been raised, or services reduced, or both. The exceptions are: (a) If the increase is after the rental unit has been voluntarily vacated by the tenant. To be vacant, the unit must be untenanted; if a roommate moves, there is no vacancy, unless the landlord and the tenants have a prior written agreement that this does create a vacancy. If a tenant moves after receiving a 30 -Day Notice from the landlord, it is not voluntary; (b) If the increase is after the eviction of a tenant by a court for non - payment, chronically late payment, or other material violation of a written rental agreement. Part 2 LIMITS 1.03 Limits on Frequency of Increases Rent may not be raised more than once in any twelve -month period. It can be raised for a new tenant when the previous tenant moved voluntarily or was evicted (see i.02.02(b)). However, if it is raised for the new tenant, it cannot be raised again until anniversary date. 1.04 Notice of Rent Increase When a landlord issues a notice of rent increase for more than the 70% CPI ceiling, he must either (a) file a petition or (b) notify the tenants of their right to use the Rental Mediation and Arbitration Hearing Pro- cess and he must supply the address and telephone number of the Rent Mediation Program. This can be included conspicuously in the rent increase notice or done separately at the same time and manner as the rent increase notice. The recommended wording is: "You have the right to use the Rental Dispute Mediation and Arbitration Hearing Process. For further information contact: Los Gatos Rent Mediation 3275 Stevens Creek Blvd., #310 San Jose, CA 95117 (408) 395 - 6350" Failure to notify tenants of their right to petition for conciliation shall void any rent increase in excess of 70% CPI, Part 3 PETITIONS 1.05 Petitions Tenants or Landlords may file by completing a written Petition for Conciliation with the Town or its agent. 1.06 Deadline To be eligible, a petition must be received by the Town or its agent within 30 days after the increase goes into effect. 1.07 Deferral of Amount of Increase Over 70% CPI When a tenant files an eligible petition, the amount of the increase over 70% CPI is stayed, pending a resolution of the dispute. The tenant should be charged and should pay only the old rent plus 70% CPI. 1.08 Consolidation of Petitions Whenever possible, petitions from rental units owned, operated, and -3- managed as a single housing complex shall be consolidated into one case by the program staff. Part 4 CONFIDENTIALITY AND PROOF 1.09 Confidentiality The identity of the parties and the factual data of the case are confidential. Any one of the parties to a hearing has the right to request to see and to copy information supplied by the other parties. This information may also be reviewed and used by the Town for program operations, administration, audit and evaluation. While the parties and the Town have access to this information, it is not public information. 1.10 Burden of Proof The burden of proof for establishing the reasonableness of a rent increase is on the landlord. However, tenants shall have the burden of proving the existence of service reductions and Housing Code violations. M Chapter 2 HEARING PROCESS AND DECISION MAKING This chapter covers those areas which both Mediation and Arbitration Hearings have in common. General rules for the conduct of hearings and decision making, for instance, are in this chapter. Part i CONDUCT OF HEARINGS 2.01 General Rules for the Conduct of Hearings 2.01.01 Participation in Hearing Any party or hiss /her counsel may attend the hearing and offer evi- dence and testimony. However, the Hearing Officer may adopt rules to encourage a timely and business -like Hearing. a. Examples of those who may attend Hearings include: owners, property managers, agents, attorneys, tenants, witnesses, paralegals, and designated representatives. b. Examples of those who generally may not attend Hearings include: tenants not covered by petitions, owners of other buildings, members of the public -- unless both parties agree. 2.01.02 Review and Response to Evidence and Testimony Each party must have the opportunity to review all evidence and testimony introduced at the Hearing and to make a response. The Hearing Officer has the discretion to allow written responses to be submitted. a. The Hearings and the right of the parties to review case files are the primary method for review of information. b. Hearing Officers have the discretion and must consider allow- ing reasonable recesses to review any new information or documentation. -5- 2.01.03 Record of Hearin s The open sessions of Mediation Hearings and all of the Arbitra- tion Hearings shall be tape recorded by the Town if both parties agree or the Arbitrator so orders. Either party may tape the hearing at his /her own expense. Any record is available for review to both parties. 2.01.04 Participation of the Hearing Officer The Hearing Officer shall, at all times in the conduct of the hearings and in otherwise performing his duties, act neutrally and impartially as between the landlord and the tenants. The Hearing Officer shall not solicit, invite, or encourage new complaints from the landlord or tenants. This does not preclude clarifica- tion of each party's rights under the ordinance. Hearing Officers are encouraged to suggest compromises to disputes raised at the hearing. 2.01.05 Relief from Default The Hearing Officer may relieve any party from his failure to adequately state his claim prior to or during the first meeting upon a reasonable showing of error, fraud, or inadvertence. The Hearing Officer may grant to the opposing party additional time to respond to any claim, addition to, or revision of, a claim filed pursuant to the relief so granted. Part 2 THE REMOUNT OF AN INCREASE 2.02 Amount of Annual Increase The annual rent increases shall not exceed the 70% CPI ceiling unless the tenants agree or the Arbitrator determines that other factors render a larger increase reasonable. -6- Computation of 70% CPI (see Appendix A) a. CPI is the Consumer Price Index -- All Urban Consumers for the San Francisco - Oakland Area, as reported bimonthly by the Bureau of La- bor Statistics. b. The Town or its agent shall compute the average annual per cent of change to insert in the formula set forth in Section 24.70.075 (3) of the Rental Mediation Ordinance. 2.03 Service Reductions and Housing Code Violations A service reduction which occurs without a corresponding decrease in rent is an additional rent increase. Housing Code violations must be con- sidered in any determination of what constitutes a reasonable rent increase under the circumstances. 2.03.01 Basic Service Level The landlord is required to furnish to the tenant a basic level of housing services, herein called the "Basic Service Level." The Basic Service Level for particular housing service for a particu- lar rental unit is established by: a. Civil Code Section 1947.1 and 1941.2 and other applicable codes and statutes; b. The landlord's implied warranty of habitability; c. Express or implied agreement between landlord and tenant; d. The level of service consistent with subsections (a), (b) and (c) next hereinabove and implied by: (7) The nature and quality of original construction of improvements, fixtures, and equipment; (2) The age of the improvement, fixture, and equipment; (3) The condition of the improvements, fixture, and equipment at the beginning of the applicable term of tenancy; -7- (4) The landlord's policies of operation and maintenance, repair and replacement communicated to the tenant at the beginning of the applicable term of tenancy. 2.03.02 Service Reductions A service reduction occurs when the landlord has breached his obligation to furnish to the tenant the Basic Service Level and the tenant's usability of the premises is thereby measurably reduced. 2.03.03 Allegations of Service Reductions Each allegation of a service reduction shall be made in a separate writing, signed by the tenant claiming it, and filed with the Town, its agent or the Hearing Officer during or prior to the first hearing. Each allegation of a service reduction shall state: a. The prior level of service established as part of the housing services to be provided by the landlord for the rental unit; and b. The specific changes in the prior level of service comprising the alleged reduction in service; and c. The date the service reduction was first noticed by the tenant; and d. The date the tenant gave notice to the landlord of the alleged service reduction, and whether the notice was given orally or in writing; and e. The date the tenant gave notice to the landlord that the tenant requested the alleged service reduction to be corrected, and whether the request was oral or in writing; and in f. When and how the landlord responded to the tenant's notices and g. Whether the condition was improved or corrected and if so, when and how; and h. The status of the condition as of the date the allegation is signed by the tenant. 2.03.04 Proof of Service Reductions The burden of proof of each service reduction is on the person alleging the reduction. A service reduction for a particular service for a particular rental unit shall be proven as follows: a. The person alleging the service reduction shall prove: (i) The Basic Service Level for the particular service for the particular rental unit; and (2) The actual service level for the particular service for the particular rental unit; and (3) That the actual service level is, or was, materially lower than the Basic Service Level. b. The burden of proof shall be satisfied by persuading the Hearing Officer that the fact sought to be proven is more probable than some other fact. c. The burden of proof shall be met by using evidence only which has a tendency in reason to prove or disprove a disputed fact of consequence in determining the Basic Service Level, or the actual service level is materially lower than the Basic Service Level. d. Proof shall be received only for service reductions alleged in a claim filed with the Town, its agent, or the Hearing Officer during or prior to the first hearing. -9- e. Proof of a service reduction shall be received only for that period of time the premises have been owned by the landlord against whom the claim is filed. 2.03.05 Determining Value of Unreasonable Service Reductions If the Hearing Officer finds that a service reduction has occurred which was or is unreasonable under the circumstances, the Hearing Officer shall determine the monetary value to be assigned to the service reduction by applying the following standards and proce- dure: a. The Hearing Officer shall determine the percentage reduction in usability of the rental unit caused by the service reduc- tion, commencing with the accrual date. b. In determining the percentage reduction of usability, the Hearing Officer shall consider the following factors: (1) The area affected; (2) The amount of time the occupant is exposed to the condition; (3) The degree of discomfort the condition imposes; (4) The extent to which such a condition causes tenants to find the premises uninhabitable and leave. c. The Hearing Officer shall apply the percentage reduction to the monthly rent, divide by 30, and multiply the resulting sum by the number of days commencing from the accrual date to the date of restoration of the service reduction condition to the Basic Service Level, to determine the value of the service reduction. 2 2.03.06 Consequences of a Service Reduction Unreasonable Under the Circumstances a. If the value of the service reduction is determined in a proceeding to determine reasonableness of a pending rent increase, the value of the service reduction shall be applied as a credit against the rent increase otherwise cost justified; b. If the value of the service reduction is determined in a proceeding not involving determination of reasonableness of a pending rent increase, the value of the service reduction shall be applied as a credit against the tenant's obligation to pay current rent. 2.03.07 Housing Code Violations Violations of the Los Gatos Housing Code or of Sections 1941.1 and 1941.2 of the State Civil Code shall be considered by the Hearing Officer who may reasonably condition, disallow, or reduce a rent increase based on their severity. a. An inspection report of the Los Gatos Building Official shall be deemed presumptive, but not conclusive, proof of the matters recited therein. 2.03.8 Findings In making any determination that an alleged service reduction exists or not, is reasonable or unreasonable under the circum- stances, or has a particular monetary value, or that a Housing Code violation exists or not, or has a particular monetary value, in any summary report or arbitration award, the Hearing Officer shall make and include a specific finding of the facts upon which the determination is based. -11- 2.04 Cost Analyses The Tenant /Landlord Task Force has authorized the use of a cost analysis method which is described below. 2.04.01 Requirements a. Cost figures must be established to the reasonable satisfaction of the Hearing Officer; b. The cost of capital improvements must be averaged on a per unit basis and amortized over a period of at least 60 months; c. The costs of rehabilitation must be averaged on a per unit basis and amortized over a period of at least 36 months; d. Each of the costs must bear a reasonable relationship to the purpose for which they were incurred and the value of the real property; e. Costs are "out -of- pocket" costs which have been incurred or obligated. f. If a rent increase is cost justified and neither service reduction nor Housing Code violations are present, that rent increase is reasonable. g. Increased costs of debt service: 1. Costs which satisfy the 70% -80% test Increased costs of debt service shall be deemed reasonable and allowed by the Hearing Officer when: (a) The increased costs of debt service arise from that proportion of the aggregate amount of debt which does not exceed seventy percent (70%) of the appraised value of the property, and no more than eighty percent (80 %) of such increased costs are passed through to tenants. dm (i} If the loan to value ratio does not exceed 70%, -13- 80% of the increase in debt service is allowable and may be passed through to tenants. (ii) If the loan value ratio exceeds 80%, the annual amount of increased costs of debt service which shall be found allowable and may be passed through to tenants is 80% of the sum calculated by multiplying the new debt service by 70% divided by the loan to value ratio less the prior debt service. EXA14PLE Facts Prior Debt Service per Annum 80,000 New Debt Service per Annum 110,000 Increased Costs of Debt Service 30,000 Aggregate Debt from which Debt Service arises 750,000 Appraised Value of the Property 1,000,000 Loan to Value Ratio (LTVR) .75 Calculation Pass Through = .8 (New Debt Service x [.7 /LTVR] - Prior Debt Service) Pass Through = .8 (110,000 x [.7/.75] - 80,000) Pass Through = .8 (102,667 - 80,000) Pass Through = .8 (22,666.67) Pass Through = 18,133.34 (Per Annum) (b) The debt is a secured, arms- length transaction. -13- 2. Amortization (a) Loan fees, including points, shall be amortized over the life of the loan. (b) Balloon payments of principal shall be disallowed. (c) Balloon payments of interest shall be allowed and will be amortized over the life of the loan. (d) Actual periodic payments shall be amortized over a twelve (12) month period and allowed. (e) Loan Brokerage fees shall be amortized over the length of the loan or over 36 months whichever is less. h. Burden of Proof The landlord has the burden of proof to establish the cost justification of a proposed rent increase. 1. The burden of proof shall be satisfied by persuading the Hearing Officer that the fact sought to be proven is more probable than some other fact. 2. The burden of proof shall be met by using evidence only which has a tendency in reason to prove or disprove a disputed fact of consequence in determining a cost justification. 3. Proof shall be received only for cost categories alleged in a claim filed with the Town, its agent, or the Hearing Officer during or prior to the first hearing. i. Lender's Appraisal A lender's appraisal for the purpose of establishing the value of the property pursuance to Section 24.70.020(2) of the Ordinance shall meet the following requirements: DEC 1. Format. The appraisal shall be prepared on the usual short form (1 -4 page) format commonly used by institu- tional lenders or licensed real estate brokers to establish the value of property, or as may be approved by landlord, Hearing Officer and 2/3 of the tenants present at the hearing. 2. Factual Data. The lender's appraisal shall include a statement of the facts upon which it is based, includ- ing: (a) Description of Property. A description of the property, including both a legal description of the land, and of the improvements thereon. (b) Neighborhood. A description of the neighborhood in which the property is located. (c) Other Data. Other data considered by the appraisers, including terms of financing, if known. 3. Appraisal Methods. The lender's appraisal shall include the appraiser's independent application of each of the following three (3) methods: (a) Market Comparison Approach. This approach shall consider recent sales and listings of similar type properties in the area analyzed to form an opinion of value by this approach. (b) Cost Approach. This approach shall consider the value of the land, assumed vacant, added to the depreciated replacement cost of the improvements. (c) Income Approach. This approach shall consider the estimated potential net income capitalized into value -15- 4. Value Conclusion. The tender's appraisal shall include a reconciliation of the values indicated by the three appraisal methods, including the logic and reasoning support thereof, and the dollar figure concluded as the value of the property. 5. Signature and Certification. The lender's appraisal shall include the signature of the appraiser and the certifi- cation as to his qualifications. 6. Appraiser's Qualifications. A lender's appraisal may be performed by an employee or agent of the institutional lender or licensed real estate loan broker negotiating the loan, an MAI, SREA, or SRA appraiser, or a real estate broker, who has the following qualifications: (a) Prior experience in the sale or appraisal of compar- able properties within the past five (5) years; and (b) Having no relationship to any of the parties to the sale, either as an agent, co- worker, relative to the first degree, partner or associate, within the two (2) years preceding the appraisal. (c) Who is not and during the previous twelve (12) months has not been an officer or employee of the Town of Los Gatos. j. Challenge of Lender's Appraisal. A lender's appraisal may not be made by the Hearing Officer, but the Hearing Officer may require the landlord to furnish an additional lender's appraisal if the Hearing Officer finds that: 1. The lender's appraisal fails to meet the requirements, or the appraiser does not have the qualifications set forth in paragraph (2) 2.04.01(i -6), or -16- 2.04.02 2. The lender's appraisal includes a substantial and material error or omission which substantially and materially affects the reliability of the appraisal. Cost Increase Computation (see Appendix 8) This cost method looks at costs between two points in time. The landlord has the option to present costs for debt service only, or for operating and maintenance, capital improvements and rehabilitation costs, or for both. (The cost categories presented at Arbitration must be the same as at Mediation.) The Nearing Officer has the discretion to require cost information from categories not initially presented by the landlord, if that information is necessary to resolve issues such as the service reductions. a. Costs are historical costs for the most recently available two (2) twelve -month periods. The later period terminates no later than the effective date of the increase. For example, if the increase is effective on July 1, 1980, the time periods would be no later than July, 1978 through June, 1979 and July, 1979 through June 1980. b. Undocumented projections or estimates of future costs may not c be accepted by the Hearing Officer for use in this cost analysis. Debt service, capital improvements, and rehabilitation costs must be incurred in the past twelve months as evidenced by payment or by contract establishing a legal obligation and evidence that the terms of the contract are or have been met. The twelve -month period for each of these types of costs may be different from the period used for operation and -17- maintenance, and must begin earlier than the effective date of the increase, but may extend past the effective date of the increase, e.g., contract on 7/80, increase 8/80, time period 7/80 -5/81. e. If, however, increases in debt service or repayment of capital improvements or rehabilitation costs are, or have been de- ferred so as to become effective at a future date in excess of a twelve (12) month period, those costs may be applied as they become effective. f. If the cost is equal to or greater than the petitioning tenants' rent increase, that increase is cost justified. 2.05 Economic, Financial and Other Factors If the rent increase is not cost justified, under Section 2.04.02, the Hear- ing Officer will determine what is reasonable by taking into consideration any relevant factors presented by either party. These factors include the following: 2.05.07 Resale or Refinancing In determining the amount of debt service allowable from a resale or refinancing within the past twelve months: a. The arras - length nature of the transaction; b. The landlord's rate of return; c. Frequency of past resale or refinancing; d. The extent to which prior rental increases have made a provision for appreciation of the property. 2.05.02 Market Value The existing market value of rents for units similarly situat- ed which are not owned or controlled by the landlord. ®18- 2.05.03 Rental - istory The amount and frequency of past increases, response to Proposition 13, and the occupancy rate in comparison to comparable properties in the same general area. 2.05.04 Physical Condition The physical condition of the unit, including maintenance and repair during the last twelve (12) months. 2.05.05 Services Any increase or reduction in services since the last rent increase. 2.05.06 Vacancy and Bad Debt Losses The degree to which vacancy and bad debt losses are not offset by retention of deposits, court judgments or increases to new tenants. 2.05.07 Other Financial Information Other financial information which the landlord is willing to provide. Part 3 THE TIMING OF AN INCREASE 2.06 Multiple Rent Increases Section 24.40.010 prohibits, after July 1, 1980, more than one increase in a twelve -month period. 2.06.01 Evidence Hearing Officers shall consider evidence establishing that there has been more than one increase within a twelve (12) month period. When it is found that there has been more than one increase, the second and subsequent increases must be disallowed in their entirety, regardless of the amount or percentage. Exceptions, see Section 1.02.01. all 2.06.02 Voluntary Vacancy or Evictions The Ordinance permits rent to be increased following a voluntary vacancy or a court - ordered eviction for a material violation of a written rental agreement. Rent will be presumed to have been in- creased when a tenant moves in and, unless the landlord establishes that it was not increased, the Hearing Officer will disallow any other increases within the twelve (12) months after the tenant moved in. 2.06.03 Annexation When rental units are annexed into the Town of Los Gatos, rent in- creases prior to the annexation are not subject to review, but do establish a twelve -month period for future increases. For example, if rent is increased in July and the property is annexed in August, the rent may not be increased until the following July. Part 4 DECISIONS AND AGREEMENTS 2.07 Applicability of Determinations and Voluntary Agreements 2.07.01 Eliqible Petitions The voluntary agreement or arbitration award shall not apply to a tenant who has not filed an eligible petition or has not been in- cluded in a landlord petition. 2.07.02 Effective Date Unless otherwise set by the Hearing Officer, determinations, awards, and voluntary agreements shall be effective as of the ef- fective date of the increase originally proposed by the landlord and shall extend for twelve (12) calendar months. -20- Part 5 FAILURE TO APPEAR AND RESCHEDULING 2.U8 Failure to Appear and To Be Represented Depending on the circumstances, failure to appear or to be represented can result in the increase being determined unreasonable or the case being closed. 2.08.01 No Appearance by the Landlord or his Representative When the landlord or his representative does not appear at the Hearing, the rent increase will be determined to be unreasonable. 2.08.02 No Appearance by Tenants a. Voluntary Agreements When a tenant fails to appear or be represented at a Mediation Hearing where a voluntary agreement is concluded with the remaining tenants, the petition of the tenant who failed to appear will be considered to have been withdrawn. b. Arbitrator's Determination When a tenant fails to appear or be represented at a Hearing which results in a written determination, that determination will include all petitioning tenants. 2.09 Rescheduling Rescheduling of Hearings causes a delay in the resolution of the dispute and inconveniences the parties. However, a rescheduling is sometimes appro- priate. 2.09.01 Request by Landlord or Tenant A Hearing may be rescheduled at the request of a landlord or a tenant once for reasonable cause, when the request is made at least five (5) days before the scheduled Hearing date. -21- 2.09.02 Request by One of the Parties A Hearing may be rescheduled when one of the parties was unable to attend due to reasons beyond his control and the request is made within four (4) days after the scheduled Hearing date. -22- Chapter 3 CONCILIATION This chapter covers the timing and procedures for conciliation. 3.01 Purpose of Conciliation The purpose of conciliation is to resolve tenant /landlord disputes throug limited intervention in a dispute. Limited intervention is telephone or mail contacts to explain to each party the position of the other. 3.02 Filing of Petitions When either party to a landlord /tenant transaction has a dispute with the other concerning rent, housing services or proposed eviction, he may seek the services of the Town by filing a written petition for conciliation with the Town or its agent. 3.02.01 Rent Increase Petitions a. 25% of the units affected must join in the petition. b. No petition may be filed later than 30 days after the rental increase takes effect. 3.03 Time Limits When 15 days have passed without the resolution of the dispute, either party may request mediation by notifying the Town or its agent. -23- Chapter 4 THE MEDIATION PHASE This chapter covers the timing and conduct of mediation hearings and the authority of Mediation Hearing Officers. Chapter 6 covers those areas that are common to both mediation and arbitration hearings. 4.01 Purpose of Mediation The purpose of the Mediation hearing is to give the parties an opportunity to resolve the dispute voluntarily. 4.02 Conduct of the Mediation Hearing The Mediation Hearing Officer may change the order, delete, or add items to the following list in order to conduct the Hearing in a timely fashion or at the request of the parties. 4.02.01 Introduction The Mediation Hearing Officer will introduce himself, identify the parties, circulate a sign -in sheet, request any proxies to be turned in or representatives to be identified, and will briefly explain the hearing process. 4.02.02 Presentation by the Parties The parties will be given a full opportunity to present evidence and testimony. The Hearing Officer may require comments to be to the point and relevant. When one party has made their presenta- tion the remaining party will be given an opportunity to make their presentation. 4.02.03 Private Sessions Following the initial presentations, the Hearing Officer will meet privately with each side to attempt to work out a voluntary agreement. Private sessions are not recorded and confidential information provided during them shall remain confidential and shall not be shared without the specific consent of the individual. 4.02.04 Voluntary Agreement If the parties arrive at a voluntary agreement which resolves the dispute, the Hearing Officer will write that agreement on a voluntary agreement form and witness their signatures. Voluntary agreements must specify the agreed upon rent and may include any other item the parties agreed upon. 4.02.05 Closing Session After meeting in private session, the Hearing Officer will meet with both parties together to sign any voluntary agreement or to provide an opportunity to present any additional evidence or testimony. 4.02.06 Additional Documentation If additional documentation is requested, the Hearing Officer may recess the Hearing at his discretion for no longer than ten days for the purpose of receiving this documentation. 4.03 Hearing Summary If a voluntary agreement is not possible, or if one of the parties does not want to seek a voluntary agreement, the Hearing Officer will make a written summary of the Hearing. 4.04 Timing and Contents of Mediation Reports 4.04.01 Timing The Hearing Officer shall issue a summary report within ten days of the Hearing. If the Hearing Officer has requested addi tional documentation, the Hearing is automatically recessed until -25- the deadline for this, and the report will be due ten days after this deadline. 4.04.02 Contents The report will include the following: a. Identification of the parties; b. Statement of evidence presented. For example, the costs, service reductions and /or Housing Code violations presented; and any relevant economic, financial, or legal factors. -26- Chapter 5 THE ARBITRATION PHASE This chapter covers the timing and conduct of arbitration hearings and the authority of Arbitration Hearing Officers. Chapter 6 covers those areas that are common to both mediation and arbitration hearings. 5.01 Purpose of Arbitration The purpose of arbitration is to make a determination concerning rental housing disputes and to determine if a voluntary agreement which has been claimed to be broken, has been broken and, if so, to determine an equitable remedy. 5.02 Conduct of Arbitration Hearina on Referral from Mediation This section applies to those arbitration hearings held because a voluntary agreement was not reached, one of the parties requested arbitration, or because a Mediator has referred the case to arbitration. 5.02.01 Introduction The Arbitrator will introduce himself, identify the parties, circulate a sign -in sheet, request any proxies to be turned in or representatives to identify themselves, and will briefly explain the hearing process. The Arbitrator may take an oath of office and may administer an oath to parties and witnesses. 5.02.02 Presentation by the Parties The parties will be given full opportunity to present evidence and testimony. When one party has made their presentation, the remaining party will be given an opportunity to make their presentation. 5.02.03 Response to Evidence and Testimony The parties will be given reasonable opportunities to respond to the new documentation and issues. The Arbitrator has the M discretion to recess the hearing or to allow the submission of written statements. 5.02.04 Request for Additional Information The Arbitrator may request the submission of additional docu- mentation or other information within ten days. When this request is made, the hearing is recessed until the submission deadline for the administrative purpose of receiving the additional information. In the event that the requested information is not provided or is incomplete, the Arbitrator may proceed to the making of the award. 5.02.05 Evidence and Testimony a. Evidence. Evidence submitted may be retained by the Arbitrator for use in making the award and will be returned at that time. The Arbitrator will be the judge of the relevancy of the evidence. Conformity to legal rules of evidence is not necessary. A list of this evidence (exhibits) will be prepared and made a part of the record. b. Testimony. The Arbitrator will be the judge of the materi- ability and relevancy of testimony. A list of the names and addresses of any witnesses will be kept and made a part of the record. 5.02.06 Voluntary Agreement An arbitrator may recess the hearing for the purpose of allowing the parties to negotiate a voluntary agreement to resolve the dispute. At the request of the parties, an Arbitrator may also assist them in coming to and preparing a written voluntary agreement. 5.03 Conduct of Arbitration Hearings on Claims of Violation of a Voluntary Agreement Voluntary agreement forms contain a section making violation of the agreement subject to arbitration under these regulations and Title 9 (commencing with Section 1280), Part 3 of the California Code of Civil Procedure. Hearings for this purpose are similar to those described in Section 5.02. However, the State Code does set some additional proce- dures. Those involved in these hearings should read this section of the State Code. Other differences are caused by the nature of these hearings. This section covers these differences. 5.03.01 Appeal a. Before appealing for Arbitration, a letter must be sent asking that the agreement be followed. This letter should point out where it is not being followed; for example, "fix the stove" or "remove the wrecked car "; b. Appeals may be made by any party in writing and must include a copy of the letter described above. 5.03.02 Processing A copy of the appeal will be sent to both parties with a notice of the arbitration hearing. 5.03.03 Clarification of Issues After the introduction, the Arbitrator will ask the party who filed the appeal to state the issue. For example, "John Doe signed an agreement that he would fix the stove /remove a wrecked car by June 15 5.03.04 Verification He hasn't done that." The Arbitrator will determine if the agreement has been violated. 5.03.05 Remedies If the agreement has been violated, the Arbitrator will issue an award which compensates for the violation. The Arbitrator may require that the agreement be kept ( "John Doe has to fix the stove /move the car "), that the rent be increased or decreased, or other just and equitable remedies. 5.04 Authority of Arbitrator The decision of the Arbitrator is final and legally binding. An Arbitrator has the authority to allow or disallow any rent increase or portion thereof and may reasonably condition his award in any manner necessary to meet the purposes of the Ordinance. 5.05 Timing and Contents of Award 5.05.01 Timing The arbitration award shall be issued within 17 days of the close of the hearing. The allowance of time to submit additional information or written statements is a recess of the hearing and the award is due 17 days after this deadline. 5.05.02 Contents The arbitration award must identify the parties and make a clear statement of: a. whether or not the proposed increase is reasonable; b. if a portion is reasonable, the dollar amount; c. any conditions which are placed on the award; d. an attached summary of cost calculation. -30- Chapter 6 HEARING OFFICERS This chapter deals with the selection and designation of Hearing Officers. 6.01 Designation of Hearing Officers Hearing Officers are those individuals who, having met the criteria established in Section 6.02, are offered and have executed a contract with the Town, and also those program staff designated as Hearing Officers for specific purposes. 6.02 Selection Criteria Hearing Officers must meet all of the following criteria. 6.02.01 Have received 14 hours formal training in mediation and seven (7) hours formal training on landlord tenant law and economics of the rental industry. 6.02.02 Have observed two mediations or hearings similar to those of this program. 6.02.03 Shall not own or rent property covered by the ordinance. 6.02.04 May not be an employee or an officer of groups or organizations which have or are viewed by significant numbers of tenants or landlords as having taken advocacy positions in landlord tenant matters. 6.03 Assignments to Cases 6.03.01 Mediation Cases Mediators shall be assigned by program staff equitably and fairly, with due regard for each Hearing Officer's availability and experience. -31- 6.03.02 Arbitration Cases A selection list shall be sent to both parties that will contain at least three names of Hearing Officers who meet one of the following qualifications: 1. Appointment to the American Arbitration Association's Panel of Arbitrators; 2. Completion of a Juris Doctor or equivalent degree from a School of Law with proof of a course in arbitration; or 3. Completion of six mediations, observation of one arbitration, and documentation of formal arbitration training. Both parties shall have the right to cross off one out of three or two out of five name(s) of Hearing Officers to whom they object. 6.04 Disqualification from Cases 6.04.01 A Hearing Officer shall disqualify himself from hearing a case and can be disqualified by program staff at the request of one of the parties if: a. The Hearing Officer knows or has reason to know he has a financial interest affected by his determination or award. b. The Hearing Officer is related to one of the parties or their representatives to the third degree. c. The Hearing Officer has been retained or employed by one of the parties within the past two years, has given advice to one of the parties relative to the issues involved in the hearing. d. It appears probable that the Hearing Officer by reason of bias or prejudice cannot provide a fair and impartial hearing. e. The Hearing Officer is a party to the hearing. -32- 6.04.02 A Hearing Officer is not disqualified from hearing a case where one or more of the parties have appeared before him in an earlier hearing. 6.04.03 The parties may waive their right to the disqualification of a Hearing Officer by a written statement accepting his service. 6.05 Review of Hearing Officer`s Performance The program staff will periodically review the performance of Hearing Officers and will inform the Committee of the execution and termination of Hearing Officers' contracts. 6.06 Administrative Hearing Officers 6.06.01 The Program Coordinator is designated as a Hearing Officer for the purpose of: a. Consolidation of cases; b. Scheduling of hearings; c. Acceptance of documentation and written statements; d. Acceptance of appeals to arbitration. -33- Chapter 7 MISDEMEANORS AND ENFORCEMENT This chapter deals with those actions of the Town taken in prosecuting misdemeanor violations of the Ordinance. Tenants have additional civil rights not covered by this chapter. 7.01 Misdemeanor Violations The ordinance provides that it is a misdemeanor (a) For a landlord to evict tenants in retaliation for tenant organizing, tenants petitioning government for rent relief, and /or tenants exer- cising rights granted by the Ordinance. (b) For a landlord to evict a tenant when the landlord's dominant motive is to evade the purposes of the Ordinance. (c) For a landlord to demand, accept, receive, or retain any rent in excess of the maximum rent allowed by the decision of a Hearing Officer. 7.02 Investigation Program staff will receive and investigate complaints of alleged misde- meanor violations. When complaints are received of an alleged violation which has not yet occurred or is in the process of occurring, it is the policy of this program to prevent it, when possible, by informational contacts with the landlord. In the event that the investigation shows that a violation has or is in the process of occurring and that it is not possible to prevent, a request will be made to the Town Attorney for review and prosecution. Either party can pursue civil action after the conclusion of Town Rental Mediation procedures. 11911!3 Chapter 8 APPEAL OF ADMINISTRATIVE ACTION 8.01 Administrative actions by program staff may be appealed to the Director of Community Programs. Individuals also have the right to present information and recommendations on the implementation of these regula- tions to the Rent Advisory Committee. -35- Chapter 9 DEFINITIONS This chapter contains definitions of the more commonly useds words and phrases found in the Ordinance and these regulations. Anniversary Date Twelve (12) months from the last rent increase. Award The written decision of an Arbitrator. Capital Improvements Capital improvements are those improvements which materially add to the value of the property, appreciably prolong its useful life, or adapt it to new uses, and which are required to be amortized over the useful life of the improvement of the building pursuant to the straight -line depreciation provisions of the Internal Revenue Code, and the regulations issued pursuant thereto. f nmmiH-na Committee means the Los Gatos Rent Advisory Committee. CPI - Consumer Price Index GPI is the Consumer Price Index - All Urban Consumers for the San Francisco - Oakland area. The figure is released bimonthly from the Bureau of Labor Statistics. Cost of Debt Service Cost of debt service shall mean the periodic payment or payments due under any security or financing device which is applicable to the rental unit, or the building, or complex, or other real property of which it is a part, including any fees, commissions, or other charges incurred in obtaining such financing which are required to be amortized for a period exceeding sixty (60) months pursuant to the Internal Revenue Code and the regulations issued pursuant thereto. Nevertheless, -36- costs of debt service shall not include adjustments in the interest costs of a variable interest rate mortgage after the indebtedness secured thereby is incurred. Cost of Operation and Maintenance Costs of operation and maintenance shall mean all expenses, exclusive of costs of debt service, costs of rehabilitation, and costs of capital improve- ments, incurred in the operation and management of the rental unit and the building or complex of buildings of which it is a part together with common areas, including but not limited to: real estate taxes, business taxes and fees (includ- ing fees payable by landlords under this Chapter), insurance, sewer service charges, utilities, janitorial service, professional property management fees, increased interest costs of variable interest rate mortgages over the base interest incurred, pool maintenance, exterior building and grounds maintenance, supplies, equipment, refuse removal, elevator service, and security services or systems. Costs of Rehabilitation Costs of Rehabilitation shall mean the costs of any rehabilitation or repair work done on or in a rental unit or common area of the housing complex containing the rental unit and which work was done in order to comply with an order issued by the Los Gatos Building Department, the Los Gatos Director of Community Programs, or the Fire Department, or to repair damage resulting from fire, earthquake, or other natural disaster. Counsel An attorney or other advisor. Day A calendar day. -37- Determination A written summary by a mediator or a written decision by an arbitrator. Fact Finding The action of an Arbitrator in establishing that certain facts, such as costs or service reductions, exist. Hearing Officer Hearing Officer shall mean a person designated by the Town Manager and the rules thereof who mediates or arbitrates rental disputes pursuant to the provisions of this Chapter. Housing Services Housing services are those services provided and associated with the use or occupancy of a rental unit, including but not limited to repairs, replacement, maintenance, painting, light, heat, water, elevator service, laundry facilities and privileges, janitorial service, refuse removal, furnishings, telephone, parking, and any other benefits, privileges, or facilities. Landlord Landlord means an owner, lessor, or sublessor, who receives or is entitled to receive rent for the use and occupancy of any rental unit or portion thereof, and the agent, representative, or successor of any of the foregoing. Party A landlord or tenant(s) who is involved in the hearing process. Daf ii -inn A petition for Conciliation. Program Staff The staff of the Los Gatos Rent Mediation Program and Department of Community Programs assigned to implement the Rental Dispute Mediation and Arbitration Ordinance. -38- Rent Rent is the consideration, including any bonus, benefit or gratuity, demanded or received by a landlord for or in connection with the use or occupancy of a rental unit, or the assignment of a lease for such a unit, including housing services or subletting. Rent Increase A rent increase is any additional rent demanded of or paid by a tenant for a rental unit, including any reduction in housing services without a corresponding reduction in the monies demanded or paid for rent. Rental Unit A rental unit is any building or part of a building which is used for residence, or land which is used for mobiiehome space, and which is rented to a tenant as a dwelling place, except. (1) Rental units, located in a building or group of buildings on the same premises, containing five or fewer dwelling units. (2) A room in an owner - occupied dwelling where under the lease provisions the tenant does not have the substantially exclusive use of a kitchen. (3) A single house, condominium or planned development (Business and Professions Code Section 11003.0) unit. (4) A hotel room or similar accommodation ordinarily let for occupancy by the same tenant for periods of less than 15 days. (5) A hospital room, skilled nursing facility or similar accommodation where the main factor in the rental relationship is the personal care given to the tenant. (6) A dwelling owned, operated or managed by a government agency or which is exempted by State or Federal law from rent regulation. -39- Tenant A tenant is a person entitled by written or oral agreement or by sufferance to occupy a rental unit to the exclusion of others. Tenancy at Sufferance A tenancy which occurs when a tenant comes into possession of a premises lawfully but holds over either after the expiration of a lease or after the expiration date of a notice to vacate. Vacancy Untenanted. A rental unit is vacant when there are no tenants living there. However, a landlord and tenants may, by prior written agreement, agree that a move out by one roommate creates a vacancy as to all tenants of that rental unit. Warranty of Habitability A landlord's minimum obligations include that: a. There are no leaks when it rains, and no broken doors or windows; b. The plumbing has to work, including hot and cold water, and a working sewer or septic tank connection; c. The heater has to work and be safe; d. The lights and wiring have to work and be safe; e. Floors, stairways and railings have to be in good repair; f. When it's rented, the place has to be clean, with no piles of trash or garbage and no rats, mice, roaches, or other pests; g. The landlord has to provide enough cans or bins with covers for the garbage. -40- }) l5 -'0 li h 1 To determine maximum reasonable rent increase under the ordinance, multiply present rent by figure in Column E. (Telephone 1i: 395 -6350) C D E LOS GATOS RENTAL MEDIATION PROGRAM 295.8 298.8 C.p.I & 70% C.P.I. COMPUTATIONS To determine maximum reasonable rent increase under the ordinance, multiply present rent by figure in Column E. (Telephone 1i: 395 -6350) C D E Date A B 2/82 4/82 295.8 298.8 - _ 298.8- 270.3 = 28.5 35,3 = 1.3.6% 28 5 = 10.5% 270.3 13.78% 82.7 - = 73.7% 82,2 = 6 May /June '82 = 5� July /August '82 ,7x13.7 = 9.59% 6/82 304.6 304.6 -274.0 = 30.6 30.6 = 11.2% 274.0 82'9 = 13.82% 6 Sept /Oct '82 .7x13.82 = 9.67% 8/82 304.3 304.3 -287.9 = 16.4 16.4 = 5.7% 287.9 73.9 = 12.32% 6 Nov /Dec '82 ,7x12.32 = 8.62% 10/82 302.4 302.4 -297.0 = 5.4 5.4 _ 1 8 297.0 57.8 = 9 6 6 Jan /Feb 183 .7x9.633 = 6.74% 12/82. 293.9 293.9 -294.0 = - -.1 - 0.0'.. 42'8 = 7.13% March /April '83 _ Key -+ A - CPI for all Urban Consumers, San Francisco - Oakland Index, all items, 1967 =100, as reported by the Bureau of Labor Statistics. B - Annual change in CPT (difference in index between same month of consecutive years). C - Annual percent of change in CPI (percent of change in index between same month of consecutive years). D - Average annual percera of change in CPI (sum of 6 consecutive figures in Column C, divided by 6). E. 70% of Average Annual Percent of Change in CPI (.7 x figures in Col. D). To determine maximum reasonable rent increase under the ordinance, multiply present rent by figure in Column E. (Telephone 1i: 395 -6350) Appendix B Cost Increase COMPUTATION OF OTHER FACTORS Debt Service New Monthly Principal and Interest - Old Monthly Principal and Interest Subtotal x .& Su Iota Allowable Cost Operating and Maintenance, Capital Improvement and Rehabilitation New Operating and Maintenance - Old Operating avid Maintenance Subtotal New Capital Improvements 1. 60 Subtotal New Rehabilitation r 36 Subtotal -41- = 0 E M Increase = Capital Improvement Increase = Rehabilitation Increase Subtotal (# units or proportion of square footage) Subtotal + .05 unit's prior rent Allow e Rent.