1983-225-Amending The Los Gatos Rental Mediation RegulationsRESOLUTION NO, i233
RESOLUTION AMENDING THE LOS GATOS RENTAL MEDIATION REGULATIONS
Pursuant to Section 24.10.025 of the Town Code, the Town Council hereby
RESOLVES that the Los Gatos Rental Mediation Regulations are amended as follows:
Section 1.02.02 is amended to read as follows:
"1.02.02. Increases in Excess of M CPI Ceilin .
Increases which are in excess of 70% CPI ceiling or 5 %, which-
ever is greater, 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 volun-
tarily vacated by the tenant. To be vacant, the unit must
be untenanted; if a roommate moves, there is no vacancy,
runless 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 fran 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."
Section 1.04 is amended to read as follows:
"1.04. Notice of Rent Increase.
When a landlord issues a notice of rent increase for more
than the 70% CPI ceiling or 5 %, whichever is greater, he must
give the tenants notice of the following;
"(1) Full right to use the Rental Mediation and Arbitration Hearing
Process. The notice must include 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 sane time and mamer as the rent increase notice. The
recamiended wording is:
'You have the right to use the Rental Dispute Mediation
and Arbitration Hearing Process
tion contact:
Los Gatos Rent Mediation
3275 Stevens Creek Blvd., #310
San Jose, CA 95117
(408) 395 -6350'
For further informa-
(2) If any tenant so requests in writing, the apartment numbers of
all tenants receiving increase notices for the same month as
the tenant making the request. Failure to give tenants the
notice required under this section shall void any rent in-
crease in excess of 7U% CeI or 5 %, whichever is greater."
section 1.U7 is amended to read as follows:
"1.07. Deferral of Amount of Increase Over 707 CPI.
When a tenant files an eligible petition, the mount of the
increase over 707 CPI or 5%, whichever is greater, is stayed,
pending a resolution of the dispute. The tenant should be
charged anal should pay only the old rent plus 70% CPI or 5 %,
whichever is greater, until the petition is resolved and the
rent level established."
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Section 2.02 is amended to read as follows:
"2.02. Amount of Annual Increase.
The annual rent increases shall not exceed the 70% CPI ceiling
or 5 %, whichever is greater, unless the tenants agree or the
Arbitrator determines that other factors render a larger in-
crease reasonable.
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 Labor Statistics.
b. The Town or its agent shall compute the average annual
percent of change as set forth in Section 24,70.015(3)
of the Rental Mediation Ordinance."
Section 2.04 is amended to read as follows:
"2.04. Cost Analyses.
The Tenant /Landlord Task Force has authorized the use of cost
analysis methods which are 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 capital improvements must be averaged
an a per emit basis and amortized over a period
of at least 36 months;
d. Each of the costs must bear a reasonable relation-
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It ship 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 reasonbie.
g. Increased costs of debt service:
1. Costs which satisfy the 70% -80% test for
nPW nT."Yt C
increased costs of debt service shall be deemed
reasonable and allowed by the Hearing Officer
when:
(a) The increased costs of debt service arise
Fran that proportion of the aggregate amount of
debt which does not exceed seventy percent
(707) of the appraised value of the property,
and no more than eighty percent (807) of such
increased costs are passed through to tenants.
(i) If the loan to value ratio does not
exceed 707, 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
807. of the sun calculated by multiplying
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"the new debt service by 707 divided by
the loan to value ratio less the prior
debt service.
X1.2 ul'
Facts
Prior Debt Service per Annum
New Debt Service per Annum
Increased Costs of Debt Service
Aggregate Debt from which Debt
Service arises
Appraised Value of the Property
Loan to Value Ratio (LTVR)
Calculation
80,000
110,000
30,000
750,000
1,000,000
.75
Pass Through = .8 (New Debt Service x [.7 /LTN - 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.
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 amoritzed over the life
of the loan.
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"(d) Actual periodic payments shall be
amortized over the length of the loan or
over 36 months, whichever is less.
3. Current owners refinance of debt service shall
be limited to costs of debt service generated
by the amount reinvested in the property, in-
cluding liquidation of existing debt.
(Appendix C)
4. All debt service shall be secured, arms-
length transactions.
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 per-
suading 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 con-
sequence 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. Lecider's AFipraisal.
A lender's appraisal for the purpose of establishing
M
"the value of the property pursuant to Section
24.70.020(2) of the Ordinance shall meet the
following requirements:
1. Format. The appraisal shall be prepared on
the usual short form (1 -4 page) format conmonly
used by institutional lenders or licensed real
estate brokers to establish the value of the
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, including:
(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
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"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 con-
sider the value of the land, assumed
vacant, added to the depreciated replace-
ment cost of the improvements.
(c) Inane Approach. This approach shall con-
sider the estimated potential net inane
capitalized into value.
4. Value Conclusion. The lender'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 certification 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 cmparable 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
2. The lender's appraisal includes a substantial
and material error or omission which sub-
stantially and materially affects the reliability
of the appraisal,
2,04,02, Cost Increase Caputation (See Appendix B).
This cost method looks at costs between two points
in time. The landlord has the option to present costs
M
"for debt service only, or for operating and maintenance,
capital improvements and rehabilitation costs, plus
no more than 5% of the monthly rent. (The cost cate-
gories presented at Arbitration must be the same as at
Mediation.) The Hearing Officer has the discretion
to require cost information from categories not
initially presented by the landlord, if that informa-
tion 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 be accepted by the Hearing Officer
for use in this cost analysis.
c. Debt service, capital improvements and rehabilita-
tion costs mast 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 maintenance, and must begin earlier
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"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 -6/81.
d. If, however, increases in debt service or repayment
of capital improvements or rehabilitation costs
are, or have been deferred 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,
e. If the cost is equal to or greater than the peti-
tioning tenant's rent increase, that increase is
cost justified."
Chapter 9, Definitions, is amended by amending the definition of "Rental Unit,"
as follows:
"Rental Unit
A rental unit is any building or part of a building which is used for
residence, or land which is used for mobilehane 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 two or fewer dwelling units.
(2) A roan 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 roan or similar accommodation ordinarily let for occupancy by
the same tenant for periods of less than 15 days,
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"(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."
Appendix B is amended to read as follows:
"Appendix B
Cost Increase
CGTUTATION OF FACTORS OTHER THAN DEBT SERVICE*
New Operating and Maintenance
(12 months total prior to rent increase notice)
-Old Operating and Maintenance
(12 months total prior to above)
u tota
t 12 months = 0 & M Increase
New Capital hmrovements
60 months
Su tota
New Rehabilitation
t 36 months
Subtotal
= Capital Improvement Increase
= Rehabilitation Increase
Subtotal
# units or proportion of
square footage
Subtotal
+ .05 unit's prior rent
Allowable Rent.
*See 2.04.01(g) for new owner debt service carmutation."
Appendix C is added, as follows:
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"APPENDIX C
REFINANCE BY EXISTING OWNER
Amount used to liquidate prior debt ....................$
Amount incurred for repairs.. ...
Amount incurred for capital improvements ...............
Amount incurred for rehabilitation, ......
TOTAL REINVESTED IN PROPERTY $
TOTAL REINVESTED IN PROPERTY CE AMOUNT X DEBT SERVICE = PASS THROUGH
TOTAL
CURRENT PASS THROUGH + RENT = ALLOWABLE RENT INCREASE"
The Toum Council FURTHER RESOLVES that the Los Gatos Rental Mediation Regula-
tions as amended by this resolution shall became effective on December 21, 1983.
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PASSED AND ADOPTED AT A REGULAR MEETING OF THE TOWN COUNCIL
OF THE TOW OF LOS GATOS this 7th day of November , 1983,
by the following votes:
AYES: COUNCIIMEMBERS Joanne Benjamin, Eric D. Carlson,
Terrence J. Daily and Thomas J. Ferrite
NOES: COUNCII.ME?4BERS None
ABSTAIN: COUNCIL11MBERS Brent N. Ventura
ABSENT: COUNCIUE2I BERT None
ATTEST:
Clerk of the Tom of Los Gat
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