12 Staff Report - Amending Town Code
DATE: TO: FROM: COUNCIL AGENDA REPORT March 10, 2004 MAYOR AND TOWN COUNCIL ORRYP. KORB, TOWN MEETING DATE: 3/15/04 ITEM NO. SUBJECT: ADOPT ORDINANCE AMENDING THE
LOS GATOS TOWN CODE, CHAPTER 14, ARTICLEVII, RENTALAND OTHERLANDLORD/TENANT DISPUTES RECOMMENDATION: 1. Adopt ordinance that was introduced at the Council meeting of March 1, 2004. 2.
Instruct the Clerk to either: (a) publish the ordinance within 15 days after adoption, or (b) publish a summary no more than 15 days after adoption (if sUmmary published before adoption).
DISCUSSION: On March 1,2004, Council introduced Attachment 1, which amends the Los Gatos Town Code, Chapter 14, Article VII, regarding rental and other Landlord/Tenant disputes. Please
note that two clerical change have been made to Attachment 1, both in section 14.80.040. The first appears in part (1) of subsection (a) concerning when a request for information regarding
notices ofrent increases must be made, replacing "takes effect" with "notice." The second appears ·in subsection (b) regarding waiver ofnotice deadlines, replacing "thirty (30)" with
"sixty(60)." These changes do not require reintroduction of the ordinance. Attachment: Ordinance Distribution: Martin Eichner, Project Sentinel, 1055 Sunnyvale-Saratoga Road, #3, Sunnyvale,
CA 94087 Jeffrey Dnnison, Tri-County Apartment Assoc., 792 Meridian Ave., #A, San Jose, CA 95126 PREPARED BY: ORRY P. KORB, TOWN ATTORNEY OPKLMB/wp [N:IATYlRent.TCR wpd] Reviewed by:
own Manager Finance Rev: 3/10/04 4:30 pm Reformatted: 7/19/99 Assistant Town Manager Community Development Clerk File# 301-05
ORDINANCE NO. ORDINANCE AMENDING THE LOS GATOS TOWN CODE CHAPTER 14, ARTICLE VIn, RENTAL AND OTHER LANDLORDffENANT DISPUTES (SECTION 14.80) THE TOWN COUNCIL OF THE TOWN OF LOS GATOS
DOES HEREBY ORDAIN: Chapter 14, Article VIII Rental and Other Landlord/Tenant Disputes, of the Town Code is hereby amended to read as follows: SECTION I Section 14.80.010 Title. This
article shall be cited as the Town's Rental Dispute Mediation and Arbitration Ordinance. Section 14.80.015 Declaration of policy and purposes. (a) The Council finds that there is "a
serious and continuous shortage ofand increasing demand for housing in the Town. This circumstance, coupled with periodic inflationarypressure, uncertain and changing strength in the
surrounding economy, and the rising costs of developing new housing, results in volatile rental rates for residential housing which are often subject to substantial upward pressure.
(b) This article is necessary in order to protect the health, safety and welfare ofthe citizens ofthe Town by meeting the needs created by the housing shortage, including, but not
to, prevention of excessive and unreasonable Rent Increases, and the assurance to Landlords of a fair and reasonable return on the value of their property. Section 14.80.020 Definitions.
The following words, terms and phrases, when used in this article, shall have the meanings ascribed to them in this section, except where the context clearly indicates a different meaning:
(a) Agent.-An individual or organization, or government, designated by the Town Council to administer this article. (b) Affected Tenant. A Tenant whose tenns and conditions of rental
relationship with his or her Landlord are changed by a proposed Rent Increase or other change in temis and conditions governed by this article. (c) Arbitrator. A person designated to
act as the hearing officer for the arbitration phase ofthe dispute resolution process under this article. (d) Duplex. A building or group ofbuildings on the same premises, containing
not more nor less than two (2) dwellings. Page 1 of 11
(e) Housing Services. Those services provided and associated with the use of occupancy of a Rental Unit, including but not limited to, repairs, replacement, maintenance, painting, light,
heat, water, elevator service, laundryfacilities and privileges,janitorial service, refuse removal, furnishings, telephone, parking, and any other benefits, privileges or facilities.
(f) Land. Real property in the technical sense. The meaning of the word includes, but is not limited to, buildings and parking spaces. (g) Landlord. The person or entity with the legal
right to exercise ownership control over rental housing property governed by this article. An owner, lessor, or sublessor, who receives or is entitled to receive Rent for the use and
occupancy ofany Rental Unit or portion thereof, and the agent, representative, or successor of any ofthe foregoing. (h) Dispute. Any dispute between a
Landlord or any agent or employee thereof, and a 'Tenant, regarding Rent or anyother aspect ofHousing Services, provided that the Tenant is occupying the premises from which the dispute
arises. (i) Lease/Rental Agreement. An agreement, written, oral, implied in fact, or implied in law, in which a landowner, for compensation, conveys the right to possess Land to someone
else for a period oftime or from period to period. 0) Mediator. A person designated to conduct the mediation phase of the dispute resolution process under this article. (k) Rent. The
consideration, including anybonus, benefit or gratuity, demanded or received by a Landlord for or in connection with the ·use or occupancy ofa Rental Unit, or the assignment ofalease
for such a unit, inCluding Housing Services or subletting. (1) Rental Unit. Any building or part of a building which is used for residence, or any mobile home owned by a mobile home
park owner, and which is rented to a Tenant as a dwelling place, except: (1) A Rental Unit located in a building or group of buildings on the same premises containing only one (1) dwelling
unit; (2) A room room in an owner-occupied dwelling·where under the lease provisions the Tenant does not have the substantially exclusive use ofthe kitchen; (3) A single h?use, condominium
unit, or planned development (Business & Professions Code § 110(3) unit; (4) A hotel room or similar accommodation ordinarily let for occupancyby the same Tenant for periods of less
than thirty (30) 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;
Page 2 of I I
(6) (7) A dwelling owned, operated, or managed by a government agency or which is exempted by state or federal law from Rent regulation; . Mobile homes located in mobile home parks and
not owned by the mobile home park (m) Rent Increase. Any additional Rent due or paid by a Tenant for a Rental Unit, including any reduction in Housing Services without a
corresponding reduction in the moneys demanded or paid by Rent. (n) Tenant. A person who is legally entitled to occupy all or part of a rental property subject to this article at the
time any issue or right under this article arises. (0) Voluntary Vacancy. For the purpose of this article, a vacancy is voluntary under any of the following circumstances: (1) A voluntary
choice bya Tenant to vacate the Rental Unit. (2) The Tenant is evicted by a court for non-payment, chronIcally late payment, or other material violation of a written rental agreement.
(3) A Tenant moves out pursuant to a three (3) day notice from the Landlord or Landlord's agent to pay Rent or vacate the Rental Unit. (4) A Tenant moves out pursuant to a three (3)
day notice from the Landlord or Landlord's agent to complywith a covenant ofthe rental agreement or move out. Ifa Tenantmoves after receiving a thirty (30) or sixty (60) day notice from
the Landlord, it is nota Voluntary Vacancy. (5) A Voluntary Vacancy occurs when one (1) ofthe roommates gives a notice to vacate and there is a written agreement to the effect between
the Tenant and Landlord that a notice to vacate submittedby one (1) Tenant is binding on all ofthe Tenants, and is a Voluntary Vacancy within the meaning of this article. (6) A Voluntary
Vacancy occurs when anyone (1) Tenant vacates the Rental Unit without . notice and the written agreement between the Tenant and Landlord provides to the effect that a failure to give
notice to vacate is a breach ofthe agreement, is binding on all ofthe Tenants, and is a Voluntary Vacancy within the meaning ofthis article. Section 14.80.025 Regulations. The Town Council
may adopt regulations to assist in implementing this article. Section 14.80.030 . Reasonable Rent Increases. No Landlord shall increase the Rent ofany Tenant in an amount which is unreasonable.
The factors to be considered in determining whether a Rent Increase is reasonable are set forth in division 4 of Page 3 of 11
this article, and may be described in greater detail in regulations adopted pursuant to this article. Section 14.80.035 Retaliatory Evictions. (a) Possession of a Rental Unit shall not
be recovered by a Landlord from a Tenant who is not otherwise in default as to the tenns ofoccupancy of such unit if either: (1) The Landlord's predominant reason for seeking to recover
possession of such Rental Unit is retaliation against the Tenant for exercising the Tenant's rights pursuant to this article; or (2) The predominant motive ofthe Landlord inseeking to
recover possession ofsuch Rental Unit is to evade the purposes of this article. (b) When an eviction occurs within one hundred eighty (180) days of the Tenant's exercise or reasonable
attempt to exercise rights provided by this article, and ifthe Tenant shows that the Landlord knew at the time of eviction ofthe Tenant's conduct in relation to this article, the eviction
is presumed to be retaliatory. This presumption applies injudicial proceedings and is one which which affects the burden ofproducing evidence. Section 14.80.040 Notice of dispute resolution
rights. (a) In order for a notice ofRent Increase to be valid, the Landlord must: (1) Serve, with the notice ofproposed increase, written advice to the Affected Tenants of their right
to petition for displiteresolutibn under section 14.80.205. Said written advice must include the name and current telephone number of the designated Agent administering this article
for the Town; and (2) Respond in writing within thirty (30) days to a written request made by any Affected Tenant for the names and apartment numbers of all Tenants receiving increase
notices for the same month as the Tenant making the request by disclosing said infonnation, provided that such request is made by anAffected Tenantwithin thirty (30) days after the Rent
Increase Notice. (b) Failure to provide the notice in the fonn specified above or in a fonn which provides substantially the same infonnation, or failure to provide a timely response
to a request for Affected Tenants, shall render the notice ofproposed increase invalid. A notice which fails to meet any remaining requirements which may be established by corresponding
regulations that may be adopted waives the sixty (60) day litnit herein and pe111lits a petition to be filed within six (6) months ofthe applicable Rent Increase or other event giving
rise to the dispute. (c) A reissued notice to correct the notification requirement shall not exceed the amount of the previous Rent Increase notice. Page 4 of 11
Section 14.80.045 Applicability to Duplexes. (a) The provisions ofthis article shall apply to Duplexes only as follows: (1) Tenants and Landlords of Duplexes are entitled to the resolution
services provided in division 3 (sections 14.80.205 and 14.80.210) below; and (2) A regulatory fee shall be imposed on each Rental Unit pursuant to that division. (b) Duplexes shall
not be eligible for mediation or arbitration services. (c) Section 14.80.310 shall not apply to Duplexes. SECTION II Section 14.80.105 Retroactive application. (a) This article shall
apply to all Rent Increases effective on or after July 1, 1980, and to all Landlord/Tenant Disputes arising after July 1, 1980. (b) No Landlord shall be required to refund any Rent under
this article; however, the mediation agreement or arbitration award may establish a reasonable Rent at a decreased level, which maybe effective for up to twelve (12) months from the
date ofthe agreement or award. Section 14.80.110 Stay. Filing a petition for dispute resolution of a Rent Increase stays the Tenant's obligation to pay any amount of the increase greater
than the limits set forth for annual increases below in sectian 14.80.310 (c), pending the final outcome ofthe resulting case under this dispute resolution process. lithe final outcome
results in approval ofan increase greater than the limit set forth in 14.80.310 (c), the Tenant shall pay the resulting retroactive increase due, calculated from the effective date ofthe
proper increase notice to the date ofthe final outcome. Said payment must be made by the Tenant within thirty (30) days of receiving notice of the final outcome of this dispute resolution
process, unless otherwise ordered as part of any arbitration award or voluntary settlement in the case. Section 14.80.115 unlawful detainer action. A finding by an Arbitrator
ofa violation ofthis article by a Landlord shall be a complete defense to unlawful detained proceedings by a Landlord against a Tenant not otherwise in'default under the lease, and to
to any action to recover Rents in excess of those found reasonable. Section 14.80.120 Nonwaiver. Any waiver or purported waiver by a Tenant ofrights granted under this article prior
to the time when such rights may be exercised shall be void as contrary to public policy. Page 5 of 11
Section 14.80.125 Standing to enforce. The Town may enforce this artiCle by bringing a civil action. SECTION III Se.ction 14.8Q.205 Town service. When either party to a Landlord/Tenant
transaction has a dispute with the other, the party may seek the services of the Town by filing a written petition for conciliation with the Town or its Agent; provided, that in the
case ofRent disputes, twenty-five percent (25%) ofthe units affected mustjoin in the petition, or file timely concurrent petitions. In all other cases an individual may submit a petition.
Petitions challenging a Rent Increase in a single unit must be filed within sixty (60) days after the Landlord sends a valid notice ofRent Increase. In the case ofRent Increases for
multiple units, an initial petition by'at least one Affected Tenant must be filed no later than sixty (60) days after the Landlord sends a valid notice ofRent Increase. Ifan initial
petition is received within the applicable sixty (60) days for a property in which multiple numbers of increases were noticed, additional petitions containing the requisite number ofsignatures
necessary to reach the twenty-five percent (25%) level must be received within thirty (30) days after any Mfected Tenant has received a list ofthe names and unit numbers ofthe Affected.
Tenants as required bysection 14.80.040 or has otherwise been notified by the Agent that additional petition signatures are necessary. A petition raising an issue other than a Rent Increase
must be filed within thirty (30) daysofthe event giving rise to the dispute. Section 14.80.210 Conciliation. The Town .or its Agent will provide conciliation service to parties engaged
in Landlord/Tenant Disputes arising from the occupancy ofRental Units as defmed herein. Section 14.80.215 Mediation. When a Landlord/Tenant Dispute arising from the occupancy of a Rental
Unit on a property containing three (3) or more Rental Units has not been resolved through conciliation, either party may request mediation by applying therefor on a fortn provided by
the Agent. Section 14.80.216 Time limit. A request for mediation is effective only if it is received by the Town or its Agent as prescribed by the regulations adopted pursuant to section
14.80.025. Section 14.80.220 Subpoenas. An Arbitrator or Mediatormay on his/her own initiative or at the request ofa party issue subpoenas... including a subpoena requiring the production
ofdocuments, provided however, that a Mediator or Arbitrator shall require a party requesting a subpoena requesting documents to make a showing of good cause supporting such a request.
For the purposes ofthis article, the Town Council's authority to issue subpoenas is delegated to the Mediator or Arbitrator, reserving to the Council full authority Page 6 of II
to issue subpoenas for the same or other purposes. Section 14.80.225 Conduct of mediation. When a partyproperly requests mediation, the dispute shall be heard under a process consistent
with the basic principles of confidentiality, neutrality, and preservation ofthe freedom ofthe parties to decide whether to settle and if so, on terms of their own choosing. No third
parties, such as representatives from the media, shall be allowed to attend mediation. Section 14.80.230 Request for arbitration. When conciliation or mediation does not result in an
agreement, any party to the case may request arbitration by applying therefor on a form provided by the Agent. If the arbitration request follows a mediation that did not result in an
agreement, the arbitration request will be granted. If the arbitration request follows conciliation that did not result in an agreement, the Town, or its Agent, may assign either arbitration
or mediation. The Town, or its Agent, will base this decision upon which procedure appears most most likely to result in a timely decision that is both fair and acceptable to the parties.
Section 14.80.235 Time limits. A request for arbitration is effective'only ifit is received by the Town or its Agent as prescribed by the regulations which maybe adopted pursuant to
section 14.80.025. Section 14.80.240 Arbitration. When a party properly requests arbitration, the dispute shall be administered and conducted according to generally accepted rules for
arbitrating disputes in Santa Clara County, California, unless otherwise specified in regulations adopted pursuant to this article. Section 14.80.245 Regulatory fees. (a) For the sole
purpose ofreimbursing the Town for the costs ofadministering this article, there is hereby imposed on each Rental Unit, subject to the provisions ofthis article, a regulatory fee in
such amount as the Council may establish by resolution from time to time. The regulatory fee for a Rental Unit in a Duplex shall not exceed fifty percent (50%) of the fee charged to
other Rental Units subject to this article. No later than June 1 of each year, the manager will report to the Council on the amount of regulatory fees necessary to recover the costs
of the Town in administering the article. (b) The regulatory fee shall be due at the same time that the Landlord's business license fee is due. Except, in the case ofDuplexes, the regulatory
fee is due July 1. A Landlord who fails to pay the fee within thirty (30) days after the Town mails its bill to the Landlord shall pay a twentyfive percent (25%) penalty, plus an additional
twenty-five percent (25%) penalty for each thirty (30) days thereafter that the bill remains unpaid. Until such time as the bill including penalties is paid, the Landlord of a Rental
Unit shall not be entitled to any Rent Increase. Page 7 of 11
Section 14.80.305 SECTION IV General standards. The purpose of this article is to permit Landlords a fair and reasonable ret1.lrn on the value of their property, while at the same time
protecting Tenants from arbitrary, capricious or utrreasonable Rent IIlcreases. The detennination of reasonableness shall be made with reference to the following standards, unless Arbitrator
detenniIies that the overall standard of reasonableness requires other standards to be applied in a given case. Section 14.80.310 Specific standards. (a) Exemptions. The first Rent IIlcrease
afterthe following events shallbe exempt from this article: (1) Construction ofa new unit. (2) A Voluntary Vacancy. (3) Eviction of a Tenant by a court for nonpayment or other violation
·of a written rental agreement. (4) lfthe last increase was initiated no less than two (2) years before the current increase and the current increase is ten percent (10%) or less. (b)
Frequency ofRentIncreases. Rent shall not be increasedmore frequently than annually, except that it may be increased: (1) When the fee imposed under section 14.80.245 is increased, it
may be passed through at the rate ofno more than one-twelfth (1/12) ofthe fee per month. (2) At any time, with the written consent of all Mfected Tenants, which shall be sought through
conciliation or mediation. (c) Amount ofannual increase. Annual Rent IIlcreases sha1l not exceed the seventy percent (70%) cpr ceiling or five percent (5%), whichever is greater, unless
the Arbitrator determines that other factors render a larger increase reasonable. CPl is the Consumer Price IIldex, All Urban Consumers for the San Francisco-Oakland Area. The most recent
CPl is the bimonthly figure most recently available from the BureaubfLabor Statistics. The seventy percent (70%) cpr ceiling is an amount arrived at by adjusting the current Rent to
reflect seventy percent (70%) ofthe most recent annual average change in the CPr. Section 14.80.315 Other factors of reasonableness. (a) Ihcreases deemed reasonable. Subject to the terms
of section 14.80.305, a Rent IIlcrease is reasonable ifthe Arbitrator deteooines the following: (1) The Rent IIlcrease consists ofno more than five percent (5%) ofexisting monthly Rent
Page 8 of II
plus the pass-through ofall or some ofthe amounts ofone (1) or more ofthe following: a. The fee imposed under section 14.80.245; b. Documented costs of capital improvements, averaged
on a per-unit basis and amortized over a period ofnot less than sixty (60) months; c. Increased costs ofmaintenance and operation; or d. Documented costs ofrehabilitation; averaged on
a per-unit basis and amortized over a period of not less than thirty-six (36) months; (2) The cost figures are established to the reasonable satisfaction ofthe Arbitrator. (3) Each ofthe
costs proposed forpassthrough to Tenants bears areasonablerelationship to the purpose for which such cost was incurred and the value ofthe real property to which it is applied. (b) When
costs ofdebt service deemed to be reasonable. Subject to the terms ofsection 14.80.305, the Arbitrator shall deem as reasonable and allowable to be passed through to Tenants the costs
ofdebt service where the Arbitrator finds the debt is a secured, arms-length transaction in the following instances: (1) In the case ofincreased costs ofdebt service bynew or existing
owners, the increase shall be limited to eighty percent (80%) ofthe increased costs ofdebt service arising from that proportion ofthe aggregate amount ofdebt not exceeding seventy percent
(70%) ofthe value of the property as established bya lender's appraisal or appraisal by some other person or entity in an arm's-length relationship to the Landlord at the time the appraisal
is performed. No notice of an increase based on this subsection shall be effective until such an appraisal has been obtained. Appraisals utilized for debt service pass-through calculations
shall have been performed within twelve (12) months ofthe Rent Increase request. (2) Reserved. (c) Standards applicable to Rent Increases which exceed theforegoing. When the amount ofany
Rent Increase or portion thereof exceeds any ofthe foregoing standards under subsection (a) or (b) ofthis section, the Arbitrator shall determine what is reasonable under the circumstances
taking into account any of the following factors on which the Arbitrator has received information: (1) In the case of increased costs of debt service due to a sale or refinancing ofthe
Rental Units or the building or property ofwhich the units are a part within twelve (12) months of the increase; a. The arms-length nature ofthe transaction, Page 9 of 11
b. The Landlord's rate ofreturn on the investment, c. The frequency ofpast resale or refinances, and d. The extent to which prior Rent Increases have made provisions for appreciation
of asset value. (2) The rental history ofthe unit or the complex ofwhich it is a part, including: a. The presence or absence ofpast increases, b.· The frequency ofpast Rent Increases,
c. The Landlord's response to Proposition 13 savings, and d. The occupancy rate ofthe complex in comparison to comparable units in the same general area. (3) The physical condition ofthe
Rental Unit or complex ofwhich it is a part, including the quantity and quality ofmaintenance and repairs performed during the last twelve (12) . (4) Any increases or reductions
ofHousing Services since the last Rent Increase before the effective date ofthis article. (5) Other .financial information which the Landlord is Willing to provide. (6) Existing market
value ofRents for units similarly situated. SECTION V Ifany ofthe provisions ofthis ordinance or the application thereofto any person or property is held invalid, such invalidity shall
not affect the other provisions of this ordinance which can be given effect without the invalid provision or application, and to this end the provisions ofthis ordinance are declared
to be severable. SECTION VI Anyjudicial review ofthis ordinance shall be by writ ofmandate, under Code of Civil Procedure 1085. Any action or proceeding seeking to attack, r,eview, set
aside, void or annul this ordinance shall be commenced within 90 days after adoption ofthis ordinance. Page 10 of 11
SECTION VII This ordinance was introduced at a regu,lar meeting ofthe Town Council ofthe Town ofLos Gatos on ,2004, and adopted by the following vote as an ordinance of the Town of Los
Gatos at a regular meeting ofthe Town Council ofthe Town ofLos Gatos on effect thirty (30) days after it is adopted. COUNCIL MEMBERS: AYES: NAYS: ABSENT: ABSTAIN: SIGNED: , 2004. This
ordinance takes MAYOR OF THE TOWN OF LOS GATOS LOS GATOS, CALIFORNIA ATTEST: CLERK OF THE TOWN OF LOS GATOS LOS GATOS, CALIFORNIA N:\ATY\Rent.ORD.wpd Page 11 of 11