Tenants to Pay Back Rent Decreases After Court Ruling

By Oliver Lukacs
Staff Writer

Jan. 29 -- If an apartment is undergoing renovation and only a few tenants complain, should the Rent Control Board be allowed to grant rent decreases to all the tenants in the building?

The answer is no, according to a recent landmark ruling by the California Court of Appeals, which pondered the question last month and overturned the Santa Monica rent board’s decision to decrease the rent for 43 tenants, only five of whom actually complained.

As a result, those tenants at 1128 Ocean Park Boulevard who didn’t file their own complaints and who accepted the roughly $300 to $400-a-month rent decrease for two years now have to pay it back, and rent control boards throughout California are prohibited from enacting similar collective rent decreases.

The precedent-setting decision is a “mixed bag,” said Rosario Perry, who represented the owner, Ocean Park Associates, in the case. While the decision somewhat circumscribes a rent board’s authority to decrease rents, it nonetheless vindicates their power to grant decreases when tenants’ lives are disrupted by renovation work.

“It’s a mixed bag decision,” Perry said. “The board now can’t make up situations that don’t exist. The board created this conflict. So it is a kind of protection of owners from that, but they can still hold hearings.”

Rent boards, Perry said, “want to punish the owners so they can’t renovate the buildings and charge market rate for the apartments” that are voluntarily vacated or emptied when a tenant is evicted for not paying rent. “They want to keep it depressed and sort of slummy so they can keep the rents low,” he said.

As a result of the ruling, the owners will recover roughly $100,000 in back rent, according to Perry, who calculated that each tenant who took the decrease is now approximately $2,500 in debt.

Rent Board officials called the appeal court decision “wrong.”

“They have an exceptionally rigid interpretation of Santa Monica’s law,” said Doris Ganga, the rent board’s general counsel.

Santa Monica’s rent control laws, Ganga said, were designed to protect tenants against owners who “are taking away housing services from tenants and still charging the same price.

“This owner went on this protracted and badly managed renovation and made these tenants’ lives living hell for years on end,” she said.

Perry, a veteran landlord attorney, questioned the kind of “hell” the tenants had to endure.

“There’s 43 people in the building. If it was a living hell why did only five out of 43 complain?” he asked. “The living hell was that they didn’t get to use their sauna, they couldn’t get into their hot tub and couldn’t use their pool table for a couple of months.”

According to the court decision, the rent board granted decreases for such things as “a warped front door, a silverfish infestation, accumulation of debris in common areas, deteriorated carpet, deterioration of paint, defective elevator, defective light panels, incomplete construction in the laundry room, loss of security, and loss of recreational facilities…a broken window, a defective electrical outlet, and a damaged bathtub stopper.”

The tenants who complained “felt sufficiently inconvenienced by the construction-caused noise, disruption, and loss of common area services,” the court found.

On the up side, Ganga said the decision will allow the board to continue to grant decreases for renovation work.

“The important thing for our concern is that the court upheld our ability to do construction rent decreases,” said Ganga, who noted that from January 2000 to January 2004, the rent board had implemented four similar collective rent decreases, which went unchallenged.

In the suit, Perry attacked the board’s right to grant rent decreases to tenants whose cause the board championed.

“There is no separation of powers,” said Perry. “The rent board was playing the role of prosecutor and the neutral fact finder, that’s like the DA filing a case against you and then deciding if you’re guilty or not.

“The rent board is supposed to be an impartial fact finder, how can they represent 38 tenants and be an impartial fact finder. It’s a violation of the owner’s right to a fair hearing.”

But while the court’s decision bars the rent board from initiating a complaint on behalf of a tenant, it still allows it to hold a hearing on an issue the board has clearly taken a position on.

“We agree that the Board does not have the power under the governing ordinance to file a petition or petitions to reduce rents on a unit-by-unit basis on behalf of individual tenants who have not come forward on their own initiative,” the court ruled.

“At the same time, we conclude that its decisions pertaining to the tenant petitioners were authorized and supported by the evidence.”