Court Upholds Rent Board Regulation

By Gathering Marbet and Jorge Casuso

July 1 -- An Appeals Court this week upheld a Rent Control Board regulation that allows landlords to charge market rates if they can prove the tenants are not using their apartments as a primary residence.

The regulation was challenged by Robert Bisno, a prominent Westside developer who saw the rent on his apartment at The Shores leap from $1,111 a month to $4,045 a month after the board ruled the rent-controlled unit in one of the twin oceanfront towers was not his primary residence.

“It is one thing to require landlords to subsidize the rents of those who reside principally in their rent-controlled units so that they will not be forced out of the Santa Monica housing market,” the three-member court ruled Tuesday.

“It is quite another to require landlords to subsidize the rent of those who use their rent-controlled units for other purposes,” Judge P.J. Spencer wrote in the unanimous decision. “Doing so adds to the landlord’s investment risk.”

Rent board officials said they were confident the court would rule in their favor.

“Obviously we thought that we would prevail, as we did in both trial and appellate court,” said Doris Ganga, the rent board’s general counsel. “We thought we would, or we would have a different regulation.”

Bisno’s attorney, Allen Abshez, said his client had not decided whether he would appeal the decision by the three-judge panel.

“We feel that the court of appeals got it wrong,” Abshez said. “The decision doesn’t grapple with the fact the (rent control) law protects all renters.”

In its ruling, the court found that the board could withdraw the Rent Control Charter’s tenant protections under certain circumstances.

“Ensuring that only those the RCL (Rent Control Law) intends to benefit receive its benefits by temporarily withdrawing some of its protections from tenants who use their rental units as vacation residences or for other ancillary purposes also is consistent with the RCL,” the court wrote.

“Once a decontrolled rental rate has been established, Regulation 3304 restores all of the protections of the RCL to the tenant,” the court wrote.

Abshez countered that the law, approved by Santa Monica voters in 1979, was meant to protect all tenants equally.

“They (the voters) didn’t say it was only available to the poor and minorities,” Abshez said. “The voters did not say it would only protect the poor or people who lived there 365 days a year.”

In addition, Abshez said, the regulation “encourages landlords to snoop in their tenants’ personal affairs” to gather evidence.

In Bisno’s case, the board “received evidence concerning plaintiff’s marital separation and living arrangements and the results of an investigator’s inspections of the apartment’s medicine cabinet, refrigerator, kitchen cabinets and bedroom closets,” according to the court’s ruling.

Abshez said the landlord knew Bisno’s primary residence was in the San Francisco Bay area when the lease was signed in 1996. The property was sold for some $100 million three years later to the current owner, Douglas, Emmett & Co., which filed the increase petition shortly after the board adopted the regulation in February 2003.

Despite Tuesday’s setback, Bisno’s two-year legal battle has already prompted the board to change the regulation by giving itself -- and not the landlord -- the authority to determine the new rental rate based on the rent of comparable units.

The ruling resulted in Bisno’s rent decreasing from the $4,295 set by Douglas Emmett, a driving force behind the regulation, to the current $4,045 set by the board.

Landlord advocates praised Tuesday’s ruling, saying it would help bolster legal efforts to evict tenants who do not use their rent-controlled units as their primary residence.

“The charter is very clear that it wants to provide housing for people who reside in their rent-controlled units,” said attorney Rosario Perry, who represents a landlord seeking to evict a tenant under the regulation. “If you’re not a resident tenant, you don’t have the right to be protected by rent control.

“If they don’t live in their units, there’s no justification, even if they pay market rates,” Perry said. “We’re going to raise these issues, so this case is going to help us.”

Since the regulation went into effect two years ago, 161 increase petitions have been filed. Of those that have been resolved, 68 were granted (21 of them without a tenant challenge), 27 were denied, 39 were dismissed and 21 were withdrawn, according to rent board officials.