So, you have chosen to purchase a rental property in magnificent San Francisco and now it’s time to figure out the City by the Bay’s many rent control rules and regulations. Understanding the city’s complex and ever-changing laws can be quite confusing, but that’s why Property Management Systems is here to break it down for you.
If you live in a building constructed prior to June 1979, your property most likely falls under the San Francisco Rent Ordinance. This generally covers most properties in San Francisco and severely restricts how much a landlord can raise a tenant’s rent.
A landlord is allowed to increase the tenant’s base rent once every 12 months by the amount of the annual allowable increase. This can only be implemented, however, after the tenant has lived on the property for a full year which is known as the tenant’s “anniversary date.” The annual allowable increase amount changes each year on March 1st and becomes effective the same day.
The increase amount changes every year by the Rent Board, but is based on 60 percent of the increase in the Bay Area Consumer Price Index. The Consumer Price Index measures the change in the price of goods over time.
Each year an owner can either choose to take the annual allowed increase and add it towards the tenant’s base rent or they may choose to “bank” the amount for future use. Regardless of which option the owner chooses, they must send their tenant a rent increase notice thirty days before the increase goes into effect. The rent increase notice should include both the dollar and the percentage amount of the increase along with the total rent due and the date the increase will go into effect.
If the owner decides to not impose the annual allowable increase on the tenant’s anniversary date, the landlord can then “bank” the increase and institute it at a later date. According to the Rent Board, the banking rules provide that a skipped annual increase is “banked” when it has been at least 24 full months since the last annual increase was imposed.
For the most part, however, people should be taking their increases each year. When an owner decides to bank their annual allowable increases a shift may occur and the tenant’s anniversary date can change. This often leads to confusion and you may lose an increase somewhere.
So, what happens when you give an illegal increase?
When you give an illegal increase this mean you have charged more than what was allotted in the given year and a tenant is paying more than what they should. A rollback notice is then put in place and the rent will get rolled back to the year where the error occurred.
For instance, say you found an illegal increase that happened ten years ago. The rent will get rolled back to the ten year mark, of what the correct rent was prior to the error, and the tenant is paid back for the last 36 months of the difference in increase. At that point, you have a new rental rate that you will then bank moving forward. This will allow you to take all the increases in between and bring your rent current.
San Francisco’s rules and regulations for rent control are challenging, so hire a reputable San Francisco property management company that understands these rules completely to facilitate the process for you and make your investment a successful one.