1805. Individual and general adjustment of ceilings on allowable rents.

     (a)  General Adjustment. The Board may, after holding those public
hearings prescribed by Section 1803(g), set and adjust upward or downward the
rent ceiling for all controlled rental units in general and/or for particular
categories of controlled rental units deemed appropriate by the Board. Such an
adjustment, however, need not take effect immediately, and the Board may decide
that new rent ceilings shall not take effect until some reasonable date after
the above-stated time periods.
     (b)  Annual General Adjustment. Each year the Board shall generally adjust
rents as follows:
     (1)  Adjust rents upward by granting landlords a utility and tax increase
adjustment for actual increases in the City of Santa Monica for taxes and
utilities.
     (2)  Adjust rents upward by granting landlords a maintenance increase
adjustment for actual increases in the City of Santa Monica for maintenance
expenses.
     (3)  Adjust rents downward by requiring landlords to decrease rents for
any actual decreases in the City of Santa Monica for taxes. In adjusting rents
under this Subsection, the Board shall adopt a formula of general application.
     (c)  Petitions. Upon receipt of a petition by a landlord and/or a tenant,
the maximum rent of individual controlled rental units may be adjusted upward
or downward in accordance with the procedures set forth elsewhere in this
Section. The petition shall be on the form provided by the Board and shall
include a declaration by the landlord that the unit meets all requirements of
Section 1805(h). Notwithstanding any other provision of this Section, the Board
or hearing examiner may refuse to hold a hearing and/or grant a rent adjustment
if an individual hearing has been held and decision made with regard to maximum
rent within the previous six (6) months.
     (d)  Hearing Procedure. The Board shall enact rules and regulations
governing hearings and appeals of individual adjustment of ceilings on
allowable rents which shall include the following:
     (1)  Hearing Examiner. A hearing examiner appointed by the Board shall
conduct a hearing to act upon the petition for individual adjustment of
ceilings on allowable rents and shall have the power to administer oaths and
affirmations.
     (2)  Notice. The Board shall notify the landlord if the petition was filed
by the tenant, or the tenant, if the petition was filed by the landlord, of the
receipt of such a petition and a copy thereof.
     (3)  Time of Hearing. The hearing officer shall notify all parties, as to
the time, date and place of the hearing.
     (4)  Records. The hearing examiner may require either party to a rent
adjustment hearing to provide it with any books, records and papers deemed
pertinent in addition to that information contained in registration statements.
The hearing examiner shall conduct a current building inspection and/or request
the City to conduct a current building inspection if the hearing examiner finds
good cause to believe the Board's current information does not reflect the
current condition of the controlled rental unit. The tenant may request the
hearing examiner to order such an inspection prior to the date of the hearing.
All documents required under this Section shall be made available to the
parties involved prior to the hearing at the office of the Board. In cases
where information filed in a petition for rent ceiling adjustment or in
additional submissions filed at the request of the hearing examiner is
inadequate or false, no action shall be taken on said petition until the
deficiency is remedied.
     (5)  Open Hearings. All rent ceiling adjustment hearings shall be open to
the public.
     (6)  Right of Assistance. All parties to a hearing may have assistance in
presenting evidence and developing their position from attorneys, legal
workers, recognized tenant organization representatives or any other persons
designated by said parties.
     (7)  Hearing Record. The Board shall make available for inspection and
copying by any person an official record which shall constitute the exclusive
record for decision on the issues at the hearing. The record of the hearing, or
any part on one, shall be obtainable for the cost of copying. The record of the
hearing shall include: all exhibits, papers and documents required to be filed
or accepted into evidence during the proceedings; a list of participants
present; a summary of all testimony accepted in the proceedings; a statement of
all materials officially noticed; all recommended decisions; orders and/or
rulings; all final decisions, orders and/or rulings, and the reasons for each
final decision, order and/or ruling. Any party may have the proceeding tape
recorded or otherwise transcribed at his or own expense.
     (8)  Quantum of Proof and Notice of Decision. No individual adjustment
shall be granted unless supported by the preponderance of the evidence
submitted at the hearing. All parties to a hearing shall be sent a notice of
the decision and a copy of the findings of face and law upon which said
decision is based. At the same time, parties to the proceeding shall also be
notified of their right to any appeal allowed by the Board and/or to judicial
review of the decision pursuant to this Section and Section 1808 of this
Article.
     (9)  Consolidation. All landlord petitions pertaining to tenants in the
same building will be consolidated for hearing, and all petitions filed by
tenants occupying the same building shall be consolidated for hearing unless
there is a showing of good cause not to consolidate such petitions.
     (10) Appeal. Any person aggrieved by the decision of the hearing examiner
may appeal to the Board. On appeal, the Board shall affirm, reverse or modify
the decision of the hearing examiner. The Board may conduct a de novo hearing
or may act on the basis of the record before the hearing examiner without
holding a hearing.
     (11) Finality of Decision. The decision of the hearing examiner shall be
the final decision of the Board in the event of no appeal to the Board. The
decision of the hearing examiner shall not be stayed pending appeal; however,
in the event that the Board on appeal reverses or modifies the decision of the
hearing examiner, the landlord, in the case of an upward adjustment in rent, or
the tenant, in the case of a downward adjustment of rent, shall be ordered to
make retroactive payments to restore the parties to the position they would
have occupied had the hearing examiner's decision been the same as that of the
Board.
     (12) Time for Decision. The rules and regulations adopted by the Board
shall provide for final action on any individual rent adjustment petition
within one hundred and twenty (120) days, following the date of filing of the
individual rent adjustment petition.
     (13) Board Action in Lieu of Reference to Hearing Examiner. The Board, on
its own motion or on the request of any landlord or tenant, may hold a hearing
on an individual petition for rent adjustment without the petition first being
heard by a hearing examiner.
     (14) Decisions decreasing rents shall remain in effect until the Board
finds that the landlord has corrected the defect warranting the decrease. The
Board shall, by regulation, establish procedures for making prompt compliance
determinations. Upon a determination of compliance the landlord shall be
entitled to reinstatement of the prior rent level, retroactive to the date that
the landlord corrected the defect which warranted the decrease.
     (e)  In making individual and general adjustment of the rent ceiling the
Board shall consider the purposes of this Article and the requirements of law.
The Board may adopt as its fair return standard any lawful formula, including
but not limited to one based on investment or net operating income. The Board
shall consider all factors relevant to the formula it employs; such factors may
include: increases or decreases in operating and maintenance expenses, the
extent of utilities paid by the landlord, necessary and reasonable capital
improvement of the controlled rental unit as distinguished from normal repair,
replacement and maintenance, increases or decreases in living space, furniture,
furnishings, equipment, or services, substantial deterioration of the
controlled rental unit other than as a result of ordinary wear and tear,
failure on the part of the landlord to provide adequate housing services or to
comply substantially with applicable housing, health and safety codes, Federal
and State income tax benefits, the speculative nature of the investment,
whether or not the property was acquired or is held as a long term or short
term investment, the landlord's rate of return on investment, the landlord's
current and base date Net Operating Income, and any other factor deemed
relevant by the Board in providing the landlord a fair return.
     (f)  No rent increase shall be authorized by this Article because a
landlord has a negative cash flow as the result of refinancing the controlled
rental unit if at the time the landlord refinanced the landlord could
reasonably have foreseen a negative cash flow based on the rent schedule then
in existence within the one year period following refinancing. This paragraph
shall only apply to that portion of the negative cash flow reasonably
foreseeable within the one year period following refinancing of the controlled
rental unit and shall only apply to controlled rental units refinanced after
the date of adoption of this Article.
     (g)  No rent increase shall be authorized by this Article because a
landlord has a negative cash flow if at the time the landlord acquired the
controlled rental unit, the landlord could reasonably have foreseen a negative
cash flow based on the rent schedule then in existence within the one year
period following acquisition. This paragraph shall only apply to that portion
of the negative cash flow reasonably foreseeable within the one year period
following acquisition of a controlled rental unit and shall only apply to
controlled rental units acquired alter the date of adoption of this Article.
     (h)  No landlord shall increase rent under this Article if the landlord:
     (i)  Has failed to comply with any provision of this Article and/or
regulations issued thereunder by the Board, including the provisions requiring
the payment of registration fees and registration penalties.
     (2)  Has failed to comply substantially with any applicable State or local
housing, health or safety law. No landlord shall increase rent unless the
notice increasing rent contains a statement in substantially the following
form: "The undersigned (landlord) certifies that this unit and common areas are
not subject to any uncorrected citation or notices of violation of any State or
local housing health, or safety laws issued by any government official or
agency." If a landlord fails to comply with this Subsection, the tenant may
refuse to pay the improperly noticed increase, may seek administrative or civil
remedies under this Article, and may raise the landlord's noncompliance as an
affirmative defense in any resulting unlawful detainer action.
     (i)  The Board may, in its discretion, enact regulations to provide for
increases of rents on units voluntarily vacated after the effective date of
this Subsection in properties where the landlord has dedicated a percentage of
units to be rented to persons of very low or low income at affordable rents.
The Board may enact procedures and other regulations governing determination of
the conditions upon which such increases will be permitted, the extent of the
increases, the required mix of affordable units to be provided, ways to ensure
the continued provision of affordable housing under this Subsection, the terms
and conditions applicable when landlords cease to participate or when tenants
vacate or cease to qualify for units dedicated to affordable housing, and other
measures it deems necessary.
     If the Board enacts regulations under this Subsection, it shall provide
for the following:
     (1)  That a property shall not be eligible for this program unless a
specified percentage of all units on the property, no less than 15 percent,
will be occupied by tenants of very low or low income and the rent on each unit
so occupied does not exceed a specified percentage, no greater than 30 percent,
of such tenants' income.
     (2)  That tenants of very low or low income occupying units maintained at
affordable rent levels under this program are protected if the landlord elects
not to participate further in the program. Such protection shall include, at a
minimum, a provision prohibiting the rent of such tenants from being increased
by a percentage greater than the general annual adjustment allowed by the Board
even if the resulting rent is below the maximum allowable rent and the landlord
has lowered the rent for other units on the property.
(Amended at General Municipal Election, November 6, 1984, Res. No. 6943CCS)