In 2019, the City of Hayward updated its 39-year-old rent stabilization ordinance. Effective July 25, 2019, the new Residential Rent Stabilization and Tenant Protection Ordinance (RRSO) (1) expands the properties subject to the ordinance, (2) prohibits harassment and retaliation, (3) limits the reasons for which a tenancy may be terminated, (4) prohibits discrimination based on source of income, including Section 8 vouchers, and (5) establishes an annual rent increase limit of 5% and a mandatory mediation and binding arbitration program for increases above that threshold in certain covered units. [1]
Applicability
The RRSO generally applies to all residential units offered for rent in the city, including houses, apartments, and rooming and boarding house units. It does not apply to mobile homes or mobile home spaces. As discussed in more detail below, some units are exempt from various parts of the ordinance. The following table provides a few examples of the application of the ordinance:
Notification to Tenants of Ordinance Applicability
Landlords are required to provide existing and new tenants both of the following: (1) a written notice indicating which provisions of the RRSO apply to their units and (2) either a copy of the ordinance or a copy of the City of Hayward RRSO Summary. That information must be provided to existing tenants by August 25, 2019, and to new tenants upon entering a rental agreement. CAA has created a form for landlords to send to existing tenants (CAA Form 69.1) and an addendum for landlords to use with the rental agreement for new tenants (CAA Form 69.0).
The written notice must be signed by both the landlord and the tenant, and the landlord should provide a copy of the signed notice to the tenant. If the tenant refuses to sign, the landlord should prepare a declaration, under penalty of perjury, stating that the notice was delivered to the tenant, the date the landlord requested the tenant to sign the document acknowledging receipt, and the date the declaration was executed.
Program Administration Fee
The cost of administering the RRSO will be reimbursed by imposition of an annual fee on all residential units offered for rent in the city. Landlords must pay that fee annually by August 31. The amount of the fee will be published in the City’s Master Fee schedule. The following fees are due by August 31, 2019:
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- Annual fee per “non-covered” rental unit = $19.00
- Annual fee per “covered” rental unit = $40.00
The difference between “covered” and “non-covered” rental units is explained below. Failure to pay the applicable fees may constitute a defense against evictions and may limit a landlord’s ability to charge a rent increase.
Rent Increase Limitations – Covered Units
Except as provided below, the RRSO authorizes a rent increase for a “covered unit” once every 12 months in an amount not to exceed 5%. A “covered unit” does not include any of the following:
- Units located in a structure for which a certificate of occupancy was issued after July 1, 1979.
- Single-family homes and condominiums.
- A legal accessory dwelling unit in which the primary residence is owner-occupied.
- Accommodations in any hospital, extended care facility, convalescent home, nonprofit home for the aged, or dormitory owned and operated by either an educational institution or a private organization which offers spaces in rooms for rent in conjunction with the providing of services such as meals, cleaning services, and social programs.
- Accommodations in motels, hotels, inns, tourist homes, rooming houses, and boarding houses, provided that such accommodations are not occupied by the same tenant for 30 or more continuous days.
- Units in a nonprofit cooperative that are owned, occupied, and controlled by a majority of the residents.
- Units whose rents are controlled, regulated, or subsidized by any governmental unit, agency, or authority for the term specified in written agreement with the governmental unit, agency, or authority (until that agreement is terminated). Thus, a covered unit does not include a unit using a Section 8 voucher – a landlord relying on that exemption should be prepared to provide documentation to support it.
For purposes of the RRSO, a “rent increase” means any additional rent requested by the tenant, including any increase in housing service costs or a reduction in housing services. Housing services include insurance, repairs, replacement, maintenance, painting, lighting, heat, water, elevator services, laundry facilities, janitorial service, garbage removal, and parking, among other things.
If a landlord imposed a rent increase on a covered unit during a 12-month period between July 25, 2018, and July 25, 2019, the landlord may increase the rent no earlier than the anniversary date of the last rent increase.
Consistent with the Costa-Hawkins Rental Housing Act, if a tenant of a covered unit voluntarily vacates a unit or is lawfully evicted as described below, the landlord can set the initial rent for the next tenant without limitation. All subsequent rent increases for that tenant are subject to the rent increase limitations of the ordinance. Unlike the City’s former rent stabilization ordinance, the RRSO does not allow a landlord to permanently remove a unit from the rent increase limitation when a unit is voluntarily vacated by a tenant and after making a nominal improvement investment in the unit.
The ordinance also authorizes a landlord of a covered unit to impose a banked rent increase and other pass through charges as described below.
Banked Rent Increases – Covered Units
With respect to covered units, the ordinance authorizes a landlord to bank all or part of the annual permissible rent increase up to 5%. The landlord can charge the banked rent increase in future years in addition to the annual increase, subject to a limit of 10% of the tenant’s current rent. Banked rent increases expire after 10 years. A landlord using a banked rent increase must provide the tenant a copy of the rental history.
Capital Improvement Pass-Through – Covered Units
In addition to a rent increase, the ordinance allows a landlord to charge a tenant in a covered unit to pay for part of the landlord’s costs for capital improvements if approved by the City. These are improvements that (1) materially add to the value of the property, (2) appreciably prolong its useful life or adapt it to new uses, (3) benefit the tenant, and (4) may be amortized over the useful remaining life of the improvement. Capital improvements include, but are not limited to, the following:
- Improvements to the seismic safety of the property.
- Improvements to increase the energy efficiency of the property, including any improvement to allow a significantly more accurate allocation of utility costs.
In determining the cost of a capital improvement, no consideration can be given to any additional cost incurred or increased property damage or improvements for ordinary repairs, replacements, and maintenance, or deterioration resulting from an unreasonable delay in the undertaking of completion or after a notice of violation by a government agency ordering repairs has remained unabated for 90 days or more. The ordinance contains detailed requirements for calculating capital improvements.
The pass-through charge cannot be more than 10% of the tenant’s current rent (which includes any applied annual and banked increase) and the landlord cannot require a tenant to pay for any amount that is attributable to a time when the tenant was not entitled to occupy the unit. The pass-through charge must be removed after the landlord recovers half of the costs of the improvement. A capital improvement pass-through is not considered rent or a rent increase, so a landlord can give both a 5% rent increase and a 5% capital improvement cost pass-through.
In order to charge this pass-through, the improvements must be completed and paid for by the landlord and the landlord must ask for approval from the City within 2 years of completing the work by filing a petition to schedule an arbitration. A landlord may also file a petition for a provisional approval of a capital improvement pass-through. The petition must include a written proposal, cost estimates, and other supporting documentation. The arbitrator cannot consider a final decision on the petition until the improvement has been completed and the necessary documentation is submitted.
RUBS Pass-Through – Covered Units
Utilities (including water, sewer, gas, electric, and garbage) that are charged by the landlord to the tenant separate from rent as stated in the lease are not considered rent. The landlord must use a system to ensure that the utilities are fairly shared among tenants.
If requested by the tenant, the landlord must give the tenant information that explains any increase in utility costs within 2 months of receipt of a utility rate cost increase or any increase in utility services cost above 1% of the tenant’s rent. That explanatory information must include the following:
- Proof of the utility service costs for the entire building showing the amount paid by the landlord for each billing period for a 12-month period prior to the increase.
- Proof of the utility service cost by month or billing period apportioned to each unit for a 12-month period prior to the increase.
- Billing notices or other equivalent documents from the agency imposing the increase reflecting the amount of the increase in the utility service cost for the entire building.
- The unmetered allocation arrangement calculations used by the landlord or a third-party agency on behalf of the landlord to apportion the increased costs among tenants.
Program Administration Fee Pass-Through – Covered Units
A landlord paying the program administration fee described above for covered units may pass through up to 50% of the fee to the tenants of those units pursuant to the terms of a written lease. A landlord who elects to pass on a percentage of the fee must send a specific notice to tenants that is set forth below.
Public Posting Required for Covered Units
By August 25, 2019, within each building containing covered units, landlords must post and maintain in a conspicuous place a written notice indicating that the units are covered units. Placing the notice in a conspicuous place within each building with one or more covered units will satisfy this posting requirement. The required notice can be found here.
Rent Increase Notice for Covered Units
When serving a rent increase notice to a tenant of a covered unit (see CAA’s Industry Insight “Rent Increases: 30- and 90-Day Notice Requirements”), the landlord must also serve the tenant a notice that sets forth the following information:
- The amount of the current rent.
- The rent increase in both dollars and as a percentage of existing rent.
- A statement explaining how the rent increase complies with the ordinance, with documentation included for certain rent increases.
- Contact information for the City’s Rent Review Office.
- A copy of the City’s petition for rent review form.
- Contact information and availability of the landlord or landlord’s representative to discuss the rent increase.
CAA has created a form for this purpose for increases of 10% or less (see CAA Form 69.4-HAY) as well as rent increase forms for non-covered units (see CAA Form 69.6-HAY and CAA Form 69.8-HAY).
City Copy of Rent Increase Notice – All Units
A landlord of any rental unit must provide a copy of any rent increase notice to the city within 30 days after serving the notice to the tenant. The city manager may issue a citation for failing to provide that copy. The copy can be provided to the city by mail, in person, or via email:
Rent Review Office of the Housing Division
777 B Street, Second Floor
Hayward, CA 94541
RentalNotifications@hayward-ca.gov
Rent Dispute Resolution Process – Mandatory Mediation with Binding Arbitration
The ordinance provides a process to resolve disagreements about allowable rent increases for covered units. Either a tenant or a landlord may start the process by filing a petition with the City of Hayward’s Rent Review Office (RRO).
A tenant may submit a petition for the following reasons within a specified period of time:
- The landlord failed to provide notice of the annual rent increase or banked increase.
- The landlord failed to provide justification of the increase in utility service costs as described above.
- To request review of a rent increase in excess of 5%.
- To contest banking calculations.
- To contest a banked increase coupled with a rent increase in excess of 10%.
- To request review of an increase in costs of utility services in excess of 1% of the tenant’s rent.
- To request a reduction in rent based on decreased housing services.
- To contest a capital improvement cost as an unauthorized or excessive pass through.
- To request review of a rent increase when the unit has uncured health, safety, fire, or building violations.
If the tenant is requesting a review of an increase in excess of 5%, banking calculations, or a banked increase coupled with a rent increase in excess of 10%, the tenant must pay a rent increase equaling the 5% threshold. For all other petitions, the rent increase or utility cost is not effective and may not be collected until and to the extent of a medication settlement or arbitration award or until the petition is abandoned.
Within 10 days of filing the petition, the tenant must make a good faith effort to contact the landlord, or his or her designated representative, to work out the dispute. Unless the petition is withdrawn or is not completed correctly, the RRO is required to accept the petition at the end of that 10-day period. The RRO is also required to consolidate similar petitions from tenants at the same complex.
A landlord may submit a petition to increase rent above the 5% threshold or 10% (including a banked increase) to an amount necessary to obtain a “fair return,” as defined in the ordinance. This petition can be filed at any time. A landlord may also submit a petition to set the proper amount of a capital improvement pass through. This petition must be submitted within 2 years of completion of the capital improvement work.
Petitions may be filed by contacting the following:
Rent Review Office of the Housing Division
777 B Street, Second Floor
Hayward, CA 94541
(510) 583-4454
housing@hayward-ca.gov
Mediation
After accepting a petition, the RRO will assign a mediator and set a date for a mediation hearing no later than 30 days after accepting the petition. The parties may agree to waive mediation and proceed directly to arbitration. In the case of a petition filed by a landlord, the landlord may unilaterally waive mediation and proceed to arbitration. In either case, written notice of the intent to waive must be filed at least 7 days before the mediation hearing. The RRO will assign an arbitrator upon receipt of that waiver.
At least 5 days before the mediation hearing, the landlord must submit a written response to the tenant’s petition, including documentary evidence, to the RRO. Both the landlord and the tenant must appear at the mediation and offer oral and documentary evidence. They may both designate representatives to appear on their behalf. During the mediation, the landlord and tenant can develop options, consider alternatives, and develop a consensual agreement. If the landlord and tenant agree to a level of rent increase, the mediator will prepare an agreement for their signature. This agreement will constitute a legally enforceable contract. If the parties fail to agree to a level of rent increase, or the mediator determines the parties have reached an impasse, the mediator can refer the case to the RRO for arbitration.
During the mediation, the landlord and tenant can develop options, consider alternatives, and develop a consensual agreement. If the landlord and tenant agree to a level of rent increase, the mediator will prepare an agreement for their signature. This agreement will constitute a legally enforceable contract. If the parties fail to agree to a level of rent increase, or the mediator determines the parties have reached an impasse, the mediator can refer the case to the RRO for arbitration.
Arbitration
The RRO is required to appoint an arbitrator to hear the dispute within 21 days. The arbitration hearing must be held no more than 30 days after the arbitrator is assigned. Both the landlord and tenant may designate representatives to appear on their behalf in writing. The arbitrator may require either party to provide pertinent records and may conduct, or request the City to conduct, an inspection if necessary.
The arbitrator will hold a hearing at which both oral and documentary evidence can be presented. The parties have the right to examine documents and cross-examine witnesses. In the case of both landlord and tenant petitions, the burden of proof is on the landlord. The arbitrator must render a decision in writing within 20 of the close of the hearing. He or she must determine the amount of rent increase, if any, that is reasonable based on the ordinance, the evidence, and previous decisions. The arbitrator may also order a decrease in rent for any period of time that a tenant has endured a reduction in services without a corresponding reduction in rent. The ordinance requires the arbitrator to consider various factors in making these decisions. The decision of the arbitrator is final and binding 30 days after it is mailed to the landlord and tenant.
Rental Fee Limitations – Covered Units
The ordinance prohibits the following charges for covered units:
- Excess replacement fees (i.e., for keys, security cards) that exceed actual replacement cost plus $10.
- Excess bounced check service fees that exceed the amount allowed under Civil Code section 1719(a)(1) ($25 for the first check and $35 for each subsequent check).
- Excess late payment fees exceeding 5% of the monthly rent for each payment of rent that is 3 or more days late. (See also CAA’s Industry Insight “Late Fees: Residential Rental Payment.”)
- Excess application screening fees exceeding the amount allowed under Civil Code section 1950.6(b). (For those amounts, see CAA’s Industry Insight “Screening: Fees.”)
Harassment and Retaliation Protections
The ordinance prohibits a landlord from retaliating against a tenant because of the tenant’s exercise of a right under the ordinance. The ordinance also prohibits a landlord from doing any of the following in bad faith:
- Interrupting, terminating, or failing to provide housing services required by law or contract or threatening to do so.
- Failing to perform repairs and maintenance required by law or contract or threatening do so.
- Failing to exercise due diligence in completing repairs or failing to appropriately follow industry repair, containment, or remediation protocols designed to minimize exposure to noise, dust, lead paint, or other environmental hazards.
- Abusing the landlord’s right of entry.
- Influencing or attempting to influence a tenant to vacate a unit through fraud, intimidation, or coercion.
- Refusing to accept or acknowledge receipt of a lawful rent payment, except as permitted by state law after a notice to quit has been served.
- Interfering with a tenant’s right to privacy, including residence or citizenship status or social security number.
- Offering payments to a tenant to vacate more than once in 6 months after the tenant has notified the landlord in writing that the tenant does not desire to receive further offers of payments to vacate.
- Interfering with a tenant’s right to quiet enjoyment of the premises.
- Verbal or physical abuse or intimidation.
Violations of these harassment and retaliation prohibitions can be enforced by tenants and the City Attorney through civil actions for damages or injunctive relief, or both, as well as attorney’s fees and costs. In certain cases, the tenant must give the landlord an opportunity to remedy the problem before bringing suit.
These harassment and retaliation provisions do not apply to the following units:
- Accommodations in any hospital, extended care facility, convalescent home, nonprofit home for the aged, or dormitory owned and operated by either an educational institution or a private organization which offers spaces in rooms for rent in conjunction with the providing of services such as meals, cleaning services, and social programs.
- Accommodations in motels, hotels, inns, tourist homes, rooming houses, and boarding houses, provided that such accommodations are not occupied by the same tenant for 30 or more continuous days.
- Units in a nonprofit cooperative that are owned, occupied, and controlled by a majority of the residents.
- Owner-occupied units if the owner or family member lives in the same building as the tenant and shares a bathroom or kitchen with the tenant or prospective tenant.
Just Cause for Eviction
The ordinance requires a landlord to have a permissible reason to terminate a tenancy. These provisions mirror the provisions the City adopted through an emergency ordinance in March 2019. They apply to most rental units, but specifically do not apply to any of the following:
- Accommodations in any hospital, extended care facility, convalescent home, nonprofit home for the aged, or dormitory owned and operated by either an educational institution or a private organization which offers spaces in rooms for rent in conjunction with the providing of services such as meals, cleaning services, and social programs.
- Accommodations in motels, hotels, inns, tourist homes, rooming houses, and boarding houses, provided that such accommodations are not occupied by the same tenant for 30 or more continuous days.
- Units in a nonprofit cooperative that are owned, occupied, and controlled by a majority of the residents.
- Units in a nonprofit facility that has the primary purpose of providing short term treatment, assistance, or therapy for alcohol, drug, or other substance abuse, and the housing is provided incident to the recovery program.
- Units in a nonprofit facility that provides a structured living environment that has the primary purpose of helping homeless persons obtain the skills necessary for independent living in permanent housing and where occupancy is limited to a specific period of time of not more than 2 years.
- Owner-occupied units if the owner or family member lives in the same building as the tenant and shares a bathroom or kitchen with the tenant or prospective tenant.
In brief, the permissible reasons for eviction are listed below. Please consult with your attorney to determine whether your circumstances qualify. The descriptions below are simplifications of the actual requirements of the ordinance.
- Nonpayment of rent. The tenant has failed to pay rent to which landlord is legally entitled.
- Breach of rental agreement. Tenant has continued to substantially violate material terms of the rental agreement after written notice to cease.
- Damage to premises. The tenant has caused substantial damage to the premises beyond normal wear and tear and has refused, after written notice, to pay the reasonable costs of repair and cease damage.
- Refusal to renew. The tenant has refused to agree to a new rental agreement upon expiration of a prior substantially similar agreement.
- Nuisance. Following written notice to cease, the tenant has continued disorderly conduct that destroys peace and quiet of other tenants or occupants.
- Failure to allow landlord access. The tenant, after written notice to cease, has refused landlord access to the unit as required by state or local law.
- Substantial health/safety repairs. After obtaining all necessary permits, landlord seeks to undertake substantial repairs necessary to bring the property into compliance with health and safety codes, or where necessary under a notice of code violations, if repairs cannot be completed while tenant resides on the premises. Tenant must be given right of first refusal to re-occupy the unit upon completion of the required work.
- Demolition of unit. After obtaining all necessary permits, landlord seeks to remove unit from the market by demolition.
- Landlord/family occupancy. Landlords seeks in good faith to recover possession for his or her occupancy or occupancy of a family member (spouse, domestic partner, or landlord/spouse’s child, parents, brother, sister, grandparents, and grandchildren). The landlord must be the owner of record holding at least 51% interest in the property and cannot include a lessor, sublessor, or agent of the owner of record. Recovery is not available under this provision if a comparable unit is already vacant and available in the property.
- Landlord occupancy under existing agreement. Landlord seeks in good faith to recover possession of the unit for his or her occupancy and has a right to recover for that purpose under an existing rental agreement with the current tenants.
- Conviction of illegal use. Tenant is convicted of using the unit for an illegal purpose.
- Controlled substances. Tenant used unit, or any other area owned or controlled by landlord, for manufacture, sale, distribution, possession, or use of a controlled substance.
- Violation of tenancy policies. Continued violation, after written notice to cease, of legal and reasonable written rules and regulations applicable to the property if those terms were accepted in writing by the tenant.
- Termination of employment. The landlord is terminating an employee’s employment and that employment was an express condition of the tenancy.
- Criminal threat. The tenant threatened to commit a crime that would result in death or great bodily harm to a tenant, guest, manager, or other person on the premises, for which a report has been filed with the Hayward Police Department.
The reason for termination a tenancy must be stated on the notice of termination. Failure to state the reason for eviction can be used as a defense in an unlawful detainer action. The landlord must also set forth specific facts to permit a determination of the date, place, and circumstances concerning that reason.
City Copy of Termination Notice for All Units
Within 30 days of serving a notice of termination of tenancy, a landlord of any rental unit must provide a copy of the notice of termination to the city by mail, in person, or via email:
Rent Review Office of the Housing Division
777 B Street, Second Floor
Hayward, CA 94541
RentalNotifications@hayward-ca.gov
The city manager may issue a citation for failing to provide that copy.
Discrimination Based on Source of Income
The ordinance also prohibits discrimination based on a tenant’s source of income, including receipt of housing subsidies, such as Section 8 Housing Choice Vouchers. For more information on these provisions, see CAA’s Industry Insight, “City of Hayward – Source of Income Discrimination Law.”
Consequences of Non-Compliance
In addition to any other remedies specified above, or any other remedies applicable under other laws, a landlord who receives rent to which the landlord is not entitled under the ordinance is liable to the tenant for actual damages, attorneys’ fees, and costs incurred by the tenant. Upon a showing in a civil action that the landlord acted willfully or with oppression, fraud, and malice, the landlord is also liable for a civil penalty of the greater of $500 or 3 times the amount of money the landlord received in violation of the ordinance.
A landlord who fails to provide the required notices, documentation, or information is guilty of an infraction. The first conviction in a 12-month period is punishable by a fine of no more than $100; the second conviction, $200; the third conviction, $500. In the case of additional A landlord who fails to provide the required notices, documentation, or information is guilty of an infraction. The first conviction in a 12-month period is punishable by a fine of no more than $100; the second conviction, $200; the third conviction, $500. In the case of additional convictions in a 12-month period, the landlord is guilty of a misdemeanor punishable by a fine of no more than $1,000, 6-months imprisonment, or both.
References
- Hayward Municipal Code §§ 12-1.01 – 12-1.21
[1] The City of Hayward formerly required landlords to pay interest on security deposits. That is no longer required under Hayward Ordinance No. 19-12.