Understanding San Francisco’s complex rental ordinance can be confusing enough, but add the various landlord petitions and you have a mixture that results in one big headache. In order for a landlord of rent controlled property in San Francisco to be able to increase a tenant’s rent above the annual allowed amount, the landlord needs to ask permission/certification of certain costs through the petition process before the San Francisco Residential Rent Stabilization and Arbitration Board. Often times this involves a lot of paperwork and a lot of time, so it’s best to use the services of a professional company that provides this type of service to help ease the process and for their expertise.
One of the ways Owners in San Francisco are afforded the opportunity to petition the Rent Board is through the comparison between two consecutive years of Operating and Maintenance expenses – hence the name of the petition – Operating and Maintenance Petition (O&M). This type of increase is added to a tenant base rent for the life of the tenancy up to a maximum of 7 percent and may be passed through every five years when applicable.
According to the San Francisco Rent Board, in determining whether an O&M increase is justified, all operating expenses must be considered, including: property taxes, debt service or mortgage, repairs, maintenance, insurance, pest control, garbage, water, etc. However, electric and gas costs are not included since an increase in utility costs may be passed through to the tenant by a separate petition.
The San Francisco Rent Board also notes that in order to qualify for an O&M increase, the landlord must demonstrate that total O&M expenses increased from one 12 month period to the next by more than the amount of the annual allowable increase. To calculate if the O&M expenses are more than the annual allowed increase the Rent Board will compare the difference in costs between year one and year two prior to filing the petition. The difference works out to what possibly could be a maximum of 7 percent added to a tenant’s base rent.
Only after your O&M petition paperwork is filed with the Rent Board, can you serve your tenant with a notice of a possible rent increase on their individual anniversary date. If you notify before the petition is filed, then the notice of increase becomes void. After completing the paperwork and schedule worksheet, as well as compiling all needed documentation, the landlord will be given a hearing in front of an Administrative Law Judge. During the hearing the property owner will answer questions regarding the paperwork provided and after will receive a decision either granting or not granting them a portion or all of what was requested.
When using a professional company specializing in passthroughs – they take care of the entire O&M process for you. At Property Management Systems in San Francisco not only will they complete all necessary paperwork for you, but they will compile/submit your documentation and go with you to the hearing. Property Management Systems was founded on this service 14 years ago and continues to provide it today.