Many rental properties in San Francisco are covered by the Residential Rent Stabilization and Arbitration Ordinance. This ordinance regulates the rent increase rules in San Francisco and severely limits the amount that a landlord can raise the rent each year. For the current year, 3/1/2012 – 2/28/2013 the allowable increase is 1.9%. The allowable increase is set each year by the SF Rent Board and the new rate is effective on March 1st. Landlords should check each year with the rent board – https://www.sfrb.org to find out what the new allowable increase is.
SF landlords with properties covered by this ordinance can raise the rent once every 12 months ONLY. Giving a rent raise in less than 12 months – even if off by only one day – can cause the increase (and all subsequent increases) to be null and void. Stephanie Gordon at Gordon Property Management had a client who discovered that a tenant in the building had been given a rent increase 5 years earlier that was one week shy of 12 months. That landlord had to write a check to the tenant for the full amount of all rent increases paid by the tenant dating back 5 years to the invalid increase. So be careful. If a tenant moves in on August 5th, the first rent increase should be effective on the following September 1st, not August 1st.
The Rent Ordinance does allow a landlord to skip a year (or more) of rent increases and give them out later – called a banked increase. For example, if you don’t give a rent raise for two years you can give the tenant the amount that would have been allowed for those two years. But be careful about the 12 month rule. If the tenant was due for an increase September first – wait until the next September first to use the banked increase and raise the rent. You cannot compound the amounts – if the allowable increase was 1.9% in year one and .5% in year two then you can raise the rent 2.4%. Tenants need to be given a 30 DAY NOTICE OF CHANGE IN TERMS OF TENANCY in order to raise the rent. If the rent raise is greater than 10% then they need to be given a 60 day notice.
All tenants in San Francisco must be paid interest on their security deposit every 12 months. The amount is also set by the Rent Board, currently .4%. Landlords may charge the tenant $14.50 each year to cover the rent board fee charged to them on their property tax bill. Gordon Property Management recommends that landlords pay tenants the interest on the security deposit each year when they raise the rent and deduct the rent board fee from the interest payment. At Gordon Property Management, we issue the tenant a rent credit for the security deposit interest (less the rent board fee) and send this notice with the notice raising the rent – it keeps the paperwork simple and it is all taken care of at the same time. Keep a copy of the rent raise notice and the notice of the rent credit / security deposit interest with the original lease agreement.
If you have any questions, feel free to contact us.