The City of Union City is proposing to add Chapter 5.55 “Rent Review” to Title 5 of the Municipal Code to:

• Create a rent review process, consisting of non-binding conciliation and mediation between a landlord and tenant;
• Allow a tenant to initiate the rent review process if the tenant has received a rent increase of greater than seven percent (7%) or if the tenant has already received a rent increase within the previous year;
• Require landlords to participate in the rent review process; and
• Require landlords to notify tenants of their rights under the proposed ordinance at the same time that a landlord provides a tenant with notice of a rent increase.

The City Council first held a study session in May 2016 to address and consider potential rent protection measures and formed a Rent and Tenant Taskforce (“Taskforce”) in July 12, 2016 in order to assist with the consideration of possible tenant protection measures.  The Taskforce held multiple public meetings between October 2016 and January 2017. 

City staff returned to the City Council with the Taskforce’s recommendations on January 31, 2017.  After considering the Taskforce’s recommendations, the City Council directed staff to prepare a Rent Review Ordinance. 

Existing State Law Requirements for Rent Increases and Residential Landlord and Tenant Relations Ordinance

California law requires a landlord to provide a tenant with certain written notice prior to increasing the tenant’s rental amount:

• 30-Day Notice: A landlord must provide a tenant a 30-day notice of a rent increase of ten percent (10%) or less.
• 60-Day Notice: A landlord must provide a tenant a 60-day notice of a rent increase of greater than ten percent (10%).

Additionally, the City Council adopted the Residential Landlord and Tenant Relations Ordinance which requires landlords to provide cause for termination of tenancy and prohibits landlords from engaging in tenant harassment.  The Residential Landlord and Tenant Relations Ordinance took effect on May 10, 2017.   

Effect of Text Amendments

The text amendments to the Municipal Code establish a rent review process.  The Rent Review Ordinance consists of three primary provisions: 1) Notice and Eligibility for Review; 2) Rent Review Procedures; and 3) Annual Program Review and Fees.

Notice and Eligibility:

The Rent Review Ordinance requires that landlords provide notice to a tenant of the availability of the rent review process at the same time that the landlord provides the tenant with notice of a rent increase.  Landlords must provide the notice in the three predominant languages spoken in the City.

The following factors will determine whether a tenant is eligible to request rent review:

1. Unit Type: Any housing unit offered for rent or lease in the City is eligible for rent review with the exception of any housing unit that is subject to a recorded regulatory agreement that requires that the housing unit be rented to a tenant at specified income levels as defined by the regulatory agreement. 
2. Rent Increase: A tenant is eligible for rent review for the following rent increases:

• Increase of 7% or greater: A tenant is eligible for rent review if the proposed rent increase is more than 7%; or
• Two or more increases within a 12 month period: A tenant has already received a rent increase within the previous year.

Rent increase excludes increases that are a result of pass through costs and ancillary costs paid separately to the landlord for parking, storage, utilities, water, garbage, or any other fee or charge associated with a residential property. 

Rent Review Procedures:

Rent Review consists of two processes: Informal Conciliation and Mediation.

1. 15 Days to Request Rent Review: A tenant must request a rent review in writing within 15 days of the tenant’s receipt of the notice of the rent increase.
2. Informal Conciliation: The administrator of the Rent Review Ordinance must contact the landlord within 3 business days of receiving the rent review request in order to initiate conciliation.  The landlord must acknowledge notification within 10 business days in order to begin informal conciliation.  Informal conciliation will occur for a period not to exceed 10 business days.  During that period of time, the landlord and tenant exchange proposals and engage in discussion regarding the rent increase.
3. Mediation: If the landlord and tenant are unable to reach an agreement during the conciliation period, the tenant will have 5 business days to request mediation.  Thereafter, mediation between the landlord and tenant shall be scheduled before a rent review officer. The date of the mediation must occur no later than 60 calendar days from the date the tenant first submitted a rent review request.  The mediation will give the landlord and tenant an opportunity to explain their respective positions and engage in discussions in the presence of a mediator. At the conclusion of the mediation, the rent review officer will make a non-binding recommendation to the parties for the resolution of their dispute. 

The rent review process is non-binding, and the parties are free to accept or reject the recommendation of the rent review officer. However, participation in the rent review process is mandatory.  Although a tenant’s election to request rent review will not delay the effective date of a rent increase, a landlord’s failure to participate in the rent review process will void any proposed rent increase and will create a defense for the tenant for any unlawful detainer related to such increase.  Similarly, if a tenant requests the rent review process, but fails to participate, the tenant will waive his or her rights under the ordinance.  

Overview of Rent Review Process

1. Notice: Tenant receives eligible rent increase notice
2. Rent Review Request: Tenant submits rent review request (15 days to request)
3. Notification to Landlord: Administrator notifies landlord of rent review request (within 3 business days)
4. Landlord Acknowledgment: Landlord acknowledges request (within 10 business days)
5.  Informal Conciliation: Informal conciliation occurs (up to 10 business days)
6. Mediation Request: Tenant submits request for mediation (5 business days to request)
7. Mediation Notice: Notification of mediation sent to parties (10 days prior mediation)
8. Mediation: Mediation hearing held before hearing office (within 60 days of rent review request)

Annual Program Review and Fees:

The City Council will receive an annual report assessing the effectiveness of the Rent Review Ordinance.  Additionally, the Rent Review Ordinance includes provisions that require landlords to pay a fee to recover costs associated with the Rent Review Ordinance including costs associated with conciliation and mediation.

Operative Date and Implementation

The Rent Review Ordinance establishes an operative date of October 2, 2017.  This will allow staff to conduct a fee study for the program, issue requests for proposals (RFP)for an administrator and mediator (i.e. rent review hearing officer)  for the program, and enter into an agreement with the administrator and mediator.  A general timeline is below:

• June 13: City Council - 1^st reading of the Rent Mediation Ordinance
• June 27: City Council - 2^nd reading of the Rent Mediation Ordinance
• June - July: RFPs issued for program administrator and mediator
• August: Review RFPs and select program administrator and mediators; finalize fee study
• September: City Council approves program administrator contract and fee study , staff conducts outreach including a citywide mailer
• October 2: Rent Mediation ordinance and rental registration fee go into effect
• Fall: Host public informational meetings on the Rent Review Ordinance

1. Introduce the attached ordinance to add Chapter 5.55 “Rent Review” the Union City Municipal Code.
2. Adopt the ordinance following second reading on June 27, 2017, or at another meeting selected by the City Council if directed.