On June 13, 2017, the City Council introduced the attached Ordinance 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 rent increase(s) within the previous year that cumulatively are in excess of seven percent (7%);
• 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.

Staff recommends that the City Council conduct the second reading and adopt the attached Ordinance that would add Chapter 5.55 “Rent Review” to create a rent review process.

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. 

On March 28, 2017, the City Council provided direction regarding key components and provisions for the Rent Review Ordinance. 

On June 13, 2017 the City Council introduced the attached Ordinance with the requirement that eligibility for rent review pursuant to multiple rent increases requires that the tenant has already received rent increase(s) within the previous year that cumulatively are in excess of seven percent (7%). 

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:
   1. Increase of 7% or greater: A tenant is eligible for rent review if the proposed rent increase is more than 7%; or
   2. Two or more increases within a 12 month period that cumulatively are greater than 7%: A tenant has already received a rent increase or rent increases within the previous year and the rent increases cumulatively exceed 7% of the first base rent paid during that 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 increase 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 shall 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 nonbinding 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 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 an RFP for an administrator and mediator for the program, and enter into an agreement with the administrator and mediator. 

There are no direct fiscal impacts as a result of adopting the attached Ordinance.

Staff recommends that the City Council:

1. Waive reading the full text of the Ordinance, conduct the second reading of the title of the Ordinance, and adopt the Ordinance to add Chapter 5.55 “Rent Review” to the Union City Municipal Code.