Focusing attention on the truth and acting strategically

By Dr. Eric Oberle
A response to Page Mill Properties. vs. City of East Palo Alto
February 18th

Initial Analysis, Public Response
First, I see no reason to be alarmed by the decision.  Its language is obscure to the point where it almost seems hostile, but the decision as written is hardly a defeat for the City—certainly not the kind of “victory” that the Page Mill press release sent out to Reuters was trying to make it out to be. Correctly interpreting the judge’s words becomes the key to holding the East Palo Alto system together; imagining that it says more that it says spells out certain defeat.

I think one of the things to do is counter Page Mill’s ‘declaration of victory’ with a clear declaration that the City’s basic system was in fact vindicated in the ruling. In general, the Court has outlined its support for the Rent Stabilization Ordinance and provided a legal framework for applying the Costa Hawkins act to the RSO that is more thorough than what the Board had directly articulated at any previous time. 

The essence of the ruling is that the Ordinance was in fact not necessary because the Board already has all of the powers it needs to address the (illegal) increases. I thought this was true in January, and think it is true now; but I also think that the passage of the urgency ordinance bought some valuable time for the residents and that the key is not to squander that time now.

I think this whole process has also revealed how devious and ill-intentioned Page Mill Properties is vis-à-vis the residents of the west side.  Their intention is clearly to undermine and evade the whole system of rent control, and they have in fact revealed this with this filing.  They need to be shown that the City is serious in defending its rights and those of tenants, and they need to be reminded that the Rent Stabilization Ordinance remains the law of this City, and Costa Hawkins the law of this State.

Focusing Attention on the Truth, Acting Strategically
I think the thing to do in light of the ruling is for the City Council to make a series of recommendations to the Board.  They should be like this:

  1. The board should move to update all of its certificates in keeping with the Costa Hawkins
  2. All rules and regulations that need to be updated to clarify the interpretation of Costa-Hawkins on the original Rent Stabilization Ordinance should be updated.
  3. The City will for its part do everything to ensure that the Board has proper legal counsel and representation to minimize any legal claims against this necessary revision.

 

It should be emphasized that the existing practice of the Rent Board has been in essential agreement with all state laws, including the Petris and Costa-Hawkins Acts.  The major upshot of the decision was simply to declare the Urgency Ordinance superfluous.  It should be understood that Page Mill Properties was not forced into this lawsuit by the so called “banking” (or backdating) issue. Rather, it was the cherry-picking problem that caused the crisis, at least conjoined with a willful campaign on Page Mill’s part to misconstrue the status of certificates in units whose tenancy began after the 1996 effective date of Costa-Hawkns.

What is cherry-picking? What Page Mill did in the late months of 2007 was to seek to actively exploit the long-standing ambiguity within the rent board system: starting in 1995, when the Costa-Hawkins Act went into effect, the city had relied upon landlords to properly report all vacancies and initial base rents in order to revise the certificates.  In cases where the tenancies predated the passage of Costa-Hawkins (and therefore the certificate maximal rent was still valid), ARAs were by contrast simply applied to the certificates.  This situation meant two things.  First, due to limited staffing issues, the units that had had vacancies since 1995 were on an “honor system” to report their initial rents properly, but if they did not, the Rent Board office would simply assume that the pre-1996 tenancy was still valid.  Second, when tenants who had post-1996 tenancies received their certificate annually, they became used to thinking it was de facto meaningless, because no landlord had in the past ten years tried to raise the rent up to the certificate amount.  Instead, landlords in EPA had, with the help of the rent board office, properly interpreted Costa-Hawkins to allow for only an annual use-it-or-lose-it adjustment off their initial base rent.  Page Mill Properties, seeing the short staffing available to the city, basically went to the Rent Stabilization Office and sought out every certificate it could where the stated maximum was above the current rent and had new certificates issued.  Breaking with all past practices of the Rent Board and all past landlords, they then proceeded to use these “cherry-picked” certificates for the basis of their claims to increase rents. They then went to court to defend the validity of the certificates.  The judge said, indeed, the certificates are valid as issued, but the Court said nothing that indicated that rents could therefore be increased in the way Page Mill has maintained.

Medium Term Strategy: Correcting the Fraudulent or Withheld Registration Information

The Court’s rulings do not forbid the Rent Stabilization Board from requiring Page Mill to update their rent registrations.  Rather, they tacitly require it.  The response of the city should therefore be to demand that all landlords seeking to increase rents immediately report five basic things. 
1. The address of the unit 
2. The name of the current tenant
3. The starting date of their tenancy
4. The initial rent of the unit at date indicated in #3
5. The current rent charged and the effective date of its increase

Medium Term Strategy: Updating the Certificates

Once this information has been gathered, and provided that Page Mill Properties does not resist its collection, the Board should issue new certificates upon the expiration of the old ones.

It seems important to underscore here that the City did nothing wrong in issuing the certificates of maximum legal rent under the original ordinance.  Page Mill certainly knew when it acquired the properties that these certificates provide no right to raise the rent beyond the AGA. The City should therefore issue a statement of intent saying in plain language that Page Mill is not entitled to these rent increases and that the City will use its legal resources to defend the work of the Board in this matter. Furthermore, the City Council should indicate that it is fully behind the Board in working through the process of updating all certificates involving post-1996 tenancies, as these now represent the vast majority of cases. 

Since these legal procedures amount to simply regularizing Costa-Hawkins’s effect on the certificate system, and they represent no change in policy, the only crucial thing is that the City Council stand behind the Board and strengthen its resolve to defend the people of East Palo Alto based on the strength of its existing ordinance.

With sincerest regards for your work for the City and the People of East Palo Alto,

Dr. Eric Oberle