In the time crunch before the end of the Council Period, it seems that the years-in-the-making legislation to quell the practice of rent concessions will finally come to fruition.
Brief history lesson: prior to 2006 Rent Control was based on a system of rent ceilings. The “ceiling” was the maximum chargeable rent under the statute. For a variety of reasons, the “ceiling” would typically be substantially higher than the market rent.
Rent Ceilings were abolished in 2006, because, among other justifications, a landlord could raise the rent charged to the rent ceiling at any time. Advocates argued that this effectively defeated rent control.
Rent Concessions as De Facto Rent Ceilings
Since 2016, the Council has been chasing around a number of bills aimed at the pervasive practice of Rent Concessions. Housing advocates have argued that this practice created a de facto rent ceiling system, which again circumvents rent control.
There are variations on the practice, but, here are the basics. Landlord discloses to tenant at lease inception that the rent is $3,100 per month BUT, the tenant pays a discounted rent of $2,100 per month for the year long lease. Then, at the end of the lease the Landlord could increase the rent to whatever the market would bear, up to the $3,100 max.
The argument in favor of the practice, is that there is nothing in the statute which prohibits giving tenants a discount.
The Rental Housing Commission Struck Down Rent Concessions in 2018
Earlier this year, in Feinman v. Smith the Rental Housing Commission acknowledged that Rent Concessions were not expressly prohibited by the Rental Housing Act. But, the Commission still found that the practice of charging the tenant a lesser amount than was disclosed on the Rent Control filings nonetheless a violation.
In its Legislative Meeting on November 13, the Council took the first of two (2) required votes, to essentially codify the Feinman decision. Simply stated, the law, once adopted, would change the definition of “rent charged” to mean the amount of money (or money’s worth) that the tenant actually pays. Moreover, the law requires that this figure, be included on the annual rent increase forms that are filed with the rent administrator.
As a result of the Commission’s decision in Feinman and the contemplated legislative change, landlords will no longer be able to maintain a maximum chargeable rent, while actually charging the tenant a lesser amount.
If you have any questions about your rights and responsibilities under the rent control law, or forthcoming amendments, contact me or feel free to use the scheduling tool on my website to book an appointment for a free case evaluation. I’d be glad to connect with you and see how I might be able to assist your rental housing business.