WEST HOLLYWOOD : Couple Files Suit Challenging City’s Rent Control Measure

A West Hollywood couple has sued the city over a provision of its rent control law that prevents property owners from automatically raising the rent to cover renovation costs.

The lawsuit, filed last week, is the latest attempt to chip away at what some rental property owners consider one of the state’s toughest rent control laws.

West Hollywood landlords Norman and Marcia Katz filed the lawsuit after the city’s Rent Stabilization Board rejected their application to increase rents on two units to cover the 1994 cost of improving the property. In their lawsuit, the Katzes state that they spent $14,841 on new plumbing, paint, roofing and other improvements.

The Katzes, who have owned the property since 1961, maintain that without a rent increase, they will not make a reasonable profit on their investment.

In addition, the Katzes complain that the city’s process for granting rent increases is burdensome and time-consuming. They note that a property owner must file an application that not only includes expenditures and earnings for the year the renovations occurred but also for 1983, the year the city’s rent control laws took effect.

(If a rent increase application is accepted, property owners present their case to the Rent Stabilization Board, which determines if a rent increase is necessary by comparing the base year and the actual year. If rejected, appeals to the board can take up to one year.)

In their lawsuit, the Katzes seek a reasonable profit on their investment. They also want the city to require that landlords only account for their cost for capital improvements, not rental receipts and other expenses and earnings.

Without addressing the merits of the Katzes’ lawsuit, a West Hollywood official defended the law, arguing that it allows owners to receive a reasonable return on the costs of upgrading their property.

Courts have ruled the city’s process for calculating rent increases for renovations “valid and constitutional,” said Mark Johnson, director of the West Hollywood Department of Rent Stabilization.

“The attack on [the law] by property owners is based on principle because they believe they shouldn’t be regulated at all,” Johnson said.

Amid the latest court challenge, West Hollywood’s rent law is also under attack in Sacramento. Its restrictions on rent hikes for vacated units are so tight that the city was one of four named in recent state legislation designed to reform rent control policies.

The bill would be the beginning of the end for rent control if it passes, Johnson said.

“This is the first step toward eventually dismantling rent control throughout the state,” he said.