Los Angeles County Municipal Code Part 1 Capital

RENT ADJUSTMENTS DUE TO CAPITAL IMPROVEMENTS (August 6, 1979)

Definitions.

A capital improvement as defined in Ordinance 11950 is: "The addition or replacement of the following improvements to a rental unit or common areas of the housing complex containing the rental unit, provided such new improvement has a useful life of five years or more: roofing, carpeting, draperies, stuccoing the outside of a building, air conditioning, security gates, swimming pool, sauna or hot tub, fencing, garbage disposal, washing machine or clothes dryer (coin-operated are not eligible, see II. Eligibility No. 3), dishwasher, children's play equipment permanently installed on the premises, and other similar improvements as determined by the Regional Planning Department."

Additional similar items not listed in Ordinance 11950 may be allowable capital improvements when they conform to the following principles:

(a)

The improvement must primarily benefit the tenant rather than the landlord. For example, the remodeling of the lobby would be eligible as a capital improvement, while the construction of a sign advertising the rental complex would not be eligible.

(b)

The improvement must have a life expectancy of five years or more.

(c)

Equipment eligible as costs for which a capital improvement rent increase can be made must be permanently fixed in place or relatively immobile (e.g., sinks, bathtubs, stoves, refrigerators, kitchen cabinets are items eligible as capital improvement).

(d)

Normal routine maintenance and repair of the rental unit and the building is not capital improvement while replacement of old screens with new screens would be a capital improvement.

(e)

In the case of painting, the complete painting of the complete exterior of the building and/or the painting of the common interior area (interior walls and corridors) are eligible as a capital improvement. The repainting of an individual apartment is considered normal maintenance.

(f)

In establishing the cost of a capital improvement, the landlord must be able to prove the actual value through adequate and reliable documentation. The landlord may transfer the landlord's personal appliances, furniture, etc., or those inherited or borrowed from friends. However, the fair market value must be established in accordance with the requirements of this paragraph.

II.

Eligibility.

Only capital improvements completed on or after April 1, 1978 are eligible for a capital improvement rent increase.

The eligibility of any particular improvement included in the landlord's application for a rent increase based on capital improvements will be determined by the Rent Adjustment Panel.

Capital improvements otherwise eligible for a rent increase are not eligible if the landlord charges a "use fee." An example of this would be a landlord-owned washer and dryer in a common area where the tenants must deposit coins to use the equipment. Since the equipment will be paid for by this fee system, the landlord may not include such a request for a rent raise based on capital improvements.

Ordinance 11950 does not require any approval by tenants or the Rent Adjustment Commission prior to the landlord making a capital improvement.

III.

Determination of extraordinary rent increase

Capital improvement costs must be circulated on the basis of actual cost. Cancelled checks, receipts, invoices, social security payments, and W-2 forms are among the types of evidence that will be required to substantiate such costs.

Labor provided by the landlord, the landlord's family, the landlord's agent or agent's family, may be billed at a reasonable cost as a part of any capital improvement, unless said persons are employees of the landlord, whose costs have previously been taken into account in establishing the existing rents.

Labor costs of a manager, maintenance men, or other employees of the landlord may be included as a part of the capital improvement cost unless said costs have previously been taken into account in establishing the existing rents.

Interest on money borrowed to pay for capital improvements work shall be included as a part of the capital improvement cost. In those cases where the landlord finances the capital improvement costs or a part thereof with his own funds, interest at the legal rate of interest set forth in Civil Code Section 1916-1 (at 7 percent as of July 1, 1979), valued over a reasonable amount of time, shall be included as a part of the capital improvement cost. The landlord shall have the burden of proof in establishing the reasonable amount of time over which interest shall be allowed. In determining the reasonable amount of time over which interest shall be allowed, the Rent Adjustment Panel shall be principally guided by the current practices of state and federally chartered banks and savings and loan associations.

In the event a landlord receives net compensation for any portion of the money spent on capital improvements (insurance, court-awarded damages, federal or state subsidies, etc.), this compensation must be deducted from the cost of the capital

improvements before amortizing the costs among the units.

In the event that the net compensation described in No. 5 above is received after the landlord receives approval for an extraordinary rent increase, but within the life of the Rent Stabilization Ordinance, the landlord shall immediately reduce rents prospectively on a per-unit basis by amortizing said net compensation over a 60-month period.

In determining the Average Per Unit Capital Improvement Cost, the cost of the capital improvement shall be divided by the number of units affected by the improvement, irrespective of whether all of such units are subject to Ordinance 11950.