Rent increases due to improvements made to residential units

How much a landlord can raise rent if substantial improvements have been made.

Landlords can temporarily increase rent when improvements have been made to a residential building that benefits tenants. This requires a petition to the Rent Board and the Rent Board’s written approval. Below are common questions about these types of rent increases. For more information, please see general information on Capital Improvement Petitions.

What kind of improvement costs and associated rent increases can be “passed” along to tenants?

So-called “capital improvement” costs can be passed along to tenants in the form of a temporary rent increase. Capital improvements are those that add to the value of the property, prolong its useful life, or adapt it for new uses.

Examples of capital improvements include new windows, a roof replacement, or exterior painting. Ordinary repair and maintenance work, such as replacing a broken window pane, patching a roof or clearing a clogged pipe are usually not allowed to be passed along to tenants.

When do tenants start paying increases associated with improvements? Do they have to be notified?

Landlords must give tenants notice of rent increase for capital improvements after filing a petition with the Rent Board. Tenants are not required to pay the increase until the Rent Board approves it. Once approved, however, the rent increase will apply retroactively to the effective date of the notice of rent increase.

For example, consider a landlord who installs a new hot water heater. The landlord files a petition to increase the rent for the heater costs on June 15. On June 16, he or she mails a notice of rent increase effective August 1. This serves as a notice that rent will increase if and when the Rent Board approves the petition. 

Sometimes an approval will come after the effective date. For example, the Rent Board may approve the above petition in November. In this case, the rent increase is retroactive to August 1.

How do I calculate the increase amount?

Only those units impacted may be charged the capital improvement rental increase. For example, the cost of a new roof would be allocated to all units in the building, but the cost of new bathroom remodel in an individual unit would be allocated to that unit only. See How to Allocate Capital Improvement Costs for more information.

What forms do landlords fill out to file a capital improvement petition?

All petitions can be found in the Forms Center (#526, #527, and #528) There are different forms and requirements for properties with 1-5 residential units and for properties with 6 or more residential units. There is also a special capital improvement petition form for seismic work required by law. Each form includes specific instructions for filing a Capital Improvement Petition.

Other considerations

There are many other types of “passthroughs” that landlords can pass along to tenants

Passthrough costs can never be folded into the percentage annual increase

Rental increases for capital improvements and other passthroughs do not “reset” the annual allowable increase anniversary date

There is no charge for filing petitions. However, if it is determined that an independent estimator’s report is needed, the Rent Board does collect an estimator’s fee from the landlord

Disclaimer

The following is a basic summary and does not, and is not intended to, constitute legal advice. If you have specific questions about your situation, please contact a SF Rent Board Counselor or visit www.sfrb.org for more information.

Last updated June 29, 2020

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