Rent Board Rules and Regulations: Part VII - Landlord Applications for Certification of Capital Improvements, Rehabilitation, and/or Energy Conversation Work

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Section 7.10 Filing

(Amended August 29, 1989 by correction May 1, 1990; June 18, 1991; subsection (d) added on January 31, 1995; amended March 7, 1995; repealed and adopted April 25, 1995; effective February 1, 1995; amended April 1, 2003)

            (a)        Those landlords who seek to pass through the cost of capital improvements, rehabilitation and/or energy conservation work must file a petition for certification on a form prescribed by the Board. If at any time prior to filing a petition the landlord determines that the total cost of a project for a parcel or a building containing six or more residential units is reasonably expected to exceed $25,000 multiplied by the number of units on the parcel or in the building, the landlord shall immediately inform each tenant and the Rent Board in writing of the anticipated costs of the work. The landlord's notice must occur within 30 days after such determination by the landlord.

            (b)        Information to Accompany Landlord's Petition

            The petition shall be accompanied by: (1) copies of the petition in sufficient number to distribute to each of the tenants named in the petition, plus one additional copy for the estimator; (2) two copies of all claimed invoices, signed contracts, and cancelled checks substantiating the costs for which the landlord has not been compensated by insurance proceeds; (3) if claim is made for uncompensated labor, the petition shall include a copy of a log of dates on which the work was performed; and (4) copies of proof of compliance with the Bureau of Building Inspection for any work claimed for energy conservation measures or other work for which proof of compliance is required by State or local law. For each petition totaling more than $25,000, in addition to the supporting material prescribed by the Board for all petitions, the applicant must either: (1) Provide copies of competitive bids received for work and materials; or, (2) Provide copies of time and materials billing for work performed by all contractors and subcontractors; or (3) The applicant must pay the cost of an estimator hired by the Board.

            (c)        Time of Filing Petition and Notice

            The landlord must file a petition before giving legal notice of a rent increase. The notice shall be in conformance with the requirements set forth in Section 4.10 above and shall further include the dollar amount requested based on the amortization of the work performed. This increase shall be inoperative unless and until the petition is approved by the Administrative Law Judge. Any amounts approved by the Administrative Law Judge shall relate back to the effective date of the legal notice, if given.

            If the landlord sends a notice of rent increase based on capital improvements without first filing a petition for certification, the increase shall be null and void. In order to be able to pass through these amounts, a petition must first be filed and then a new notice sent.

            (d)        Special Provision for Owners of Proposition I Affected Units

            Landlords of Proposition I Affected Units may petition the Board to certify the cost of capital improvements, rehabilitation and/or energy conservation work in accordance with, and subject to, the rules and procedures set forth in Part 7 of these Rules and Regulations and Section 37.7 of the Rent Ordinance. Events before the unit was subject to the Rent Ordinance may be considered. Petitions for Proposition I Affected Units based upon capital improvements that are pending as of, or filed within six months of, April 25, 1995 may, at the request of the landlord, be treated as if filed on May 1, 1994; provided, however, that the actual date of filing shall be used to determine the effective date of any rent increase pursuant to Section 7.10(c) above.

(e)        Requirements for Certification

            The Board and designated Administrative Law Judges may only certify the costs of capital improvements, rehabilitation, energy conservation improvements, and renewable energy improvements, where the following criteria are met:

                        (1)        The landlord completed capital improvements or rehabilitation on or after April 15, 1979, or the landlord completed installation of energy conservation measures on or after July 24, 1982 and has filed a proof of compliance with the Department of Building Inspection in accordance with the requirements of Section 1207(d) of the Housing Code;

                        (2)    The landlord has not yet increased the rent or rents to reflect the cost of said work;

                        (3)        The landlord has not been compensated for the work by insurance proceeds;

                        (4)        The building is not subject to a RAP loan in a RAP area designated prior to July 1, 1977;

                        (5)        The landlord files the certification petition no later than five years after the work has been completed;

                        (6)        The cost is not for work required to correct a code violation for which a notice of violation has been issued and remained unabated for 90 days unless the landlord made timely good faith efforts within that 90-day period to commence and complete the work but was not successful in doing so because of the nature of the work or circumstances beyond the control of the landlord. The landlord's failure to abate within the original 90-day period raises a rebuttable presumption that the landlord did not exercise timely good faith efforts.

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Section 7.11 Inspection of the Building

(Amended April 1, 2003)

            If the Board or its Executive Director determines that inspection by a qualified estimator of the building is necessary to determine whether the petition shall be approved, the landlord and tenants shall provide entry to the Rent Board's representative at a convenient time during normal business hours.

            (a)        The necessity for use of an estimator in a particular case may be determined after consideration of the following factors, among others:

                        (1)        the cost of the work;

                        (2)        the number of units;

                        (3)        complexity of the work performed;

                        (4)        objections made pursuant to Section 7.15 below.

                        (5)        whether the landlord provided copies of competitive bids or time and materials billings for work performed by all contractors and subcontractors for a petition totaling more than $25,000.

            (b)        A qualified estimator is a person:

                        (1)        who is not a San Francisco city employee; but

                        (2)        who is selected by the Rent Board or the Executive Director because he or she is qualified and experienced in the area of residential rehabilitation, such as a member of the American Society of Estimators, subscribing to its Code of Professional Ethics and Standards of Professional Conduct. The estimator shall operate under the direction of the Board or its Executive Director.

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Section 7.12 Allocation of Cost of Improvements or Work to Individual Units

(Amended March 14, 1989; August 29, 1989; June 18, 1991; Subsection (b) amended October 20, 1998; Amended April 1, 2003)

            (a)        The cost of capital improvements, rehabilitation, and/or energy conservation work for which the landlord has not been compensated by insurance proceeds shall be allocated to each unit in the building. The method used for cost allocation shall be that which most reasonably takes into account the extent to which each unit benefits from the improvements or work. Methods which may be appropriate, depending on the circumstances, include allocation based on the square footage in each unit, allocation based on the rent paid for each unit, and equal division among all units. Where the improvements do not benefit all units, only those benefitted may be charged the additional rent. For example, if a new roof were installed, the rents of all units in the building may be raised to cover the cost. But if, in addition, a new floor had been installed in one unit, that unit would be charged its proportionate share of the roof cost plus the cost of the new floor. Costs attributable to units where the rent cannot be raised (because of a lease restriction, owner occupancy, or other reason) may not be allocated to the other units. Costs attributable to routine repair and maintenance shall not be certified but shall be considered part of the costs of operating and maintenance.

            (b)        Effect of Vacancy on Rent Increases Requested for Capital Improvements

            If a unit becomes vacant and is rerented after completion of capital improvements, rehabilitation, and/or energy conservation work listed in a petition for certification, no additional rent will be allowed on the unit based on the improvements or work since the landlord has the opportunity to bring the unit up to market rent at the time the unit is rerented. This section also applies to those units rented during the construction period for the project of which the work is a part, as stated in the permit(s), contract document(s), and/or as shown by other relevant evidence, or rented within six months of the commencement of work for which a petition for certification is filed, provided that ownership has not changed in that period.

            (c)        Amortization Periods and Cost Allocation

            The Board shall apply the amortization periods and cost allocation formulas as set forth below.

                        (1)        Petitions Filed Before November 14, 2002. The following provisions shall apply to all petitions filed before November 14, 2002:

                                    (A)       Amortization Periods. Costs shall be amortized on a straight-line basis over a seven or ten-year period, depending upon which category described below most closely relates to the type of work or improvement and its estimated useful life.

                                                (i)         Schedule I - Seven-Year Amortization. The following shall be amortized over a seven-year period: Appliances, such as new stoves, disposals, washers, dryers and dishwashers; fixtures, such as garage door openers, locks, light fixtures, water heaters and blankets, shower heads, time clocks and hot water pumps; and other improvements, such as carpeting, linoleum, and exterior and interior painting of common areas. If the appliance is a replacement for which the tenant has already had the benefit, the cost will not be amortized as a capital improvement, but will be considered part of operating and maintenance expenses. Appliances may be amortized as capital improvements when: (1) part of a remodeled kitchen; (2) based upon an agreement between the tenant and landlord; and/or (3) it is a new service or appliance the tenant did not previously have.

                                              (ii)        Schedule II - Ten-Year Amortization. The following shall be amortized over a ten-year period: New foundation, new floor structure, new ceiling or walls - new sheetrock, new plumbing (new fixtures, or piping,) weather stripping, ceiling insulation, seals and caulking, new furnaces and heaters, refrigerators, new electrical wiring, new stairs, new roof structure, new roof cover, new window, fire escapes, central smoke detection system, new wood or tile floor cover, new sprinkler system, boiler replacement, air conditioning-central system, exterior siding or stucco, elevator rebuild, elevator cables, additions such as patios or decks, central security system, new doors, new mail boxes, new kitchen or bathroom cabinets, and sinks.

                                    (B)       Allowable Increase. One hundred percent (100%) of the certified costs of capital improvements, rehabilitation, and energy conservation improvements may be passed through to the tenants who benefit from such work and improvements. However no increase under this Subsection 7.12(c)(1) shall exceed, in a twelve-month period, ten percent (10%) of the tenant's base rent at the time the petition was filed or $30.00, whichever is greater. A landlord may accumulate any certified increase which exceeds this amount and impose the increase in subsequent years, subject to this 10% or $30.00 limitation.

                        (2)        Petitions Filed On or After November 14, 2002 For Qualified Energy Conservation Improvements and Renewable Energy Improvements. For Petitions filed on or after November 14, 2002, the following provisions shall apply to certification of costs for qualified energy conservation improvements and renewable energy improvements:

                                    (A)       Amortization Periods and Allowable Costs. For purposes of this Subsection, qualified energy conservation improvements and renewable energy improvements are:

                                                (i)         100% of new EPA Energy-Star-compliant refrigerators where the refrigerator replaced is more than five years old and where the unit has separate metering, which costs shall be amortized on straight-line basis over a ten-year period; and,

                                                (ii)        Other improvements as may be approved by the Board of Supervisors upon recommendation of the Rent Board, following hearings and development of an Energy Conservation Improvements and Renewable Energy Improvements List of energy conservation improvements and renewable energy improvements that demonstrably benefit tenants in units that have separate electrical and/or natural gas metering by the Commission on the Environment.

                        (3)        Petitions Filed On or After November 14, 2002 For Seismic Work and Improvements Required by Law, and for Work and Improvements Required by Laws Enacted After November 14, 2002. For petitions filed on or after November 14, 2002, the following provisions shall apply to certification of costs for seismic work and improvements required by law and to costs for capital improvement, rehabilitation, energy conservation, and renewable energy work and improvements required by federal, state, or local laws enacted on or after November 14, 2002:

                                    (A)       Amortization Periods. Costs shall be amortized on a straight-line basis over a twenty-year period.

                                    (B)       Allowable Increase. One hundred percent (100%) of the certified costs of capital improvement, rehabilitation, energy conservation, and renewable energy work and improvements required by law may be passed through to the tenants who benefit from such work and improvements. Any rent increases under this Subsection 7.12(c)(3) shall not exceed, in a twelve-month period, a total of ten percent (10%) of the tenant's base rent at the time the petition was filed or $30.00, whichever is greater. A landlord may accumulate any certified increase which exceeds this amount and impose the increase in subsequent years, subject to this 10% or $30.00 limitation.

                        (4)        Petitions Filed On or After November 14, 2002 for Other Work and Improvements On Properties With Five Residential Units or Less. For petitions filed on or after November 14, 2002, the following provisions shall apply to certification of all work and improvements for properties containing five residential units or less, with the exception of work and improvements costs certified for passthrough under Subsections 7.12(c)(2) or 7.12(c)(3):

                                    (A)       Amortization Periods. Costs shall be amortized on a straight-line basis over a ten, fifteen or twenty-year period, depending upon which category described below most closely relates to the type of work or improvement and its estimated useful life.

                                                (i) Schedule I - Ten-Year Amortization. The following shall be amortized over a ten-year period: New roof structure, new roof cover, electrical heaters, central security system, telephone entry systems, new wood frame windows, new mailboxes, weather-stripping, ceiling insulation, seals and caulking, central smoke detection system, new doors and skylights; appliances, such as new stoves, disposals, refrigerators, washers, dryers and dishwashers; fixtures, such as garage door openers, locks, light fixtures, water heaters and blankets, shower heads, time clocks and hot water pumps; and other improvements, such as carpeting, linoleum, and exterior and interior painting of common areas. If the appliance is a replacement for which the tenant has already had the benefit, the cost will not be amortized as a capital improvement but will be considered part of operating and maintenance expenses. Appliances may be amortized as capital improvements when: (1) part of a remodeled kitchen; (2) based upon an agreement between the tenant and landlord; (3) it is a new service or appliance the tenant did not previously have; and/or (4) it is an appliance certified as a qualified energy conservation improvement or renewable energy improvement pursuant to Subsection 7.12(c)(2).

                                                (ii)        Schedule II - Fifteen-Year Amortization. The following shall be amortized over a fifteen-year period: New floor structure, new ceiling or walls - new sheetrock, wood decks, new stairs, new furnaces and gas heaters, new thermal pane windows, new wood or tile floor cover, new sprinkler systems, air conditioning-central system, exterior siding or stucco, elevator rebuild, elevator cables, new kitchen or bathroom cabinets, and sinks.

                                                (iii)       Schedule III - Twenty-Year Amortization. The following shall be amortized over a twenty-year period: New foundation, new plumbing (new fixtures or piping), boiler replacement, new electrical wiring, fire escapes, concrete patios, iron gates, sidewalk replacement and chimneys.

                                    (B)       Allowable Increase. One hundred percent (100%) of the certified costs of capital improvement, rehabilitation, and energy conservation work and improvements may be passed through to the tenants who benefit from such work and improvements. However, no increase under this Subsection 7.12(c)(4) shall exceed, in a twelve-month period, five percent (5%) of the tenant's base rent at the time the petition was filed or $30.00, whichever is greater. A landlord may accumulate any certified increase which exceeds this amount and impose the increase in subsequent years subject to this 5% or $30.00 limitation.

                        (5)        For Petitions Filed On or After November 14, 2002 for Other Work and Improvements for Properties with Six or more Residential Units. For petitions filed on or after November 14, 2002, the following provisions shall apply to certification of all work and improvements for properties containing six residential units or more, with the exception of work and improvements certified under Subsections 7.12(c)(2) or 7.12(c)(3):

                                    (A)       Amortization Periods. Costs shall be amortized on a straight-line basis over a seven or ten-year period, depending upon which category described below most closely relates to the type of work or improvement and its estimated useful life.

                                                (i)         Schedule I - Seven-Year Amortization. The following shall be amortized over a seven-year period: Appliances, such as new stoves, disposals, washers, dryers and dishwashers; fixtures, such as garage door openers, locks, light fixtures, water heaters and blankets, shower heads, time clocks and hot water pumps; and other improvements, such as carpeting, linoleum, and exterior and interior painting of common areas. If the appliance is a replacement for which the tenant has already had the benefit, the cost will not be amortized as a capital improvement, but will be considered part of operating and maintenance expenses. Appliances may be amortized as capital improvements when: (1) part of a remodeled kitchen; (2) based upon an agreement between the tenant and landlord; (3) it is a new service or appliance the tenant did not previously have; and/or (4) it is an appliance certified as a qualified energy conservation improvement or renewable energy improvement pursuant to Subsection 7.12(c)(2).

                                                (ii)        Schedule II - Ten-Year Amortization. The following shall be amortized over a ten year period: New foundation, new floor structure, new ceiling or walls - new sheetrock, new plumbing (new fixtures, or piping) weather stripping, ceiling insulation, seals and caulking, new furnaces and heaters, refrigerators, new electrical wiring, new stairs, new roof structure, new roof cover, new window, fire escapes, central smoke detection system, new wood or tile floor cover, new sprinkler system, boiler replacement, air conditioning-central system, exterior siding or stucco, elevator rebuild, elevator cables, additions such as patios or decks, central security system, new doors, new mail boxes, new kitchen or bathroom cabinets, sinks, telephone entry system, skylights, iron gates, sidewalk replacement and chimneys. If the refrigerator is a replacement for which the tenant has already had the benefit, the cost will not be amortized as a capital improvement, but will be considered part of operating and maintenance expenses. Refrigerators may be amortized as capital improvements when: (1) part of a remodeled kitchen; (2) based upon an agreement between the tenant and landlord; (3) it is a new service or appliance the tenant did not previously have; and/or (4) it is an EPA Energy-Star-compliant refrigerator where the refrigerator replaced is more than five years old and where the unit has separate metering.

                                    (B) Allowable Increase.

                                                (i)         Only fifty percent (50%) of the costs certified under this Subsection 7.12(c)(5) may be passed through to the tenants who benefit from such work and improvements. However, no increase under this Subsection 7.12(c)(5) shall exceed, in a twelve-month period, ten percent (10%) of the tenant's base rent at the time the petition was filed or $30.00, whichever is greater. A landlord may accumulate any certified increase which exceeds this amount and impose the increase in subsequent years, subject to this 10% or $30.00 limitation.

                                                (ii)        In the alternative, a tenant may elect to have one hundred percent (100%) of the costs certified under this Subsection 7.12(c)(5) passed through to the tenant. In that event no increase under this Subsection shall exceed, in a twelve-month period, five percent (5%) of the tenant's base rent at the time the petition was filed, and the total increase for capital improvements elected under this Subsection shall never exceed fifteen percent (15%) of the tenant's base rent. If the total increase for capital improvements elected under this Subsection is less than fifteen percent (15%) of the tenant's base rent at the time the petition was filed, the landlord may impose the remaining percentage in a subsequent petition where the tenant makes an election under this Subsection and the remaining percentage shall be calculated on the tenant’s base rent in effect at the time the new petition is filed. A tenant must elect this alternative by filing such an election with the Board on a form prescribed by the Board. An election may be filed at any time after the petition is filed but no later than fifteen (15) calendar days after the Administrative Law Judge's decision on the petition is mailed to the tenant. After a tenant files an election form, the tenant cannot rescind the election unless either party files an appeal and a new decision is subsequently issued that changes the amount certified for passthrough to the tenant. In that case the tenant will have fifteen (15) calendar days after the new decision is mailed to the tenant to rescind the previous election or to make a new election under this Subsection even if one had not been made after the first decision was issued. In a unit with multiple tenants, the election form must be signed by a majority (more than 50%) in order for the election to be accepted. If a timely election is made after a decision has been issued, an addendum to the decision will be issued reflecting the tenant's election. The addendum is not subject to appeal.

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Section 7.13 Valuation of Uncompensated Labor

            Any uncompensated labor (i.e., labor performed for no remuneration of any kind) performed on capital improvements, rehabilitation, or energy conservation work shall be valued at prevailing labor rates. The craft classification to be employed shall be that of laborer unless the uncompensated worker is licensed in the particular craft for which credit is being claimed.

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Section 7.14 Allowance of Interest

(Amended October 4, 1994; amended Subsection (b)(2) and adding Subsection (b)(3), January 19, 1999; Amended April 1, 2003)

            A landlord who expends funds for capital improvements or rehabilitation work shall be entitled to a reasonable rate of interest. Any allowance of interest, whether imputed or real, in favor of a landlord pursuant to this section shall be limited to no more than ten (10) percent and shall be amortized over a period equal to the amortization period of the improvement. The following rules shall apply to any request for the allowance of interest.

            (a)        Allowance of Actual Interest Incurred. The landlord has the burden of proof to establish the actual rate of interest. To meet this burden, the landlord must submit, at a minimum, either the applicable loan agreement, promissory note or other admissible documentary evidence substantiating the rate of interest. In addition, the landlord has the burden to show that the actual rate of interest for which an allowance is sought is reasonable under the circumstances.

            (b)        Allowance of Imputed Interest. In cases where the landlord does not incur or prove in accordance with subsection (a) any actual interest expense on funds used for capital improvements or rehabilitation work, the landlord shall be entitled to an allowance of imputed interest. The rate of imputed interest shall be determined in accordance with the following rules:

                        (1)        On March 1 of each year, in accordance with subparagraph (b)(2), the Board shall publish four rates of imputed interest. Subject to the ten (10) percent limitation contained in the first paragraph of this rule, the published rates shall constitute the rates of imputed interest to be allowed on petitions filed on or after March 1 through February 28 (or February 29, as the case may be) of the following year.

                        (2)        The first rate shall be the average of the twelve most recent monthly rates (rounded to the nearest tenth) as posted by the Federal Reserve on their Federal Reserve Statistical Release Internet site for seven-year Treasury Securities and shall apply to certified capital improvement costs amortized over a seven-year period in accordance with Section 7.12(c).

                        The second rate shall be the average of the twelve most recent monthly rates (rounded to the nearest tenth) as posted by the Federal Reserve on their Federal Reserve Statistical Release Internet site for ten-year Treasury Securities and shall apply to certified capital improvement costs amortized over a ten-year period in accordance with Section 7.12(c).

                        The third rate shall be the average of the twelve most recent monthly rates (rounded to the nearest tenth) as posted by the Federal Reserve on their Federal Reserve Statistical Release Internet site for twenty-year Treasury Securities and shall apply to certified capital improvement costs amortized over a twenty-year period in accordance with Section 7.12(c).

                        The fourth rate shall be the average of the ten-year and twenty-year rates (rounded to the nearest tenth) and shall apply to certified capital improvement costs amortized over a fifteen-year period in accordance with Section 7.12(c).

                        (3)        These rates shall be calculated by December 15th of each year using the average of the twelve most recent monthly rates posted by the Federal Reserve for seven and ten-year maturity Treasury Securities as of this date.

            (c)        Government Subsidies or Guarantees. Notwithstanding subparagraphs (a) and (b) of this Section, if the interest is less than 10 percent due to governmental or any other subsidy or guarantee, the landlord shall only be entitled to the actual rate of interest incurred.

            (d)        This Section was amended on March 18, 2003 and is effective for petitions filed on or after November 14, 2002. The Board shall publish the applicable rate of interest for petitions filed between November 14, 2002 and February 28, 2003 before February 21, 2003.

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Section 7.15 Tenant Objections

(Amended March 21, 1989)

            (a)        Tenant objections may be on the basis that the work claimed to be performed was not performed, that the work performed was necessitated by the current landlord's deferred maintenance resulting in a code violation, that the costs claimed are not true or reasonable costs, or some other reasons. The tenant shall include as much documentation to support the objection as the tenant has reasonably available.

            (b)        Allowance for the cost of equipment, fixtures, and improvements in an individual unit shall not be made if the tenant has objected to the installation unless the landlord can establish that the existing equipment, fixtures, or improvements need replacement for reasons of health or safety or because of excessive maintenance cost. The tenant shall have the right to raise these objections at the hearing when the landlord seeks to have the capital improvements certified.

            (c)        The cost of "luxury" items in common areas of a building shall not be certified

where a tenant has objected at the hearing to the installation unless the landlord can establish that the items were required for reasons of health and safety or excessive maintenance costs, that the items needed to be replaced and the replacement items were of equivalent quality to the items being replaced, that the building is and has been a "luxury" market building, or other extraordinary circumstances.

            The type of "luxury" items disfavored would be those that are not in keeping with the socioeconomic status of the building's existing tenants and the quality and condition of the building at the time the existing tenants rented their units. Disfavored luxury items would be those that are intended to change the building's style to appeal to a wealthier class of tenants.

            Where the Board finds that an item's cost is substantially excessive, but that the item itself is a reasonable improvement, then the Board shall approve a reduced cost that it finds to be reasonable. The tenant shall have the right to raise these objections at the hearing when the landlord seeks to have the capital improvements certified.

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Section 7.16 Base Rent

            For purposes of calculating future rent increases, base rent shall not include any costs for capital improvements, rehabilitation, or energy conservation measures which have been certified.

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Section 7.17 Administrative Dismissal

(Added March 14, 1989; amended July 15, 1997)

            Notwithstanding the acceptance of a petition, if any of the following conditions exist, the Board shall dismiss the petition without prejudice and shall not schedule a hearing. Prior to dismissal of a petition, the Board shall mail to the petitioner a written notice of intention to dismiss stating the specific applicable reason(s) for such dismissal. The petitioner shall have thirty (30) days from the date of mailing of the notice to cure the defects in the petition prior to dismissal.

            If the petitioner fails to cure the defects in a timely and proper manner, and the petition is administratively dismissed, the petitioner may file an appeal to the Board or file a new petition for certification of capital improvement costs. Appeals shall be governed by the applicable provisions of Ordinance Section 37.8(f).

            The filing of a new petition shall be in accordance with the procedures set forth in Ordinance Section 37.7(f), and shall be subject to the five-year limitation in subsection (2) and the requirement that a new notice of rent increase must be mailed or delivered to the tenants after the new petition is filed. Any previous notice of rent increase, or portion thereof, based on a landlord's petition that was administratively dismissed, shall be null and void as to that portion of the rent increase notice only; other lawful portions of the rent increase notice which were not related to the landlord's dismissed petition shall remain valid.

            A petition for certification of capital improvement costs may be administratively dismissed in the following circumstances:

            (a)        Where the petition submitted fails to clearly itemize costs according to specific improvements categorized by type of improvement; e.g., foundation work, new roof, electrical service, electrical wiring, fire sprinkler system, etc.;

            (b)        Where the petition submitted for improvements to more than one building does not clearly allocate costs to each building;

            (c)        Where the petition submitted for improvements to a building with more than one unit fails to clearly distinguish costs of common area improvements from costs of improvements to specific units;

            (d)        Where the documentation submitted in support of the petition (i.e., bills, canceled checks, etc.) is not clearly marked so as to identify the specific improvement to which it relates;

            (e)        Where insufficient copies of the petition or supporting documentation have been submitted pursuant to 7.10(b)(1) and 7.10(b)(2) above.

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Section 7.18 Repair and Rehabilitation Work Due to Natural Disaster

(Adopted April 17, 1990; amended May 1, 1990, effective for work completed by April 17, 1991)

            The cost of natural disaster repair work of a non-structural nature which, in the absence

of any accompanying structural work, ordinarily would be considered routine maintenance and repairs, such as plaster patching and painting, may be passed through to the tenants, subject to the following provisions:

            (a)        Filing: A landlord who seeks to pass through the costs of non-structural disaster repair work must file a petition for certification on a form prescribed by the Board and accompanied by the documentation listed in Sections 7.10(b)(1)(2) and (3) above. A petition for such a passthrough must be filed before giving notice of a rent increase, and any such notices shall be in conformity with the provisions of Section 4.10 and Section 7.10(c) above.

            (b)        Allowable Costs: Passthroughs of costs for non-structural disaster-related repair work that has not been reimbursed by insurance proceeds shall be limited to seventy-five percent (75%) of all such costs (including interest).

            (c)        Allocation of Costs: The cost of such repair work shall be allocated to all units in the building, regardless of the extent to which each was damaged. Methods which may be appropriate – depending on the circumstances – include, but are not limited to, allocation based on the square footage in each unit or equal division among all units. Each unit may only be charged its pro rata share of the costs. Costs attributable to units where the rent cannot be raised may not be allocated to the other remaining units.

            (d)        Amortization Period: The cost of all such disaster-related repairs shall be amortized over a period of ten years.

            (e)        Allowance of Interest: Interest on money spent to perform such disaster-related repairs shall be limited to the actual interest paid for such money or to ten percent (10%), whichever is lower, and to 10% if interest is not paid, and shall be amortized over ten years.

            (f)         Passthrough: The limitation described in Section 7.12(d) above shall apply to passthroughs based on repairs made necessary by natural disaster except under extraordinary circumstances such as:

                        (1)        When the landlord's financial position can not sustain the extended period of recovery resulting from such a limitation without threatening loss of the building, or forcing the landlord to spread performance of the repairs over an extraordinarily long period of time such that tenants could reasonably claim that a "decrease in services" has resulted; or other hardship to the landlord.

                        (2)        When the maximum allowable capital improvement passthrough for a given tenant is already in place at the time repair costs are certified. Under such circumstances, any rent increase based on passthrough of repairs caused by natural disaster shall be limited to an additional 5% or $15.00, whichever is greater, in any twelve-month period. Any certified passthroughs exceeding this amount may be accumulated and imposed in subsequent years subject to this limitation.

            (g)        Work eligible for passthrough under this Section shall not be considered as an operating and maintenance expense under Section 6.10.

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