Los Angeles City Housing Law:
INCREASES REQUIRING APPROVAL/DECLARATION

1. CAPITAL IMPROVEMENT (application and approval required) A capital improvement is the addition or replacement of an item in the rental unit or common areas of the housing complex containing the rental units. Also, a capital improvement must meet the following criteria:
   
   
   • The improvement must primarily benefit the tenant rather than the landlord
   • The improvement must have a life expectancy of five years or more
   • The improvement must be permanently fixed in place or relatively immobile.
   • The application must be submitted within 12 months of the completion of the work
   • Normal routine maintenance is not a capital improvement
   
   Examples of a capital improvement: roofing, carpeting, stuccoing, or painting the exterior of a building, garbage disposals, hot water heaters, meter conversion, smoke detectors, etc.
   
   Capital improvement ("CI") surcharge calculation
   
   
   1. As of October 1, 1989, CI increases are not a permanent monthly increase, but will become a temporary monthly surcharge
   2. Only 50% of CI costs can be passed through as a rent increase to the tenants. The amortization of CI costs will continue to be 5 years or 60 months, however CI surcharges terminate after 72 months or 6 years.
   3. $55 per month maximum surcharge unless otherwise agreed upon in writing by the landlord and the tenant.
   4. Surcharge terminates if the CI fails.
   5. A CI surcharge for complete exterior painting is eligible only once every ten years
   
   
2. MAJOR REHABILITATION (declaration required)
   
   
   1. The amount of work must equal $10,000 per unit, with 90% of the work in permit-required rehabilitation, and only 10% in cosmetic improvements.
   2. the unit must be uninhabitable 45 days.
   3. The evicted tenant has the right of first refusal when the rehabilitated unit is re-rented
   4. The owner must obtain a re-rental certificate and must establish to the Department's satisfaction that the requisite work has been done
   5. 25% of all units (4 or more units in a two year period) must remain at the pre-rehabilitation rent level plus automatic increases for a period of 30 years, as an affordable housing preservation measure.
   
   
3. SEISMIC REHABILITATION WORK (application and approval required)
   Seismic rehabilitation work is limited to the following:
   
   
   • tension wall anchors
   • diaphragm strengthening or connections
   • bracing of existing walls
   • strenghtening existing shear walls
   • adding new lateral load resisting elements
   • structural elements that provide a continuous stress path
   • new footings
   • removal, stabilization, or bracing of parapets or appendages
   • structural repair work
   • other work necessary to restore the rental unit to a completed and habitable condition
   
   The landlord is entitled to a monthly increase of 1/60th of the average per unit seismic work cost not to exceed $75 per month. the monthly increase shall continue until the landlord has recovered all costs.
   
   Actual interest and finance costs for money borrowed to pay for seismic work is an eligible cost only if the expense is to cover the period of time necessary to completely amortize the loan within the monthly increase provisions described above.
   
   The landlord has one year from the time the seismic rehabilitation work was completed to file an application.
   
   
4. REHABILITATION WORK (application and approval required)
   Work not meeting the criteria of rehabilitation may be considered a capital improvement.
   
   Calculating the rent increase -- The total cost is amortized over a five year period. Divide the total allowable cost by 60 then divide that amount by the number of units benefiting from the work. The landlord has one year from the completion date of the work to file an application.
   
   
5. JUST AND REASONABLE (application and approval required)
   This is an increase authorized by a hearing officer in situations where the landlord may have incurred reasonable operating expenses which have exceeded the rent increases allowed by the Ordinance.
   
   Examples of items considered
   
   
   • actual rental income
   • mangement and administrative expenses
   • lanlord performed services
   • operating expenses (such as water, gas)
   • maintenance expenses (such as security, painting and repair)
   • taxes including real state), insurance expenses, and other fees and licenses
   
   Examples of items not considered
   
   
   • debt service (mortgage and interest payment)
   • depreciation
   • reimbursed expenses