In a decision hailed as a major victory by landlords, a Santa Monica Superior Court judge has for the second time ordered West Hollywood's Rent Stabilization Commission to reconsider a rent increase case involving an 89-year-old landlady.
The ruling by Judge David M. Rothman will force the rent commission to rehear the case of Mary Simonson, who has complained of severe economic hardship as a result of retaining low rents for more than 20 years in her 9-unit apartment building.
"It's a clear victory for my client and other property owners in that the judge is reiterating that rent control agencies have to take into consideration fair market value (of rents) when deciding rent increase requests," attorney Christopher M. Harding said.
But while he and others were elated over what the ruling may mean for landlords, tenant activists were quick to cast the action in a different light.
"If the landlords are jumping for joy over this, it's obvious they're desperate for something to get excited about," said Larry Gross, executive director of the Coalition for Economic Survival, a tenants' rights group.
In an 11-page opinion critical of the rent panel's handling of the case, Rothman ruled that the commission was "too restrictive" in determining a fair rate of return when it granted Simonson less than half the rent increases she sought after the judge ordered the case reconsidered the first time last year.
At that time, Rothman ruled that when the commission is determining whether a landlord is making a fair return from a rental unit, it must take into account the rents of comparable units in the surrounding area.
However, in the latest ruling issued July 7, the judge expanded his previous finding, saying the commission should also take into account other factors, including "the fair and reasonable expectation" of a landlord when buying property to eventually reap financial gain from the investment.
"The fair and reasonable return for someone who has owned property for 40 years cannot be measured by the same standard as one would determine a fair and reasonable return (for) someone who is a heavily indebted new owner," the judge said.
Aided by Caretaker
City Atty. Michael Jenkins called the decision "disappointing, since we obviously believe we have handled the case correctly."
Simonson and her late husband built the stucco apartment building on Hancock Avenue, not far from City Hall, in 1935. She has continued to live there and manage the property with the help of a caretaker since her husband died eight years ago.
Her quest to raise rents became a cause celebre among local landlords two years ago after the rent commission spurned her request for increases.
Claiming that her medical bills were spiraling out of control, and noting that she had not asked tenants for a rent increase in more than two decades, Simonson and her caretaker, Anna Boyce, argued that they needed to nearly double the rents of the 1-room and 1-bedroom apartments, some of which were renting for as little as $72 a month.
Landlord advocate groups who have rallied to her side, helping to pay her legal expenses, insist that her case is crucial because it is representative of other "historically low" rent cases.
In 1986, attorneys on her behalf asked the commission to ignore the complex formula it normally uses to award rent increases to landlords who want more than their annual rent hikes (75% of the rise in the consumer price index), arguing that the commission had the authority to bypass the formula because of the peculiar circumstances of Simonson's plight.
After the commission was unable to agree on a response to her request, deferring to an earlier ruling by a hearing examiner that denied her any rent increase at all, Simonson filed suit against the commission.
In obeying the judge's order to rehear the case, the commission allowed her to raise the rents to between $149 and $351 last July, but the case went back to court after attorneys for Simonson argued that the decision left the rent of Simonson's units well below market value.
"We're hopeful that when the commission considers the matter the next time around, they will finally give Mrs. Simonson the rents she deserves," Harding said.
Rents Still Moderate
He said that the $355 to $600 Simonson is requesting for the seven units she currently rents "in most cases qualifies under federal standards as affordable housing, and in every case falls within the range of moderate-income housing."
Landlord advocate groups were quick to hail the decision as a step forward in the struggle against what they consider to be oppressive rent control laws.
"It's a tremendous victory," said Gene M. Burke, an attorney for the Apartment Assn. of Greater Los Angeles, whose 25,000 members are landlords and apartment managers. "It says property owners have the right to present their full case (to rent control agencies) in determining just what a fair rate of return is, which is the essential question."