The state Supreme Court let stand a ruling allowing the estate of a West Hollywood landlady to more than double rents to levels comparable to other rent-controlled apartments in the city.
The landlady had charged very low rents before passage of West Hollywood's rent control law and had been seeking the right to raise those rents before she died in 1989.
The court's Dec. 20 ruling denied an appeal by West Hollywood officials, who had sought reversal of an earlier decision allowing the higher rents. That decision arose from a lawsuit filed in 1986 by the landlady, Mary Simonson, after the city refused her requests to raise rents in her apartment building despite her claim of economic hardship.
The 2nd District Court of Appeal ruled in September that Simonson's heirs could raise rents to the market rate in effect at the time rent control was enacted in 1985, plus increases allowed under the ordinance since then.
Landlord groups praised the Supreme Court for not overruling the earlier decision, saying it opens the way to higher rents for landlords who were charging below-market rents at the time their cities adopted tough rent-control ordinances.
"Fantastic, this will have a very big impact all over the state," said Grafton Tanquary, an apartment building owner and leader of the West Hollywood Concerned Citizens, a landlord lobbying group. "This ruling will impact a substantial number of landlords."
Although the case is considered precedent-setting, officials in cities with rent-control measures said they doubted that it would substantially weaken their ordinances.
"The Simonson case was a very unique situation," West Hollywood Mayor John Heilman said. "But I'm sure there will be other owners who will use Simonson to attack the rent-control law and claim increases beyond what they are entitled to under the current formula."
City officials say the Simonson case was unique because she was able to prove that the rents she charged on the seven units in her building on Hancock Avenue were far lower than the market value when the city enacted its rent-control ordinance.
Under an agreement with her tenants, Simonson charged rents ranging from $72 to $206 for one-room and one-bedroom apartments and tenants bore much of the cost of the building's maintenance. Simonson had raised rents in 1984 before the passage of rent control, but rolled them back as required when the new law took effect in 1985.
Two years later, her spiraling medical bills caused Simonson to appeal to the city's Rent Stabilization Commission for relief. When the commission spurned her request, the 87-year-old widow filed the lawsuit against the city, becoming overnight a symbol of the landlords' struggle against rent control.
Under pressure of the lawsuit, the commission allowed her to increase rent to between $149 and $351 a month. But her attorneys said the increase was insufficient, with Simonson's units still well below market value. They produced appraisals supporting additional increases and pressed the court for the range of $315 to $550 a month per unit that will now go into effect.
Christopher Harding, the attorney for Simonson and her estate, said the court's decision increases the rental income for the seven units to $2,750, plus a cost of living increase of about 35% for a total of $3,600 per month. The commission's interim ruling had allowed rental income of just $1,227; in 1984, the building brought in only $925 a month.
Harding said the ruling will force other rent-control agencies to re-evaluate their method of granting increases, or they may face large damage claims. Harding's office plans to submit a claim against West Hollywood for about $100,000 in legal fees, and the heirs of the Simonson estate are considering a lawsuit against the city for damages, he said.
"The implication is that all rent-control agencies will have to comply with this ruling," Harding said. "They will have to systematically address the issue of landlords who were charging historically low rents."
Officials in West Hollywood, Santa Monica and Berkeley said that landlord claims of historically low rent will receive more attention, although such arguments are hard to prove.
Tony Trendacosta, general counsel for the Santa Monica rent board, said he expects that more landlords will file petitions as a result of the ruling, but that doesn't mean their requests will be approved.
In Simonson's case, he said, "the facts were clear that the rents she was charging were well below the market rate, but other landlords may not find it that easy to prove their case."
"The question is what does market rate really mean?" he asked. "Is it determined by the neighborhood, by the building? You have to look at a number of factors. It may well be that a landlord is charging low rents because the place was a pigsty."
Joseph Brooks, executive director of Berkeley's rent control board, said more than 10 years have gone by since his city enacted rent control in 1980, making it even more difficult for a landlord to prove that rates were below market at the time of enactment. But, he said, the newly elected rent board in Berkeley has vowed to address the issue of historically low rents.
Larry Gross, executive director of the Coalition for Economic Survival, a local tenants rights group, said the court's decision will remind tenants of the need to continue to fight.
"We think it's a bad, bad ruling," he said. "It serves as a message to tenants that rent control is not safe and should not be taken for granted."