Bernal Heights, where things are getting ugly between one tenant and landlord over a massive rent hike. James Gaither/Flickr Creative Commons

Landlords are exploiting a loophole in a law meant to protect renters.

Earlier this month, Debra Follingstad received an alarming notice from her landlord. Or rather, her landlord's attorney. The notice informed Follingstad, a longtime San Francisco resident, that her rent was going up. A lot. More than 400 percent.

"Effective May 5, 2015, your monthly base rent pursuant to Section 4 of the Lease shall increase from $2,145 to $8,900," the notice reads. The 60-day notice also required Follingstad to provide an additional $12,500 as a security deposit.

After Follingstad posted the letter to Facebook, many of her friends, followers, and even strangers had the same question: Can this possibly be legal?

(Debra Follingstad)

The answer may be yes.

On her Facebook post about the notice, Follingstad speculates that the landlord is raising the rent in an effort to evict her. She tells me, via text message, that she has lived in the house since 2005 and works as a licensed acupuncturist. (She also says she is unavailable to speak while she is immediately seeking legal counsel and a new place to live. As of press time, CityLab has not been able to obtain or review the full notice beyond the single posted page.)

According to the San Francisco Tenants Union, the maximum allowable annual rent increase is 1.9 percent. Follingstad was served with a 415 percent rent increase, even though the Bernal Heights home that she occupies would appear to be protected by the city's rent-control laws. Per the Housing Rights Committee of San Francisco, a tenants'-rights organization, rent control applies to most any building built before June 1979, including the 1924 house in question.

There are some exceptions to the law—and now, this Bernal Heights house may be one of them, thanks to a technicality in the law. A loophole in a policy designed to protect renters may be enabling some landlords to send their rents soaring.

"It's totally plausible. We're seeing a lot of this right now," says Tommi Mecca, the director of counseling programs at the Housing Rights Committee of San Francisco. "This is just the latest trick these landlords are doing to remove the price controls on the property."

Here's how it might work: On her Facebook post, Follingstad alleges that the landlord recently converted the house's unoccupied downstairs rental unit into storage, following a transfer of the title between family members. In demolishing the downstairs unit—by tearing out its kitchen and bathroom—the landlord reportedly changed the two-unit house into a single-family residence. One whose rent-control status was suddenly void.

The property in question: 355 Bocana St., San Francisco, California. (Google Earth)

"The situation of a single-family home with an illegal unit—sometimes downstairs, sometimes out back, in what’s called an in-law unit, sometimes it’s an apartment they put in the garage—it’s various scenarios, but it’s all the same situation," Mecca says. "Under rent control, those properties, as long as the single-family house was built before 1979, the illegal unit does not matter. Having that illegal unit puts that property under rent control. Once you remove that illegal unit, technically, you lose rent control. It’s now a single-family dwelling."

Records show two title transfers for the address on December 30, 2014, between the owner and other individuals, including another individual with the same last name as the owner. A search for the address on the city's permits database didn't yield any results matching a housing-unit demolition or conversion. The owner's attorney could not confirm these transactions, but did confirm that the notice was legit.

There's a formal procedure for rental housing demolitions and mergers, the process whereby housing units are removed by their owners, according to the San Francisco Tenants Union. In some cases, when landlords demolish units, tenants are liable to receive thousands of dollars in relocation payments. "A landlord must first get the required permits or their ability to do the eviction legally is significantly impaired," the SFTU website reads. "Tenants who face eviction due to such mergers may be able to contest the issuance of such permits."

Illegal or in-law units—the likes of which Follingstad says her landlord converted to storage in order in order to strip the property of its rent-control protection—have been the subject of increased scrutiny in recent years. In April of last year, San Francisco supervisors approved legislation recognizing these in-law units as legal housing, ending a "don't ask, don't tell" approach to a big part of the city's affordable-housing stock.

"There's tens of thousands of units that were legalized. Now they’re on the books," says Sonja Trauss, the founder of the San Francisco Bay Area Renters' Foundation, a grassroots pro-growth organization. "People would have a garage, or a basement, and instead of carefully going through process of filling out firms, they would just finish them. They weren't illegal in the sense that they were uninhabitable, they just weren't permitted."

Granting legal housing status to illegal in-law units was a measure meant to protect renters in San Francisco. However, bringing these units out of the "shadow economy," in a sense, may have stripped renters of an unlikely but powerful protection: legal limbo.

"How are you going to sue your tenants when you’re not supposed to have a tenant there in the first place?" Trauss says. "When you know your landlord’s breaking the law, haven’t you always felt that you're safer than when you’re in a fully permitted building?

If Follingstad's accusations are accurate, then her housing situation is a conundrum. The in-law unit adjacent to her own rental unit may have been an illegal unit, one that was not necessarily up to code for rental housing. Nevertheless, thanks to the April 2014 sunshine law giving amnesty to illegal housing units, these in-law units warrant rent-control protections.

Does the new rent-control legislation mean that demolishing an in-law unit—potentially an illegal unit not up to code—requires a demolition or merger permit? Does removing an in-law unit from a home, and thereby rendering it as a single-family dwelling no longer subject to rent-control protections, trigger relocation payments—the way any other unit demolition or merger would?

The answer is unclear.

Peak eviction in San Francisco arrived in 1998: That's when Ellis Act and owner-move-in evictions reached their highest numbers. Since then, landlords looking to move renters out of rent-controlled properties have used increasingly sophisticated and varied legal mechanisms to do so. Given the legal ambiguity surrounding illegal and in-law units, it may not be a surprise that a landlord could find in them a way to raise the rent astronomically.

"Welcome to the San Francisco housing crisis," Mecca says.

Top Image: James Gaither/Flickr Creative Commons

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