While tenants should have their fair share of rights, in San Francisco, “fair” is far gone. Laws in the city are so skewed toward tenants that landlords have almost no rights. Perhaps the most shockingly protected party is the “Master Tenant” – a term that echoes beyond the legal designation. Tenants have become the masters of everything.
San Francisco laws are geared toward creating life-time tenancies. No other city has more protections for tenants or, frankly, disdain for landlords. Should a landlord dare stand up for her rights, she quickly learns the wrath of tenants and the power of the City Attorney – just as did Anne Kihagi. Ms. Kihagi hated feeling victimized, so she chose to speak up in the hopes that landlords intelligently discern the truth and seek ways to change lopsided laws.
To fully understand the tyranny of the master tenant, it’s necessary to first understand the vocabulary. If two tenants sign a lease for a two-bedroom apartment, they are considered “original” tenants. When one original tenant moves out, he can be replaced with a “sub-tenant.” The remaining original tenant, who is the custodian of this sub-tenancy, then becomes the “master tenant.”
The protections afforded to the master tenant are unprecedented, enabling the master to control the unit(s) for the indefinite future. This perpetuity becomes dangerous for the rightful owners of the properties.
The average San Franciscan who has leased their rent-controlled unit for 15 years or more pays $1,250 each month for a two-bedroom, while those just moving in are paying around $4,000 every month. On average, rent has increased 2% over the past 20 years, without regard for the inflation of utilities and maintenance costs. The new rent might seem steep, but with the average rent of $1,250, landlords can barely maintain their properties, as rent might be controlled but cost of both living and upkeep continues to rise.
The most common “master” practice is also completely illegal. For instance, even if the original tenants split $1,500 rent equally and paid $750 apiece, the master tenant often uses a new sub-tenancy to turn a profit once the other original tenant has vacated. More than 95% of masters create splits that take advantage of the sub-tenant; the new sub-tenant might even pay $1,500 while the master tenant pays nothing.
This is illegal. Per the Rent Board:
“A master tenant may not charge a subtenant more rent upon initial occupancy of the subtenant than that rent which the master tenant is currently paying to the landlord. For tenancies that commenced after May 24, 1998, the master tenant is required to provide each subtenant a written disclosure of the amount of rent the master tenant is obligated to pay the landlord, prior to commencement of the sub tenancy. …
Where a master tenant shares a rental unit with one or more subtenants, the master tenant cannot charge any subtenant more than a proportional share of the total rent the master tenant pays to the owner. The subtenant’s allowable proportional share of the total rent may be based on equal division by the number of occupants or bedrooms, or the square footage of exclusively occupied space.” (Rule 154)
While it might seem like this law delineates restrictions, it allows plenty of freedoms. It requires a written disclosure “of the amount of rent the master tenant is obligated to pay the landlord,” but it does not obligate them to provide the actual lease, which should be the law. The language is intentionally ambiguous. Instead, the master can merely disclose their demands in writing.
The second part of the law prohibits the master tenant from charging more than a proportional share of rent. However, the sentence that follows adds justifications to allow the master tenant to charge beyond proportional square footage, by adding subjective things like furnishings, cable, and cleaning. This effectively cancels out the entire proportion-related restriction.
In 2017, the laws were amended to make it even more attractive to be a master tenant. Now, the laws even have a clause wherein the master tenant can sublet the entire unit. Is this not the textbook function of a landlord? With such flimsy laws, there are master tenants that do not even reside in the property yet rent their $1,500 units for up to $4,000 while paying the unknowing landlord the rent-controlled rate.
The horror stories abound:
“One person, she was paying $250 a night to sleep on the couch for Pride, and we had two couches in the living room, and the other person we had set for $200 because they were willing to clean or cook for us. I rented the shower one month, one year in June.”
The master tenant even has eviction powers beyond any San Francisco landlord’s imagining. If a sub-tenant files a complaint on the master tenant, he/she can terminate the sub-tenancy with no questions asked and a 30-day notice. The Rent Control has more restrictions than ever on landlords’ eviction of tenants, yet the master tenant can evict at will? Sub-tenants quickly learn never to complain.
The truth is that laws are created all the time without landlords in mind, and even when they try to stick up for themselves, landlords still lose an average of 90% of the cases they bring to the Rent Board regarding over-profiting master tenants.
Will San Francisco ever consider fairness to owners? Or will tenants continue to be the master of owner’s fate?
For more information on Anne Kihagi and West 18 Properties, visit http://annekihagisf.com/