Remodeling is the process of changing the functionality and design of an area. It may involve tearing down a wall to enlarge a bathroom and reconfiguring the kitchen layout so that the cabinets, refrigerator, sink, and stove are in different places. Building an addition to your home would also be considered a remodel. However, remodeling doesn't always involve major structural changes; it can be something as simple as turning a guest room into a home office.
If the purpose of the area has been altered, it has been remodeled. A minor renovation is mainly about keeping the structure as it is and improving the final look. In other words, it happens when you want to rejuvenate and refresh the look of a room. If you compare renovations to surgeries, an important renewal is when you have heart surgery and you get a new heart.
On the other hand, a minor renovation is when you have a hair transplant. In the past, even in October, landlords could simply give their Chapter 6 tenants 60 days' notice and finish the process. And before paying the relocation fees, the landlord could empty their property without paying a cent. However, the 60-day notices never applied to Chapter 5 tenants, so the remodeling provision was in force.
It now also applies to Chapter 6 tenants. Of course, an alternative is to make an offer to the tenant in cash for the keys. That's what the new 121 South Elm did. And Renters Alliance received a couple of calls about it.
However, we want to warn tenants to think twice before accepting any purchase. Our lease is more valuable than ever now that we can't be fired for just cause. Major remodeling does not refer to the construction itself, but to the provision of the rent stabilization ordinance (section 4—6—6 (k)) that allows a landlord to fire a tenant with certain protections. Protections take effect when construction is expected to exceed an amount in dollars (a threshold that varies depending on the size of the unit).
However, the relevant provision is complicated and there are key decision points (and caveats). What's even worse is that the FAQs don't say anything about when the “important” threshold is for a remodel. When is it activated? The Municipal Code sets some specific dollar thresholds for unit size that may result in the termination of the lease. They are identified in the rent stabilization ordinance.
So why are the activation thresholds so low? Because they were established in 2004 and were never updated to take into account changes in construction costs. As costs rise, smaller and smaller jobs can lead to a layoff. The City Council considered updating those rates in February, but took no action. We urge councilmembers to make it a priority to stop abuse related to “prolonged remodeling”.
Let's discuss the options as long as the tenant doesn't accept the purchase. That, of course, will end the landlord's obligation to the tenant. Does the tenant want to return to their apartment and is willing to move to a comparable unit during construction if one is available? If more than one tenant requests a unit, the city decides based on difficulties and other factors. It's not clear if the landlord can refuse to make a comparable unit available.
For how many years can the costs of improvements, the cost of financing and any associated costs be amortized to include the new base income? As a guide, the rent stabilization ordinance includes a depreciation schedule to adjust rents, which is an unrelated section of the ordinance. That schedule ranges from seven years for appliances and floors to fifteen years for electricity and, on average, about ten years in total. Does it apply? The city doesn't offer any guidance. Overall, the “major remodeling” provision is an important protection for tenants that contains some safeguards against dismissals in bad faith.
However, this is a complex provision and the dollar thresholds are simply too low. Now that the city has put an end to evictions without just cause, we expect this provision to be invoked more often. Have you been dismissed in accordance with the “major remodeling” provision? Get in touch with us.
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