A national anti-rent control group is warning that restrictions on landlords may be spreading from residential to the commercial markets, and that commercial rent control could drive investors away from nonresidential properties.
The Washington-based National Rental Housing Council, a group representing landlords, warns of the "spillover of rent control" to commercial properties in ordinances enacted Berkeley and Davis, Calif.
Both ordinances have been challenged in the courts. The attorney representing Berkeley argues that the ordinances are not really rent control measures.
In its September newsletter, the council says that in "adopting local rent control, the Davis and Berkeley included commercial property along, with residential rental units." Commercial rent control could obstruct new building, lead to shortages of commercial and industrial space, and drive up prices on existing buildings, the council said.
George Mehocic, council vice president, says of the Davis and Berkeley laws, "We will be monitoring this new development as it will surely have a rippling effect through the states."
The newsletter noted that the Davis ordinance was challenged successfully in court as an unconstitutional impairment of contract between lessor and lessee.
Myron Mocovitz, a Golden Gate University Law School professor who is representing Berkeley in two suits brought against the local law and who has been involved in the Davis case, said the Davis decision is expected to be appealed. The Berkeley case is scheduled for trial in early November.
Moscovitz says that Measure 1, passed by Berkeley voters last November, is not really a rent control law. The act, which expires at the end of this year, does not set rents or establish a board to hear rent complaints. It requires that landlords of all properties pass on to renters 80 percent of their savings from the Proposition 13 rollback of property taxes.
The Davis law is similar to Berkeley's, Moscovitz said, except that it calls for a 100 percent pass-on.
Measure 1, Moscovitz says, "forces landlords to share the windfall" from Proposition 13. It doesn't prohibit rent increases but requires landlords to explain increases to tenants. Tenants who feel the increases are not justified can seek relief in the courts. The city attorney can bring suits on behalf of tenants. When the measure expires on Dec. 31, landlords will still be required to explain to tenants increases of 5 percent or more, Moscovitz explained.
"If this was a full-blown rent control law, it probably wouldn't include commercial," he said. "Usually, the feeling is that the (commercial) market should be let alone."