Los Angeles LA RSO Property New Lease Allowed?

[David Shaw]

I own a 4-unit Rental Property in Los Angeles city that is covered under LA RSO (Rent Stabilization Ordinance). I have one tenant that has been there for 10 years so their rent is very low. They love living there but they want the unit updated, about a $50k cost. In exchange the tenant is telling me that they are willing to sign a brand new lease at market rent. 

The issue is that I don't know if I am allowed to make a new lease at a much higher rent price with the tenant since he is under RSO, EVEN if the tenant is the one wanting it. I have called LAHD (Los Angeles Housing Department), and they have no idea, apparently no one has seen this scenario, or they are just incompetent. 

Has anyone experienced this? Would I be able to create a new lease agreement with the existing tenant? Or is there a workaround, for example if they move out then move back in? 

Any advice would be appreciated, sad that the department responsible for such issues can't answer me. 

[Greg M.]

LAHD are morons who will outright lie to you. Never trust them. I'd suggest not even trusting what is on their website. Double check everything. 

I think this is what you are looking for. 

The main issue is if they ever complain and it's not airtight, the LAHD will likely force you to return all the "illegal" rent to the tenants. 

Perhaps have the tenant move out during the repairs. Have them stay at a hotel for a month and get all the repairs done and then start fresh with a pretext of listing the unit to the public. List it online at the new price. Show it to people and keep records of the showings. Collect applications and keep those on file. Collection new applications from your old tenants. Run their credit like you would for anyone else. 

You can also have the tenant respond in writing to your renewal lease with confirmation that they are not renewing and will be vacating the unit. Then they can "apply" later for this unit after they changed their mind.

Maybe you could draw up a separate contract that says in exchange for modifications to the unit, tenants have agreed to cover half the costs at $300/month for 7 years. This is totally separate from the rent, which will be annually adjusted with the market as allowed by RSO. Or work it as a loan. You're loaning tenant $25K for the upgrades that they have no title to and tenants agree to pay you back at over X years. 

Perhaps the tenants would be willing to pay for the changes up front in exchange for a long-term lease at a low cost. For example, give them a 10 year lease with a guaranteed rent increase of no more than 3% each year. 

All this is sketchy, but probably doable. Talk to a lawyer.