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Illegal Rental Income Above Rent Control

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ZZGAMAZZ

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Jul 23, 2007
Professional Status
Certified Residential Appraiser
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California
The subject is a duplex with rent control guidelines in LA.

The owner collects a extra $300 per month because the girlfriend of the designated "legal" tenant moved in recently.

The extra $300 would appear to reflect "market reaction" above-and-beyond the controlled rent of $400 per month, based upon a very long term tenant.

Would y'all include the additional--probably illegal--rental income in determining the subject's actual rent?

(I figure this issue might invoke the ultimate debate between "market reaction" and "legally permissible" camps.)
 
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Doug Wegener

Senior Member
Joined
Apr 14, 2005
Professional Status
Certified Residential Appraiser
State
Oregon
Illegal rental income

The subject is a duplex with rent control guidelines in LA.

The owner collects a extra $300 per month because the girlfriend of the designated "legal" tenant moved in recently.

The extra $300 would appear to reflect "market reaction" above-and-beyond the controlled rent of $400 per month, based upon a very long term tenant.

Would y'all include the additional--probably illegal--rental income in determining the subject's actual rent?

(I figure this issue might invoke the ultimate debate between "market reaction" and "legally permissible" camps.)

http://www.caltenantlaw.com/LARSO.htm


No you cant include illegal rental income.However, she may not be an illegal tenant but there are procedures in place for lawfully raising the rent.

"The landlord still has the right to reasonably disapprove of the new tenants [except the children] and to charge the additional 10% for each new tenant [except the first additional child] who stays beyond 30 days, by a 30-day written notice changing terms of tenancy"

http://www.caltenantlaw.com/LARSO.htm

Another problem here is that it is a duplex. Duplexes are frequently bought by owner occupiers and the LA rent control law allows eviction for a tenant by an owner occupier. Im not sure if you could evict both tenants and have one unit occupied by the owner, and another occupied by members of his immiediate family. Maybe, but you will have to check with the rent control authorities on that one.

The point is that because it is a duplex which often sell to owner occupiers, you may find that rent control duplexes are not as significantly impacted by low rents as other income properties. Look to you market evidence for that one.

Anyway, as I said, complex appraisal beyond the scope of your license.
 

Michigan CG

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Nov 1, 2006
Professional Status
Certified General Appraiser
State
Michigan
...........Would y'all include the additional--probably illegal--rental income in determining the subject's actual rent?............

If the tenant also sold little white rocks through the back door and the landlord was entitled to 10% of that "pharmaceutical product" income would you include that too?

Illegal is illegal.
 

ZZGAMAZZ

Elite Member
Joined
Jul 23, 2007
Professional Status
Certified Residential Appraiser
State
California
Tim: That's an interesting question not as rhetorical as one might think. The floor of the filthy kitchen was covered with approx 50 plastic gallon milk jugs each half-full of a brownish liquid--way beyond anything I'd experienced regardless of my license level. I figured the best approach was to avoid taking photos of the kitchen floor and to git as quick as possible.
 

ZZGAMAZZ

Elite Member
Joined
Jul 23, 2007
Professional Status
Certified Residential Appraiser
State
California
Doug: Thanks for the link. I read the Rent Stable. policy but the link was much more helpful. Also I'll correct the cert designation asap although it's a challenging assignment regardless of the license level.
 
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