Kavanau v. Santa Monica Rent Control Board, 16 Cal. 4th 761 (1997)

Citation: Kavanau v. Santa Monica Rent Control Board, 16 Cal. 4th 761 (1997)
Parent Document: Kavanau v. Santa Monica Rent Control Board, 16 Cal. 4th 761 (1997)
Jurisdiction: California (state)
Effective Date: 1997-08-26
Original Source: https://www.courtlistener.com/opinion/5607899/kavanau-v-santa-monica-rent-con... ↗

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The City uses a “maintenance of net operating income” formula for calculating rent ceilings. A typical maintenance of net operating income *769formula presumes the landlord’s net operating income at the time rent control began provided a just and reasonable return. In order to maintain this net operating income at a constant level, the law permits rent increases that will enable the landlord to recoup increases in ongoing operating expenses. (See Guidelines, supra, 35 Rutgers L.Rev. at pp. 809-817.) The landlord may also amortize the costs of capital improvements over the useful life of those improvements and pass those costs through to tenants. (See id. at pp. 817-826.) Of course, if the law holds net operating income constant, inflation will erode the real value of that income. Thus, many maintenance of net operating income formulas permit a periodic inflation adjustment. (See Fisher, supra, 37 Cal.3d at p. 683; cf. Cotati Alliance for Better Housing v. City of Cotati (1983) 148 Cal.App.3d 280, 289 [195 Cal.Rptr. 825] (Cotati).)

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