Son of parents in rent-controlled building takes over his parents’ lease, still protected by rent control

The recent decision of the California Court of Appeal, Mosser Companies v. San Francisco Rent Stabilization and Arbitration Board (2015) can have serious implications on landlords in rent controlled jurisdictions.

In jurisdictions subject to rent control, an owner of residential real property may establish the initial rental rate for a dwelling or unit.  Local jurisdictions are authorized to impose rent control limiting rate increases until the original occupant(s) who took possession of the dwelling or unit no longer permanently reside there.

The question before the court was whether the son who with landlord’s consent resided with his parents when the rental agreement was entered, is an “original occupant” within the meaning of the statute. The status of “original occupant” would preclude the landlord from establishing a new unrestricted rental rate for the apartment when the son remains in the apartment after the parents depart.

The Court of Appeal concluded that the son, although a minor when the rental agreement was entered and not a signatory to the rental agreement, is nonetheless an “original occupant” entitled to the continued protection of the rent control provision.

In this case, parents moved into an apartment in San Francisco with their three children. Their son Brian was 13 years old. A written lease, signed by the parents, provided a term of 12 months to continue thereafter on a month-to-month basis until terminated by written notice. Parents are the only tenants named in the lease. The lease provides “that the Premises is to be used exclusively as the primary and principal residence of the named Tenant(s) who are the only ‘Original’ Tenants of the Premises.” The children are not mentioned in the lease, but it is undisputed that the landlord approved their occupancy. The family lived in the apartment for almost nine years. By 2012, parents and two of their children moved out of the apartment. Brian, then aged 23, did not move with his parents but continued to live in the apartment. A few days after parents moved out, the landlord served notice that it was raising the monthly rent from $1,681.75 to $3,295. This amount substantially exceeds the rental rate permitted by the ordinance so long as the original occupants reside in the premises.

The landlord asserted that he was permitted to raise the rent beyond local rent control limits because parents were the only original occupants under the lease and they no longer lived in the apartment. The court of appeal disagreed and affirmed the lower court decision that the rent board’s interpretation that the minor who went to the premises legally with his parent is