A San Francisco corporate landlord accused of pricing out rent-controlled tenants by charging them for expenses has waived those fees and promised to expedite the process for tenants seeking exemptions due to financial hardship.
Veritas Investments has made headlines over the past year after dozens of tenants urged city leaders to close a loophole in rental law that has allowed the company to charge tenants “pass-through” fees for things such as repairs, property taxes and debt incurred after purchasing a building.
The company announced it had switched course Monday, ahead of a rally scheduled for Tuesday at which tenants will call on it to drop increases related specifically to debt service and property taxes. Tenants say the company is still requiring some to pay the charges despite a change in law last year that restricted this type of pass-through charge.
Last May, the Board of Supervisors responded to tenants’ complaints about pass-throughs by unanimously passing legislation that prevents landlords from passing on to tenants the cost of debt service and property tax, effectively restricting Operating & Maintenance (OM) increases.
However, other pass-through fees, including for building repairs, can still be passed on to tenants without restrictions.
The new law is not retroactive, and Veritas has continued to charge tenants for the OM pass-throughs at buildings acquired in the months prior to the law’s passage, according to Brad Hirn, an advocate with Housing Rights Committee.
Hirn said that the number of buildings that are exempt from the new law because they were purchased prior to its passage totals 25. Tenants there have been fighting Veritas over hardship waivers as recently as this year.
“Veritas has been claiming in Rent Board hearings that they ‘rely’ on the rent increases — and we have been arguing they don’t,” said Hirn. He acknowledged that the company gave hardship credits about a month ago to tenants facing OM pass-throughs, but noted that not all tenants who needed them received them.
Instead of displacing tenants, a spokesperson for Veritas said that the company is now setting an example for other large landlords to follow by waiving all legal pass-through charges through an “Expedited Hardship Waiver Program.”
The program covers OM pass-throughs, which tenant advocates deem among the most troubling because they allow for a 7 percent rent increase to tenants to help landlords pay off their debt and property taxes.
“At every one of our properties that have OM pass-throughs we have proactively waived all cumulative charges today,” said Veritas CEO Yat Pang Au. He said the OM charges equal about “$50 to $60” on top of tenants monthly rent, but add up to “tens of thousands of dollars” across the companies’ portfolio.
The change of heart comes after more than 100 Veritas tenants filed a lawsuit last October alleging that the company is neglecting maintenance in its buildings and subjecting some tenants to lengthy construction in an effort to force them out.
Au said that Veritas worked collaboratively with Supervisors Aaron Peskin and Vallie Brown on the program, which was piloted at a few buildings in their respective districts.
“As we met with a few supervisors, we heard that [granting] that hardship waiver was taking a lot of time. It was very arcane,” said Au. “We turned it around.”
In a joint statement issued Monday, Brown and Peskin said that each had “large numbers of rent-controlled tenants in our respective districts who have reached out for help with onerous ‘pass-through’ rent increases they simply can’t afford.”
They also said that the voluntary relief program proposed by Veritas does not spare the company or other corporate landlords capitalizing on current loopholes from future legislative intervention.
“If Veritas wants to offer private tenants case-by-case relief, that is their prerogative. But as policy makers, we are not in the business of creating unenforceable policies outside of the law,” the supervisors said in their statement. “While we appreciate Veritas’s efforts to begin a dialogue with tenants about addressing rent increases fairly, we remain committed to working with our colleagues and impacted tenants to author concrete reforms to the San Francisco Rent Ordinance.”
Tenants have said that they are burdened by the pass-throughs, which can come bundled together and are charged on top of an annual allowable rent increase of 2.6 percent.
Those who are unable to afford the pass-throughs have the option of applying for a hardship waiver with the rent board, but that process can stretch anywhere from 12 to 24 months, forcing tenants to either pay the increases while they wait or potentially face eviction.
Veritas is promising to bridge that gap by automatically waiving fees for all tenants who claim hardship “in good faith.
Au said that the company is in conversation with the rent board about expanding the hardship waiver program to “include more people.” In the meantime, Veritas, which operates more than 250 properties in San Francisco “has reached out to all residents who have pass-throughs” and “waived many accumulated fees.”
He confirmed that OM pass-throughs have been issued since the law’s passage for about 25 buildings, and stated that the company does “rely upon [pass-throughs for] being able to reinvest back into our buildings, to be able to retrofit our buildings for [The City’s] seismic retrofit program, and to upgrade our buildings.”
Au noted that the waiver program applies to “every pass-through in San Francisco” and called it “very generous.”
Hirn said that his group has repeatedly shown at public hearings that the company does not need to issue pass-throughs to make a profit. He agreed that the rent board’s current hardship process is inadequate for tenants, but also disapproved of Veritas’ “internal fix.”
“Even for those who do qualify for [financial hardship], many tenants do not like to use it or are afraid to use it because they have to disclose all their financial information to Veritas,” he said. “Now Veritas is saying they are going to privatize a process done by a public agency, the rent board.”
A Veritas spokesperson clarified that the company does not determine who qualifies for the waivers, which are still validated by the rent board, and that the company is “simply accelerating the benefit.”
At Tuesday’s rally, Hirn said that the tenants will reiterate a demand that they’ve expressed since day one — that Veritas “pull or drop the OM rent increases” — for all of it’s tenants, without requiring them to first claim hardship.