Memorandum

City of Lawrence

Planning & Development Services

TO:	David L. Corliss, City Manager
FROM:	Brian Jimenez, Code Enforcement Manager
CC:	Scott McCullough, Director
Date:	August 30, 2013
RE:	Rental Expansion

At the June 25, 2013 city commission meeting, the commission directed staff to prepare an ordinance to expand the city’s existing rental licensing program.  Ordinance No. 8840 was drafted under the Commission’s direction and made available for public review.  A public meeting was held on August 21, 2013 to review the ordinance.  Comments made at or after that meeting are outlined below.  Staff’s responses to each comment follow.

1. Suggestion to re-evaluate the requirement to display the license “prominently on the inside of the main entrance door of the Dwelling Unit” given practical challenges to maintaining it in this fashion and its impact on the aesthetic of the license in a living situation. The goal of this provision is to make available notice to tenants that the unit is licensed.  Given this goal, staff recommends revising this section to require that the Owner/Licensee maintain a copy of the license for the subject unit and provide it to the tenant upon request.  The city will also maintain a copy of the license as well as post a list of licensed properties on the city’s website.

2. Suggestion to ensure that properties that act as a single complex (contiguous parcels, same owner, same management) but exist on multiple lots are viewed/treated as one rental property.  The definition of “Premises” was revised to accommodate this suggestion.

3. Suggestion to re-evaluate the impact of the 10% inspection cap on small-scale complexes. As proposed, any Residential Rental Property containing more than one unit will receive an inspection on 10% of the units, rounded to the nearest whole number.  For properties that contain 10 or less units, the percentage of inspections equates into a range between 10 and 100 percent.  A single-family structure would count as 100% of units, a duplex as 50%, a triplex as 33%, etc.  The 10% cap is intended to serve large complexes where a sampling provides the ability to understand how a property is being maintained.  This outcome of smaller properties being inspected to a higher percentage is necessary in order to meet the intended goal.

4. Suggestion to employ the 10% inspection sample across all units owned by the same “entity” regardless of contiguity or location.  The intent of sampling is to understand the maintenance and condition of a larger complex given the context of that complex (age, similar unit types, same management, similar demographics, etc.)  Employing the sampling to properties owned by the same party but potentially much different in context does not address the value to ensure that life/safety measures are maintained within the context of the surroundings.  Staff recommends sampling only when a complex meets the definitions of Premises and Residential Rental Property as contained in the ordinance.

5. What happens to tenants during license probation/revocation?   Unless a significant life/safety issue is present that requires vacating a unit, which can be discovered via a complaint outside the scope of the program, the tenant(s) will be permitted to remain while the violations triggering a probation are being addressed.  If a license is revoked, then the unit is no longer able to be rented and tenants will need to vacate the unit.

6. Will Section 42 units be exempt from the program?  Section 42 is a dollar-for-dollar Low Income Housing Tax Credit for affordable housing investments. It was created under the Tax Reform Act of 1986 (TRA86) that gives incentives for the utilization of private equity in the development of affordable housing aimed at low-income Americans.  The exemption noted in Section 6-1325(k) related to subsidized housing is intended, in part, to allow those units that are subsidized by the state or United States and inspected by a public agency to forego the inspection part of the program.  Section 42 units are tax credits, and so in theory the owner is made whole financially through the program.  These units are not inspected for life/safety issues and so staff believes they should fully participate in the program.

7. If a property contains a percentage of Section 8 housing, are those units included when determining the 10% of units to inspect?  Section 8 housing is proposed to be exempted from the inspection portion of the program, but is required to be licensed at no cost.  Units identified as Section 8 housing will not be counted for purposes of calculating the number of units to inspect when an inspection is due.

8. Is the right of entry provision legal? In Jones v. Wildgen, 450 F. Supp. 2d 1265, 1270-71 (D.Kan. 2006), aff'd 244 Fed. Appx. 859 (10th Cir. 2007), plaintiffs challenged the exact language found in Section 6-1313, "Right of Entry," on constitutional grounds. The Tenth Circuit Court of Appeals affirmed the decision of the United States District Court for the District of Kansas holding that the language of Section 6-1313 was legal and that it comports with the Fourth Amendment to the United States Constitution.

9. Does the city have the legal right to terminate utilities? Section 6-1322 of the ordinance states that the city may terminate utility service when “continued occupancy or habitation of Residential Rental Property that is in violation of the provisions of this Article shall constitute a hazard to the public health, safety, and welfare and that the City’s provision of water, sanitary sewer, and sanitation services is reasonably related to the ability to occupy or inhabit said Residential Rental Property.”  This is an appropriate police power to protect the public’s health, safety, and welfare.

10. There was a suggestion that the City be responsible to notify both owners and tenants of the inspection.  The Owner/Licensee is responsible to ensure compliance with the program and staff believes it is necessary that they attend the inspection and work to coordinate the inspection date and time given that the landlord is responsible for giving reasonable notice of his/her presence per the Kansas Residential Landlord and Tenant Act.  The contact information for the Owner is much more consistent and the process will be more efficient working with the Owner to schedule inspections.

11. Suggestion that the owner need not be in attendance during an inspection with a tenant. As the property owner and responsible participant of the rental unit in the program, the Owner/Licensee/Agent needs to be in attendance at the inspection.  This reduces conflicts between Owner, tenant, and staff if an issue arises during the inspection and also provides a level of safety for inspectors that are not as familiar with the tenants or the unit as the Owner should be.  The owner, resident agent, and tenant are all encouraged to be in attendance during the inspection to ensure transparency in the process.

12. There was discussion regarding tenant based code violations, such as expired vehicle license plates, or BBQ grills on the deck.  Though compliance is ultimately the responsibility of the Owner, the ordinance and Administrative Regulations provide that staff can cite tenants for code violations when it is clear that the tenant is causing the violation.  The ordinance also provides that tenant based violations shall not count toward an Owner meeting the requirements to receive the incentive of going to a 6-year inspection cycle.  The Administrative Regulations provide guidance on such issues, but there will be staff discretion to determine outcomes.  An Owner has the ability to appeal an inspector’s determination on whether the violation is owner-caused or whether it is major or minor.

13. Do minor violations need to be re-inspected, thus requiring additional tenant/owner/staff time to prepare for the re-inspection?  Staff will have discretion to determine how evidence of compliance will be documented and will determine the appropriate method of demonstrating proof of compliance in discussions with the Owner.  In certain instances of minor violations, photo evidence will be accepted from the Owner demonstrating compliance.  In other instances, a re-inspection will be necessary.  One re-inspection is included in the inspection fee.  Any additional inspection to address compliance is proposed to cost $50.00 each per unit re-inspected.

14. Suggestion that the method of inspections cycle outlined in the Administrative Regulations be random instead of alphabetical as a matter of fairness in paying inspection fees. Staff views the program over cycles of inspection. When viewed in this way, every licensed unit pays the required inspection fee over the initial 3-year inspection period, thus ensuring a fair fee system for all program participants over time.  No change is proposed.

15. How will currently licensed units in the RS districts be transitioned into the program? Rental Dwelling Units participating in the current RS-based program will maintain their current schedule, though the month of renewal may change slightly, and will be eligible for the Incentive program at their next regularly scheduled inspection.  Dwelling Units part of the expansion and units licensed subsequent to the expansion will be inspected per the schedule outlined in the Administrative Regulations.
16. Suggestion that a series of training seminars be completed to educate landlords on how to most effectively participate in the program.  This is an important part of the program that staff will conduct regularly, especially as the program gets started. Details of process and tips to efficiently participate in the program will be covered.
17. Suggestion to promote properties that qualify for the incentive on the city’s website. Staff is committed to finding ways to provide information to the public on the status of all rental units, highlighting those that qualify for the incentive program.
18. Suggestion to create educational material about the program for landlords to provide to tenants.  Staff will create materials and will otherwise help landlords educate tenants on the program.
19. Will the program offer courtesy inspections outside the required inspection (prior to purchasing a property, for example)? Generally, no.  Courtesy inspections are a good way for owners and potential purchasers to know the status of a rental unit from the code’s perspective; however, the proposed program has been created with minimal staffing costs in mind.  Because of this, courtesy inspections on a large-scale program level will not be possible.  Staff will, however, attempt to accommodate courtesy inspections as resources and staff time allow.

After the public meeting, the ordinance was revised to account for the comments received.  The ordinance, together with the administrative regulations, essentially provide for the following:

1. Provides for an effective date of January 1, 2014.  The Administrative Regulations provide a schedule to efficiently license all existing rental units within the first 3 quarters of 2014.  This provides time to license the many thousands of units, as well as seek enforcement of such for those owners that do not voluntarily register their properties.

2. Expands licensing and inspections to all rental units, except as noted in the ordinance.

3. Adds new definitions in Section 6-1302.

4. Incorporates a fee schedule that prorates fees based on the number of units of a rental property.

5. Maintains the requirement for a Resident Agent if the owner resides more than 40 miles outside of the city.

6. Amends the annual license renewal schedule.

7. Requires the rental license to be available to tenants as identified in Section 6-1307.

8. Requires inspection of units on a 3-year schedule, unless the unit qualifies for the incentive inspection schedule of 6 years.

9. Includes a provision that newly constructed rental units and structures qualifying as Major Reconstruction shall be licensed but are exempt from inspection requirements for six years from completion date.

10. Incorporates an inspection cap of the lesser of 10% or 15 dwelling units for multi-unit rental properties as noted in Section 6-1310(b).

11. Includes certain administrative fees to aid in compliance with regulations.

12. Provides an incentive of longer inspection cycles (6 years versus 3 years) for properties that yield, upon inspection, only a certain number of minor violations as noted in Section 6-1312.

13. Provides for the City Manager to promulgate Administrative Regulations to outline minor and major violations and other elements of the ordinance.

14. Maintains occupancy violations as a violation of the Ordinance.

15. Includes new language that requires a violation to be identified as minor or major as a basis for the incentive program.

16. Includes a provision that makes tenants responsible for complying with certain elements of the ordinance.

17. Allows for placing a license on probation or revoking altogether if compliance is not maintained.

18. Provides for appeals before the Building Code Board of Appeals.

19. Provides for the periodic review of fees to fulfill the goals of the program.

20. Provides for certain types of housing to be exempt from parts or the entire program.

Upon adoption of the ordinance, staff will hire the initial staff necessary to begin licensing all rental units in the city, will revise applications and create licensing packets to educate landlords on the expanded program, will hold seminars on the expanded program to educate landlords on how to most effectively participate in the program, and will begin inspecting units.

Action Requested

Adopt on first reading, Ordinance No. 8840, if appropriate.