of 1970, as amended (Public Law 91-379, 84 Stat. 799; Public Law 91-558, 84 Stat. 1468; Public Law 92-8, 85 Stat. 13; Public Law 9215, 85 Stat. 38), the Economic Stabilization Act Amendments of 1971 (Public Law 92-210, 85 Stat. 743), Executive Order No. 11627 (36 F.R. 20139, Oct. 16, 1971), and Cost of Living Council Order No. 4 (36 F.R. 20202, Oct. 16, 1971). SOURCE: The provisions of this Part 301 appear at 36 F.R. 25387, Dec. 30, 1971, unless otherwise noted. Subpart A-General § 301.1 Scope. (a) In general. This part sets forth the regulations applicable to increases in rents to be paid for any residence or other real property, not exempted under paragraph (b) of this section, which occur after December 28, 1971. Personal property which is a residence is subject to this part. (b) Exemptions. Pursuant to § 101.32 (g) (2) of this title, rentals of the following classes of real property are exempt from the requirements of, and are not included in, the coverage of this part: (1) Industrial, farm, and nonresidential commercial property; (2) Rental units, including houses, apartments, or any other residential rental property, on which construction is completed, and which are offered for rent for the first time after August 15, 1971; and (3) Rehabilitated dwellings for which the cost of rehabilitation exceeds onethird of the total value of the rehabilitated property (including the cost of rehabilitation), offered for rent in the newly rehabilitated condition for the first time after August 15, 1971. * For the purposes of subparagraphs (2) and (3) of this paragraph, the words "offered for rent * * for the first time after August 15, 1971" refer to a residence or rehabilitated dwelling which was first habitable as a residence or rehabilitated dwelling after that date. Where, under the requirements of local building codes, property law, zoning ordinances, or other land use regulations, a certificate of occupancy or inspection or similar official instrument is required to be executed before lawful occupancy of a dwelling, that certificate or instrument shall be conclusive as to when property is first habitable as a residence or rehabilitated dwelling. Where a certificate of occupany or inspection or its equivalent is not required to be executed before lawful occupancy, an affidavit of the date of readiness for occupancy, to which shall be attached substantiating documents, shall be used in place of that certificate. The following are examples of situations covered in subparagraphs (2) and (3) of this paragraph: Example 1. X begins constructing an apartment building in March 1971. The units were first habitable as dwellings on August 21. However, several persons signed leases before August 15, 1971, stipulating September 1, 1971 as the date of occupancy. None of the units in the apartment building is subject to the requirements of this part. Example 2. X begins construction of an apartment building in March 1971. The building was substantially completed on August 14, 1971, at which time it was inspected and a certificate of occupancy issued pursuant to local ordinances. The building was leased and occupied subsequent to August 14. All of the units in the apartment building are subject to the requirements of this part. Example 3. X rehabilitates, at a cost of $4,000, a house previously rented and previously valued at $10,000. The rehabilitated house is valued at $14,000 and first offered for rent in the newly rehabilitated condition after August 15, 1971. The rental of the house will not be exempt from the requirements of this part because the cost of the rehabilitation did not exceed one-third of the total value of the rehabilitated property (including the cost of rehabilitation). (c) Geographic limitations. This part does not apply to rents to be paid under leases or implied contracts of occupancy for any residence or other real property which is located outside of the United States. The following definitions apply in this part: "Base rent" means base rent determined under Subpart C of this part. "Capital improvement" means a permanent improvement or betterment the use of which will continue beyond a 12month period beginning with the completion of the improvements. The improvement must benefit the residence or other real property, and must be subject to an allowance for depreciation under the provisions of the Internal Revenue Code of 1954. "Class of lessees" means either a renewal class, that is, persons who are renewing leases or implied contracts of occupancy on residences or other real property which they had previously leased or held under contract; or a new lessee class, that is, persons who are leas ing or entering into implied contracts of occupancy on residences or other real property for the first time. "Complex" means a group of substantially adjacent buildings containing residences which, for the purposes of management, were operated as a single entity on August 15, 1971. contract of occupancy" "Implied means a contract whereby a person having a legal estate in any residence or other real property conveys a part of his interest to another person in consideration of rent or other compensation where the contract is created by the actions of the parties without resort to a writing. "Including" means including, but not limited to. "Lease" means a contract whereby a person having a legal estate in any residence or other real property conveys a part of his interest to another person in consideration of rent or other compensation, but does not include a license. "Lessee" means the person who is legally obligated to pay rent under a lease or implied contract of occupancy. "Lessor" means the person to whom the lessee or tenant is legally obligated to pay rent. "Person" includes any individual, trust, estate, partnership, association, company, firm or corporation, a government, and any agent or instrumentality of a government, but does not include a foreign government, or any international organization established by treaty or agreement between partcipating governments. "Price" means any compensation for the lease of any real property and includes rent, commissions, dues, fees, margins, rates, charges, tariffs, fares, or premiums, and similar charges, regardless of form or designation. "Rent payment interval" means each time period for which rent is paid to the lessor under a lease or implied contract of occupancy. "Residence or other real property". "Residence" means a unit of housing normally occupied as a dwelling place. It does not necessarily refer to a principal residence, and it includes other housing units maintained for the purpose of occupancy as a dwelling. Whether or not property is used as a residence depends upon all the facts and circumstances in each case. For example, a seasonal or vacation dwelling, houseboat, hotel or motel-type housing unit, or a mobile home, is included in the term residence if it is the principal place of abode of nontransient occupants. Therefore, a single hotel or similar establishment may contain both residential and nonresidential housing units. "Other real property" includes only real property devoted to the use of a residence. "Service" includes any service performed by a person for another person, other than in an employment relationship, and also includes professional services of any kind, and services performed by membership organizations for which dues are charged, and leasing or licensing of any residence or other real property. "Transaction" means an arms-length transaction between unrelated persons who are not members of a controlled group (as defined in section 1563 (a), Internal Revenue Code of 1954), and is considered to occur at the time and place a lease or covenant to lease is executed by the parties, is created by implication, or an implied contract of occupancy comes into being. "United States" means the several States and the District of Columbia. "Unrelated person" means a person other than a person described in section 267(b), Internal Revenue Code of 1954. § 301.3 Rent defined. (a) General. For the purposes of this part, except where the context indicates otherwise, "rent" means any price for the use of a residence or other real property. It includes any charge, no matter how set forth, paid by the lessee for the use of any property, or for any service, in connection with the residence or other real property. For example, a bonus paid to a lessor or his agent for execution of a lease or paid to a lessee as consideration for assignment of a sublease is considered to be rent. A rent is considered to be charged either when a transaction occurs or when rent is paid. (b) Exclusions. Notwithstanding paragraph (a) of this section, rent does not include (1) Security deposits: A deposit of money with a lessor or his agent by a lessee as a security for the faithful performance of the terms of the lease and which is refundable upon such performance, unless considered as rent under local law; (2) Fees or charges for automobile parking space, mobile home space, and boat slips, when the fee or charge is paid for space not used in connection with a residence; or (3) Charges for in-patient medical care: (i) A charge paid to an establishment the principal purposes or functions of which are the providing of "in-patient medical care" which is defined as the diagnosis, cure, mitigation, and treatment of disease for residents, but does not include care in a convalescent home or a home for children or the aged, or institutions whose principal purposes or functions are to train handicapped persons to pursue a vocation. (ii) For purposes of this subparagraph, an establishment is not considered to be primarily providing in-patient medical care, and is considered to be a home for the elderly, and thereby charging rent, if its principal purposes or functions are the providing of a residence for elderly persons with health-related services for the provision of continuous general supervision; and either (a) Sheltered care services with only occasional direct personal care services to residents (who are otherwise able to manage the normal activities of daily living), for the purpose of general supervision and protective services for persons who do not need in-patient medical care, or continuous personal care services for assistance in the activities of daily living; or (b) Direct personal care services to residents in their activities of daily living, for the purpose of general supervision and direct personal care services for persons who require regular assistance in activities of daily living but who do not need in-patient medical services. § 301.4 Calculation of monthly rent. (a) Definition. For the purposes of this part, "monthly rent" means the rent charged per month under any lease or implied contract of occupancy regardless of the length of the rent payment interval period. (b) Payment at other than monthly intervals. Where the rent is payable for rent payment intervals which are less than or greater than one month, the amount of rent paid on each rent payment date shall be prorated to one month to arrive at the monthly rent. Example 1. $50 monthly rent is: rent is paid weekly. The Example 2. $300 rent is paid every 6 weeks. (c) Payment for items not called rent. A charge for the use of property or services furnished in connection with a residence or other real property is considered to be a part of the monthly rent. Example. A month-to-month lease requires the lessee to make a monthly payment of rent of $150. In addition, the lessee is required by the lease to pay $10 per month for security services, $10 a month for maintenance, $10 a month for the use of recreation facilities and $10 a month for parking. The monthly rent is $190. (d) Side payments. The monthly rent shall include any amount paid to the lessor for the execution of the lease or privilege of entering into an implied contract of occupancy in the nature of a bonus or side payment. That amount shall be prorated to the monthly rent charged or chargeable— (1) During the next 12 months, if the term of that lease or contract is 12 months or less; or (2) During the term of the lease, if the term is longer than 12 months. If the side payment is to be paid at intervals during the lease period it shall be prorated to the monthly payment of rent which will be paid under the lease during the lease period. Example. A lessee is required to pay a nonreturnable "key fee" of $600 to the manager of an apartment for the privilege of entering into a month-to-month lease on a residence requiring a monthly payment of rent of $200. $600 The monthly rent is $200 plus 12 or $250. (e) Discounts. The foregiveness of any rent payment shall be prorated as a discount from the rent which will be paid during a 12-month period, plus the forgiven period, or the term of the lease, plus the forgiveness period, if that term is longer than 12 months. The 12-month period shall begin after the month or months for which the rent was forgiven. Example. On August 1 a person signed a 12month lease for a residence effective November 1 with a required monthly payment of rent of $100. The person is given occupancy on September 1 in consideration of having signed the lease. No rent is charged for the month of September or October. The 12 X $100 monthly rent is. or $85.71. 14 § 301.7 Prenotification and reporting firms. (a) General. A residence or other real property is occupied when it becomes subject to a lease, covenant to lease, or implied contract of occupancy. The physical presence of any person is not required for a residence or other real property to be occupied. (b) Time of becoming occupied. A residence or other real property becomes occupied at the time when a transaction involving that residence or other real property occurs, even though possession is not required until a later time. are (c) Examples. The following examples of situations covered by this section: Example 1. A residence became occupied with month-to-month terms before December 29, 1971. A monthly term ends January 31, 1972. No new lease agreement is entered into; the tenant retains his right of occupancy thereby automatically renewing the existing lease. A new monthly term begins February 1, 1972. Example 2. A residence became occupied with terms of year to year prior to December 29, 1971. The yearly term ends on October 31, 1972. A new yearly lease is signed August 31, 1972. The residence becomes occupied on that date notwithstanding the fact that the first lease has not yet expired. Subpart B-Rent Adjustments § 301.101 General rule. Except as otherwise provided in this subpart, no person may charge, offer to charge, or give notice of intent to charge, a monthly rent, with respect to any transaction after December 28, 1971, involving a lease of or an implied contract of occupancy for a residence or other real property, which exceeds the base rent of that residence or other real property. § 301.102 Allowable rent increases. (a) General. When a residence or other real property becomes occupied after December 28, 1971, a person may charge, offer to charge, or give notice of intent to charge, a monthly rent in excess of the base rent, after notification pursuant to § 301.501, only to the extent that the monthly rent does not exceed the sum of the base rent, plus (1) Two and one-half percent of the base rent for the residence or other real property with respect to each 12-month period beginning after December 28, 1971 (the 22 percent may not be accumulated from one period to another period); and (2) The amount of any increase in allowable costs occurring after December 28, 1971, allocable to the residence or other real property, as determined under paragraph (b) of this section. (b) Allowable costs-(1) Definition. As used in paragraph (a) (2) of this section, "allowable costs" means the following items of expense: (i) State and local real estate taxes. (ii) State and local fees, levies, and charges for all municipal services, except such charges for gas and electricity. Special assessments imposed by any governmental authority are not considered to be an item of allowable cost. (2) Increase in allowable costs. The increase in allowable costs which is to be allocated is the difference between: (i) The allowable costs related to the residence, structure containing the residence, complex, or other real property which were charged during the 12-month period ending on the date the first installment of the increase in costs is payable; and (ii) The allowable costs related to the same residence, same structure containing the residence, same complex, or same other real property which will be charged during the 12-month period beginning after the date the first installment of the increase in costs is payable. (3) Allocation of increase in allowable costs. For the purposes of paragraph (a) (2) of this section, the increase in allowable costs determined for a multiple-unit residential housing structure or complex shall be prorated to individual residences. Similarly, the increase in allowable costs on other real property shall be prorated to a residence, if the owner of the residence will be required to bear that increased cost. (4) Method of allocation. The increase in allowable costs allocable to a residence shall be determined by multiplying the increase in allowable costs determined under paragraph (b) (2) of this section on the structure containing the residence or the complex by a fraction. The numerator of that fraction is the rent charged or chargeable during the 12 month period before the increase in the allowable costs becomes effective for the residence. The denominator is the sum of all rents charged or chargeable, for all residences or other rental units in the structure or complex (whether or not subject to this part), which are subject to the increase in allowable costs during the 12-month period before the increase in the allowable costs becomes effective. (5) Special adjustment. Where an increase in allowable costs occurs after December 28, 1971 and cannot be recovered by an increase in the monthly rent until a later lease period, the amount of the unrecovered increase already paid by the owner in the prior lease period may be prorated to the monthly rent in the next lease period. (c) Limitation on date of rent increase. No monthly rent may be increased under paragraph (a) (2) of this section until the first installment of the increase in allowable costs is payable to the State or local government imposing the tax or charge. (d) Rounding. Any monthly rent adjusted under this subpart may be rounded to the nearest dollar by the lessor. (e) Examples. The following are examples of situation covered by this section: Example 1. A house with a month-tomonth lease has a base rent of $200. The house becomes occupied on March 1, 1972. A monthly rent of $205 may be charged ($200 plus 22 percent of $200). Effective June 1, 1972 the local real estate taxes on the house will be increased $24 per year over the amount of such tax for the previous year. Assuming that the lessor complies with the requirements of subpart F of this part (relating to rental increase procedures) he may increase the monthly rent for the house to $209 per month for the month of July 1972 ($205 plus $24/12 plus $2 tax for June) and $207 thereafter ($205 plus $24/12). If no other increase in allowable costs occur the lessor can increase the monthly rent on March 1, 1973, to a maximum of $212 ($207 plus 22 percent of $200). Example 2. In the above example assume that the house is owned by one person and the real property on which it is situated is owned by another person. The real estate tax is attributable equally between the land and the house. The monthly rent on the house may be increased $2 due to an increase in allowable costs only if the owner of the house becomes obligated to the owner of the real property to pay the entire tax. Otherwise, the increase in allowable costs which may be allocated to the house is only $1 per month. Example 3. An apartment building has 15 residences and one commercial unit. Five efficiency apartments have a base rent of $100 ($1,200 per year). Five one-bedroom apartments have a base rent of $150 ($1,800 per year). Five two-bedroom apartments have a base rent of $200 per month ($2,400 per year). The commercial unit has a current rent being charged of $750 per month. The rent charged for all of these rental units during the 12 months before February 1, 1972 was $36,000 ($6,000 for the efficiencies, $9,000 for the one bedrooms, $12,000 for the two bedrooms, and $9,000 for the commercial unit). If municipal charges for garbage collections from the building increase $20 per month ($240 per year) and property taxes on the building and land increase by $1,200 per year, both effective January 1, 1972, the maximum monthly rent which may be charged on a lease which goes into effect on or after February 1, 1972 (after 30 days notice has been given) on an efficiency, disregarding the proration of the January fees and taxes, is $106.50 per month ($100 plus 22 percent of $1,200 $1,200 plus $240` $100 plus $36,000 X maximum monthly rent which may be charged on a lease which goes into effect on or after February 1, 1972, on a one bedroom, disregarding the proration of the January fees and taxes, is $159.75 ($150 plus 21⁄2 percent of $1,800 $1,200 plus $240 $150 plus The $36,000 maximum monthly rent which may be charged on a lease which goes into effect on or after February 1, 1972 on a two bedroom, disregarding the proration of the January fees and taxes is $213 per month ($200 plus 21⁄2 percent of $200 plus -X 12 12 °). The Example 4. If in example 3 above, any portion of the increase in allowable costs was solely attributable to the commercial tenant because of the operation of State or local law, or because of the nature of the commercial tenant's business, then that portion of the cost increase is not allocable to the residences. If, for example, the garbage collection fee increase was a result of a change in the commercial tenant's operation from a shoe store to a restaurant, the increased fee is not an allowable increased cost which can be allocated to the residences. § 301.103 Capital improvements. (a) General. In addition to the allowable rent increases permitted by § 301.102, a person may charge a monthly rent in excess of the base rent for a residence or other real property which has been benefited by a capital improvement made after August 15, 1971, and which is not a rehabilitated dwelling under 301.1(b) (3). (b) Amount of allowable capital improvement rent increase. The allowable increase in monthly rent over the base rent under this section may be not more |