Ferkinhoff: reviewed Staff report (see attached)
Fox: Reviewed the statement submitted with the appeal, shared response to tenant’s
statements
- Application of last month’s rent escrow included as rental income
- The lease includes maintenance Credit of $200/month
- This is not an act of generosity; it is based on the agreement of anything above snow
removal and lawn- all other yard maintenance it is voluntary
- Tenant stated something about 200/week
- Tenants are on a month-to-month lease, and rent is allowed to increase with 1
month’s notice.
- These are excellent tenants and he does not want to place burden on them
- Unexpected washing machine replacement
- Hail damage – insurance claim, not reimbursable, a loss to property owner
- The second line on the MNOI
Moermond: Agrees that anything beyond the $200 for snow and lawn maintenance can
be considered
Duration of tenancy shouldn’t have an impact on whether the rent increase is allowed–
lease would govern how much notice of the increase is required for an increase.
Asked Mr. Sass to explain how unexpected capital/improvement and maintenance
costs are handled in MNOI
Demetirus Sass: Costs described are mostly repairs and are not capitalized. Capital
improvements are considered ongoing improvements that prolong the life of the
property, are considered capital investments, for example, washing machine added this
year.
Moermond: Suggested a hypothetical – if we were looking at 2026, how would the
bumps that come up in 2025 the analysis could look different a year from now. What
would you project the outcome based on what we know now?
Sass: Nearly all expenses have increased overall, looking at expenses, this year may
not lead to as sizeable increase, would need info on hail damage, and insurance
-deductible would count as an expense, but the portion the insurance paid for would
not count.
It would be the same except for income – it would be roughly breaking even with an
allowed increase.
There has been a steady increase in expenses, but the same is true for income. If I
were to just remove this year's exceptional maintenance as well as the late fees
collected and the concessionary rate, it would be roughly breaking even with an
allowed increase, likely capping it at the 3% range.
Fox: Stated that he agrees with Mr. Sass - any expenses that occur this year would
likely fall within a 3% increase. Doesn’t anticipate going through this process in future
years. So he is trying to achieve an accurate amount this year to sustain it for years to
come.
Moermond: Asked if staff has additional information to share.
Stated that it seems that the tenant doesn’t seem to want any increase –
Left with single question: If administrative rules govern the calculations on line 2 (of the
MNOI), is a portion attributed to vacancy?
Moermond: The formula that was applied does adversely impact your application, if I go
with the arguments you made, I think overall the formula works. I am inclined to deny
the appeal. Will give a final readthrough today and confirm by letter next week.
