The Capital Improvement Program splits the cost of approvable expenditures 50/50 between the landlord and all tenants benefiting from the improvement. Landlords are not required to obtain the approval of the tenant before making a capital improvement.
A Capital Improvement is defined by the RSO as: “The addition or replacement of the following improvements to a rental unit or common areas of the housing complex containing the rental units,….”(LAMC 151.02.C) Eligible improvements include the complete exterior painting of the building, landscaping, flooring, fixtures, doors, windows, fences, security items, meter conversions, major appliances, screens, window coverings, etc. The improvement must also meet the following criteria:
a. The improvement primarily benefits the tenant.
b. The improvement will last for five or more years.
c. The improvement is permanently affixed in place or relatively immobile.
d. The improvement was completed within 12 months of the date of the landlord’s application.
e. The improvement is not normal or routine maintenance or repair.
Once work is completed on the capital improvement, landlords have 12 months to file an application with the Department. Proof that the work was done, e.g. contractor invoices, contracts, and proof of payment, must accompany the application. Multiple applications may be submitted, but the maximum temporary rent surcharge that can be applied through this program at one time to each rental unit is $55. The surcharge is collected for 72 months, or until the total amount approved is collected.
The Department applies the following formula to the Total Cost it determines eligible for the program: Total Cost x 50% divided by 60 months divided by the number of rental units that benefit from the improvement.
Example: Total cost for exterior painting of a 24 unit building = $25,000.
To calculate the rent increase:
$25,000 x 50% = $12,500
$12,500 ÷ 60 months = $208.33
$208.33 ÷ 24 units = $8.68 per month for each unit.
We strongly urge landlords to obtain the Capital Improvement Cost Recovery Application Packet before beginning a capital improvement project. The packet consists of information on how to plan a capital improvement project to facilitate the application process and a completed sample application. Also included is a list of Common Permits, which lists common improvements that require a building permit from the Department of Building and Safety, and the Rent Adjustment Commission’s (RAC) Regulations for the Capital Improvement Program. The RAC Regulations are the rules used to process applications.
Please submit your application by using the Capital Improvement online application which applies the relevant formula and completes the calculations. Any supporting documentation should be uploaded to the online application. Any documents that you were unable to upload should be mailed and received by the Department (P.O. Box 57398, Los Angeles, CA 90057-0398) within 30 days of filling the application. For your convenience, a mailing label will be provided at the completion of the application.