1262. Base Year Net Operating Income (NOI)

(A) The base year shall be the calendar year of 1979, or the calendar year of 1981 for rental units specified in Section 13.76.050F of the Ordinance, except as otherwise provided in subsection (B) below.

(B) If the base year is demonstrated to be inappropriate for reasons other than the way the records are kept for bookkeeping or income tax purposes, the hearing examiner may use another more appropriate calendar year as an alternative base year. An alternative base year selected under this subsection may not be substituted for the actual base year in determining eligibility for an adjustment under subsection (C). However, if a property using an alternative base year is determined to be eligible for base year rent adjustments under subsection (C), the alternative base year gross income shall include the base year rent adjustment as increased by subsequent annual general adjustments. The net operating income for any such alternative base year shall be calculated without taking into account any portion of any rent increases allowable for the property under the 1991 Inflation Adjustment Order (Regulation 1113).

(C) The base year net operating income and current lawful rent ceiling shall be adjusted by the Board if the petitioning party demonstrates, by a preponderance of the evidence, that any of the following circumstances existed:

(1) The landlord's operating and maintenance expenses in the base year were unusually high or low in comparison to other years. In such instances, adjustments may be made in calculating such expenses so the base year operating expenses reflect average expenses for the property over a reasonable period of time.

(2) The rent in the base year was exceptionally high or low due to the fact that the rent was not established in an arms-length transaction or was otherwise not set under market conditions.

If the circumstances specified in subsection (C)(2) are demonstrated, base year net operating income shall be adjusted to reflect the rents that would have been received if the base rent had been equal to the prevailing market rent for comparable units. Adjustments of current lawful rent ceilings under this subsection (C) may only be awarded in conjunction with an NOI analysis under Regulation 1264. For future net operating income petitions, the base year net operating income shall include this increase.

[Amended regulation effective December 8, 1995]