We probably don’t need to tell San Francisco property owners that their insurance rates have soared—if they can even find a carrier to write a policy. The news does not get any better, with home insurance companies expected to soon request rate increases after regulators paved the way.

On top of this, San Francisco’s aging buildings have become more difficult to insure unless there are substantial and expensive renovations to their properties. Special attention should be given to roofing and outdated heating systems, as insurers will go over the risks associated with these critical characteristics of the property with a fine-tooth comb.

The question is whether these increased costs can be passed through to tenants. The short answer is possibly, but it will not come with instant gratification. Patience and meticulous documentation are in order.

The vehicle to raise rents above and beyond the permitted annual percentage increase is an Operating and Maintenance Expense Petition (O&M). The purpose of this petition to the Rent Board is to show that the annual allowable increase does not fully cover the landlord’s yearly increase in operating and maintenance expenses for a property. Housing providers can seek an additional base rent of up to 7%.

Adjusted for inflation, the allowable annual increase effective March 1, 2025, through February 28, 2026, is a measly 1.4%, hardly enough to cover the escalating costs of operating a rental housing business.

When determining whether an O&M increase is appropriate, all operating expenses must be considered. Think property taxes, repairs and maintenance, insurance premiums, pest control, garbage removal, and management expenses if the landlord shows the increased expenses are reasonable and necessary.

Electric and gas costs are not included in the calculation because rising utility costs may be passed through to tenants by means of a separate petition. Likewise, capital improvements like major renovations are reserved for another petition. Debt service costs are also off the table. Notably, increases in property taxes resulting from a change in ownership are disallowed.

Successful candidates for an O&M increase must demonstrate the following:

• Total operating and maintenance expenses increased from one twelve-month period to the next by more than the amount of the annual allowable increase.

• Two consecutive calendar years, or a 24-month period prior to filing the petition, must be used for comparison of O&M expenses. In other words, we need to go back in time and show a precipitous spike in expenses, with accompanying proof of costs, be it invoices and monthly statements, and proof that payments were made.

We echo the Rent Board’s admonition to not select a particular 24-month period with the goal of exaggerating the results. Having seen the full gamut of petition submissions, the Rent Board is highly suspicious of landlords who fudge the numbers. In theory, the Rent Board is representative of both housing providers and renters, but it is skewed in favor of tenants. Receipts and carefully prepared documentation are a must, and if there is any scent of subterfuge, the O&M petition will be denied.

O&M petitions are not a gift that keeps giving.

These types of pass-throughs cannot be pursued with multiple properties or over and over again throughout the years. Property owners with six or more residential units are limited to a total O&M increase of 7% in any five-year period.

How to get the ball rolling?

1. Fill out the petition form, available from the San Francisco Rent Board.

2. Provide supporting documentation, such as receipts, invoices, contracts, and proof of payment. Include a spreadsheet or summary showing expenses by category, amounts, and allocation per unit.

3. Serve a copy of the petition to the tenants. Importantly, the landlord must file the O&E petition before serving the notice of the rent increase. The notice can be served at any time after the petition is filed, but not before the petition is filed. If housing providers provide a notice to raise the rent before the O&M petition, the notice is void.

Ultimately, it will be up to an administrative judge to review all documents and sign off on the rent increase.

Tenants have a say. They are not muted when facing a rent increase.

As in all Rent Board petitions, it is a two-way street. Tenants staring at a rent increase can elect to file a financial hardship application. Moreover, tenants can object to the imposition of an O&M increase if their landlord has failed to perform the requested repair and maintenance that is required by law. We have told housing providers time and time again to respond quickly to repair requests and keep the unit in habitable condition, and this serves as another exclamation point to this.

The time of imposing an O&M rent increase must coincide with the same time as the annual rent increase. For envious landlords enjoying market-rate rents, they can “bank” any rent increases and impose them at a later date.

The O&M rent increase can only be asked for at the scheduled time of the annual rent increase, not before. Tenants must pay the increase if the landlord imposes it, but they can choose to defer payment of the disputed portion until the Rent Board arrives at a final decision.

Tenants saddled with this rent hike can opt to pay the additional rent when it is imposed, or wait for a final decision from the Rent Board. Keep in mind that this is not a quick and easy process and could take upwards of a year. Ultimately, it will be up to an administrative judge to review all documents and approve the rent increase.

This subject matter engenders many questions best approached by proper legal counsel with extensive experience appearing in front of rent boards to both file petitions on behalf of clients and defend against petitions initiated by tenants. For informed advice, contact the firm built for rental housing providers.