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Page 11 of 12 <br />5/5/2026 <br />ATTY/DOCS-ORDINANCE-REGULATIONS/05-05-26 FAIR RATE OF RETURN APPEAL GUIDELINES AND APPEAL FORM <br />REV: 05-05-26 LF <br />Step 2: Determine Baseline Stabilized Rent <br />B₃ = B₁ × (1 + I) ˢ <br />B₃ = $38,340 × (1 +5%)2 <br />B₃ = $42,270 (annually) or $3,523 (monthly) <br />Step 3: Calculate Substantial Remodel Cost Supported by Baseline Stabilized Rent <br />Supported Cost = (B₃ − B₁) ÷ Cap <br />Supported Cost = ($42,270 − $38,340) ÷ 5.5% <br />Supported Cost = $71,455 <br />Step 4: Feasibility Test <br />Supported Cost < C <br />$71,455 < $100,000 <br />→ Proceed to Step 5 and 6 to calculate the Fair Rate of Return Rent (A1) <br />Step 5: Calculate the Annual Fair Rate of Return Rent <br />A1 = B₁ + (C × Cap) <br />A1 = $38,340 + ($100,000 × 5.5%) <br />A1 = $43,840 <br />Step 6: Calculate the Fair Rate of Return Rent <br />A1 ÷ 12 months = F <br /> $43,840 ÷ 12 = $3,653 <br />In this example, the Fair Rate of Return Rent ($3,653) is greater than the Right to Return Rent ($3,195) <br />and therefore the landlord would be allowed to use the Fair Rate of Return Rent when offering the <br />tenant the right to return. <br />Illustrative Example 2: Only Right to Return Rent permitted <br />Assumptions <br />1. Base Rent = $3,000/month <br /> <br />2. P0 = Annual Base Rent : $36,000 <br /> <br />3. Cap = Market Cap Rate: 5.5% <br /> <br />8.A. - Page 60 of 85 <br />318