Opinion

The Santa Monica Rent Control Board (hereinafter Board) appeals from a judgment declaring portions of the Santa Monica Rent Control Board Regulations (hereinafter Regulations) null and void and enjoining Board from enforcing these Regulations. We affirm in part and reverse in part.

Procedural History

The voters of the City of Santa Monica adopted a rent control law at the April 10, 1979 municipal election (hereinafter the 1979 law). The 1979 law established, inter alia, an elected rent control board, ceilings on allowable rental rates and increases and the financing of the Board through registration fees collected from the landlords.

On June 18, 1983, the Board adopted Regulation 11004 which provided, in pertinent part:

On July 14, 1983, the Board adopted Regulation 3005 which provided, in pertinent part:

On July 27, 1983, 301 Ocean Avenue Corporation, Joseph Baur, Elaine Dobrin, David Partovi, Asim Altamimi, Akshai Rundral, Helen McClellan, Walter Bills and Gilbert Perea (hereinafter Plaintiffs) filed a petition for writ of mandate and complaint for declaratory and injunctive relief seeking to invalidate several of the Board’s Regulations. Plaintiffs are owners of real property subject to the Board’s regulation.

On November 9, 1983, the trial court filed its judgment declaring Regulations 3005, subdivision (c)(2) and 11004, subdivisions (f)(1) and (2) null and void. The judgment enjoined the Board from enforcing these Regulations.

The Board filed its notice of appeal on February 8, 1984. While this appeal was pending, the 1979 law was amended by the voters of the City of Santa Monica at the November 6, 1984 municipal election (hereinafter the 1984 law).

Issues

On appeal, the Board contends that the trial court erred since it had the express and/or implied power to issue the Regulations in question under both the 1979 law and the 1984 law. Plaintiffs, on the other hand, contend that the 1984 law is invalid.

Discussion

I.

As noted above, the 1979 law was amended after the trial court issued its judgment. “Under settled principles, the version of the ordinance in force at present is the relevant legislation for purposes of this appeal.” (Kash Enterprises, Inc. v. City of Los Angeles (1977) 19 Cal.3d 294, 306, fn. 6 [ 138 Cal.Rptr. 53 , 562 P.2d 1302 ]; see also Building Industry Assn. v. City of Oxnard (1985) 40 Cal.3d 1, 3 [ 218 Cal.Rptr. 672 , 706 P.2d 285 ].) We will therefore gauge the validity of the Regulations in question against the 1984 law.

“The scope of our review of an administrative agency’s regulations is limited: we consider whether the challenged provisions are consistent and not in conflict with the enabling statute and reasonably necessary to effectuate its purpose. [Citation.] As a general proposition, administrative regulations are said to be ‘shielded by a presumption of regularity’ [citation] and presumed to be ‘reasonable and lawful.’ [Citation.] The party challenging such regulations has the burden of proving otherwise. [Citation.]” (Fox v. San Francisco Residential Rent etc. Bd. (1985) 169 Cal.App.3d 651, 655 [ 215 Cal.Rptr. 565 ], italics omitted.)

The pertinent portions of the 1984 law are:

It is clear that the 1984 law expressly authorizes the Board to collect registration fees as a source of its financing and to impose penalties for nonpayment (§ 1803, subds. (f)(2), (f)(6), (f)(15) and (n)). The remaining issue is whether the Regulations in question are reasonably necessary to the 1984 law’s purpose. If the Regulations’ necessity is reasonably debatable, we cannot second-guess the legislative determination. (Consolidated Rock Products Co. v. City of Los Angeles (1962) 57 Cal.2d 515, 522 [ 20 Cal.Rptr. 638 , 370 P.2d 342 ].)

Regulations 3005, subdivision (c)(2) and 11004, subdivision (f)(1) provide for a penalty of 5 percent per month on any unpaid registration fee and prohibit a landlord from increasing a tenant’s rent, including the annual general adjustment, until such registration fees and penalties are paid. These harsh penalties are related to the effective collection of the registration fees which fund the Board’s activities. The Board, in turn, is the agency that is empowered to attain the goals set forth in the 1984 law’s statement of purpose.

However, we find that Regulation 11004, subdivision (f)(2) is not reasonably necessary to achieve the 1984 law’s purpose. This Regulation prohibits a landlord from increasing the rental price of a controlled unit for ninety days after payment of all registration fees and late charges for that unit. A provision of this type is nothing more than the Board attempting to flex its muscles in front of a badly beaten opponent. Once a property owner has paid the registration fee plus the harsh penalty of 5 percent per month no further purpose can be served by making him wait three additional months before he can implement the automatic annual rent increases. The amount of these increases are calculated by the Board and take into account such factors as increases in utility, tax and maintenance expenses. (§ 1805, subd. (6) of the 1984 law.) To deny these increases to a landlord who has cured his delinquency by paying a 5 percent per month penalty would run counter to the 1984 law’s purpose of limiting landlord’s income to “no more than a fair return.” (§ 1800.)

We therefore affirm that portion of the trial court’s judgment which declares this Regulation null and void.

II.

The Plaintiffs contend that the 1984 law is invalid since the “constitutional facts” upon which it relies no longer exist. (See Birkenfeld v. City of Berkeley (1976) 17 Cal.3d 129 [ 130 Cal.Rptr. 465 , 550 P.2d 1001 ].) While the Plaintiffs do not challenge the fact that a housing shortage may still exist in the City of Santa Monica, they assert that it is inconceivable that rents are rising rapidly since rent increases have been carefully monitored for the last six years.

The deficiency in the Plaintiffs’ argument is twofold. First, the Plaintiffs do not explain why a housing shortage alone would not be a sufficient basis for the exercise of the city’s police power. Second, there can be no doubt that rental rates would increase to market level once the artificial barriers are removed. This condition coupled with a perceived shortage in housing is what led to the passage of the rent control law in the first place.

III.

Having determined that the 1984 law expressly permits two of the three Regulations invalidated by the trial court, we must next decide the fate of those landlords who are delinquent in the payment of their registration fees. In order to resolve this issue, we must first determine whether the trial court was correct in its ruling under the 1979 law.

The reasoning behind the trial court’s ruling was that the 1979 law provided the Board with neither the express nor the implied authority to impose penalties for nonpayment of the registration fees.

The pertinent portions of the 1979 law are:

The trial court correctly concluded that the 1979 law did not expressly authorize the penalties contained in the Regulations in question. However, that portion of Regulation 3005, subdivision (c)(2) which addresses itself to the failure to pay the registration fees (as opposed to the late charges) is expressly authorized under section 1803, subdivisions (f)(2), (g), (n), (q) and section 1805, subdivision (h)(1).

The Board contends that it had the implied power to impose penalties for nonpayment of registration fees. The Board’s reliance on Atlas Roofing Co. v. Occupational Safety Comm’n (1977) 430 U.S. 442 [ 51 L.Ed.2d 464 , 97 S.Ct. 1261 ] is misplaced. In that case, the United States Supreme Court upheld an administrative agency’s power to impose civil penalties for violations of the Occupational Safety and Health Act of 1970 against a challenge that this violated the right to a jury trial as guaranteed by the Seventh Amendment to the United States Constitution. However, unlike the case at bench, the enabling legislation specifically provided for these penalties.

We therefore conclude that the trial court correctly concluded that the 1979 law did not give the Board the implied power to impose penalties for nonpayment of the registration fees.

IV.

In summation, we conclude that the 1984 law expressly permits Regulations 3005, subdivision (c)(2) and 11004, subdivision (f)(1). Accordingly, we reverse the judgment as to these Regulations. Since we have concluded that Regulation 11004, subdivision (f)(2) is not reasonably related to the 1984 law’s purpose, we affirm the judgment as to this Regulation.

The penalties imposed on the Plaintiffs for nonpayment of the registration fees prior to the effective date of the 1984 law (Dec. 3, 1984) must fall since they were imposed under invalid Regulations. However, the registration fees themselves were valid and would still be owed by landlords who have not paid them.

Disposition

The trial court’s judgment is reversed as to Regulations 3005, subdivision (c)(2) and 11004, subdivision (f)(1), and affirmed as to Regulation 11004, subdivision (f)(2).

A petition for a rehearing was denied November 20, 1985, and respondents’ petition for a review by the Supreme Court was denied January 15, 1986.

Plaintiffs contend that it is not “necessary" to collect the registration fees from the landlords since section 1803, subdivision (n) of the 1984 law empowers the Board “to request and receive funding when and if necessary from any available source for its reasonable and necessary expenses.” Plaintiffs argue that the Board should seek its funding from the Santa Monica City Council. Since the Board is specifically permitted to finance its operations from the registration fees it collects from landlords, we cannot command the Board to seek funds from the public fisc. We deem this to be a harsh penalty since it is the equivalent of more than 60 percent per year when one considers that each month’s interest payment is based on the previous month’s principal balance plus all previously unpaid interest amounts. One need only reflect for a moment to realize the furor that would be raised if a lending institution were to charge similar rates. This 90-day penalty was first introduced in 1980 with Regulation 11001, subdivision (c)(2). It was included in the annual registration fee Regulations for the fiscal years July 1, 1981-June 30, 1984. (Regs. 11002-11004, respectively.) It was omitted from the registration fee Regulation for the fiscal year July 1, 1984-June 30, 1985. (Reg. 11005.) It was reenacted in substantially the same language in the registration fee Regulation for the fiscal year July 1, 1985-June 30, 1986. (Reg. 11006.) Of these Regulations, only Regulation 11004 is before this court. However, we are confident that the Board will not enforce the similarly deficient provisions contained in Regulation 11006, subdivision (f)(2). We express no opinion as to whether collection of any of these past registration fees are time-barred by the applicable statute of limitations.