San Francisco Legislative Update (2020): “Intermediate Length Occupancy” Now Regulated

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Ordinance 78-20, sponsored by Supervisor Peskin, amends the Planning Code to regulate “intermediate length occupancy” of residential dwellings. The Planning Code now defines intermediate length occupancy as “A Residential Use characteristic that applies to a Dwelling Unit offered for occupancy by a natural person for an initial stay, whether through lease, subscription, license, or otherwise, for a duration of greater than 30 consecutive days but less than one year”.

Intermediate length occupancy is now prohibited for buildings with three or fewer units. It is a principally permitted use for buildings with four to nine units, provided that no more than 25% of the units are occupied in this manner. And for buildings of ten or more units, conditional use authorization is required. Further, only 1,000 of these uses are allowed in the City, and rent-controlled units may not but used this way.

Finally, Ordinance 78-20 prohibits “non-tenant uses”, which is when “the landlord is allowing the unit to be occupied by a person or entity who is not a “tenant” as defined in [the Rent Ordinance]”. Given the broad definition of “rental units” in the Rent Ordinance (i.e., all dwellings in the City), this would appear to prohibit the use of dwellings by a property owner’s family members, and many other common sense uses that most property owners would assume to be lawful.

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Hiona v. Superior Court (2154 Taylor LLC): Waiver of Incidental Damages in Unlawful Detainer Judgment Does Not Require Reclassification to Limited Jurisdiction

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In Hiona v. Superior Court, the owner of an apartment building withdrew the property from the rental market under the Ellis Act. Several tenants held over after the date of withdrawal, raising several dozen defenses each. Ultimately, the defenses lacked evidentiary support. The owner moved for (and was granted) summary judgment against each of the three groups of defendants.

A summary judgment motion is defeated if the opposing party can show that there is a “triable issue” as to any material fact. An action for unlawful detainer seeks possession of the property and per diem holdover damages, and so the easiest way for a defendant to defeat a property owner’s motion is to dispute the value of the damages. However, damages in an unlawful detainer case are merely incidental to the claim for possession. Owner 2154 Taylor LLC therefore conditionally waived damages for the purpose of seeking summary judgment.

The trial court awarded judgment to the owner. Then, because the owner had waived damages, the defendants each moved to reclassify a case from unlimited to limited jurisdiction. The distinction is partly vestigial and partly substantive. California formerly had municipal courts and superior courts, with distinct jurisdiction. In 1998, California voters amended the constitution to allow them to unify. Today, the trial court sitting in limited jurisdiction cannot award judgment above $25,000. Appeals from limited jurisdiction go to the Appellate Division of the Superior Court instead of to the Court of Appeal. There are also rules of “economic litigation” for limited cases, but these expressly do not apply to unlawful detainers.

The penalty for a plaintiff who “overpleads” their case (i.e., where the plaintiff alleges damages above $25,000 but recovers less) is that they may not be entitled to their costs, even as a prevailing party. Obviously, the cap on damages in limited jurisdiction is appealing to a defendant. But since unlawful detainer cases aren’t subject to economic litigation rules anyway, and since this owner waived damages, there would seem to be little sense in reclassifying these cases: the defendants would lose their argument that the case had been overpled.

However, there were other benefits for these defendants if the case were reclassified. It would be banal to note that Ellis Act evictions in San Francisco are political theater fixated on transfer of wealth. (A rent-controlled tenancy is, in effect, a highly valuable and non-transferrable property interest, which ends when the tenancy does.) San Francisco funds tenant eviction defense with the goal of elongating a tenant’s occupancy of their (former) rental unit. By reclassifying the case, defendants can potentially delay an adverse outcome by creating one more “rung” of appellate review. (Though not allowed by right, the Court of Appeal can grant a motion for transfer from the Appellate Division or review its ruling.)

The Appellate Division is also bound by its own decisions in a way that the Court of Appeal is not, and this is of particular importance for a San Francisco Ellis Act eviction defendant, following the excessively tenant-friendly opinion Hilaly v. Allen (2017). The reclassification motion was tantamount to forum-shopping.

The trial court denied the defendants’ motion. A judgment above $25,000 was still possible. (The defendants were preparing their appeal of the judgment, and a reversal would vacate the order where the plaintiffs waived damages.) Defendants sought a writ of mandate, reversing the trial court’s order, but the Court of Appeal affirmed.

It noted that “A party seeking to reclassify a case from unlimited to limited faces a ‘high threshold’. (Ytuarte v. Superior Court (2005) 129 Cal.App.4th 266, 278.) The trial court must conclude ‘that the verdict will ‘necessarily’ fall short of the superior court jurisdictional requirement of a claim exceeding $25,000.’ (Walker v. Superior Court (1991) 53 Cal.3d 257, 270.) ‘The unlikeliness of a judgment in excess of $25,000 is not the test. The trial court reviews the record to determine whether the result is obtainable. Simply stated, the trial court looks to the possibility of a jurisdictionally appropriate verdict, not to its probability.’ (Maldonado v. Superior Court (1996) 45 Cal.App.4th 397, 402.).”

Ultimately, the Court of Appeal found that the trial court did not abuse its discretion in denying the motions on purely statutory grounds. The reclassification statute expressly states that “Nothing in this section shall be construed to require the superior court to reclassify an action or proceeding because the judgment to be rendered, as determined at the trial or hearing, is one that might have been rendered in a limited civil case”. While the statute authorizes a defendant to reclassify the case at any time, the Court interpreted the language “the judgment to be rendered” as essentially foreclosing the option once the trial court granted the summary judgment motion.

http://costa-hawkins.com/wp-content/uploads/2020/07/2154-Taylor-Opinion.pdf

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Owens v. City of Oakland: Court of Appeals Fleshes Out Meaning of “Dwelling or Unit” under State Law

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“When the owner of a single-family home rents bedrooms in the home to separate tenants, does the Costa-Hawkins Rental Housing Act exempt each of the tenants’ rooms from local rent control because the home is considered an exempt dwelling under the Act? Jonathan Owens rented out bedrooms in his home to three unrelated individuals. He contends the City of Oakland’s Housing, Residential Rent and Relocation Board (the Rent Board) and the trial court erred when they determined the rented rooms are subject to Oakland’s rent control ordinance. We agree with the Rent Board and the court and affirm the trial court order denying Owens’s petition for writ of mandamus.”

Landlord Jonathan Owens owns a single-family home in Oakland. He lives in the home and rents three individual bedrooms to three unrelated tenants. One tenant filed a petition at the Oakland rent board “alleging her housing became unsuitable due to disruptive construction work and hazardous conditions on the premises [and that] Owens failed to provide required notice of the Rent Adjustment Program and retaliated against her by terminating her lease when she complained about the construction work and sought a reduction in rent.”

Owens responded that her tenancy was exempt from the jurisdiction of the rent board because the entire property was “alienable, separate from the title of any other dwelling unit” – a status that would exempt the property from local rent controls under Costa-Hawkins.

What happened next was procedurally bizarre. The hearing officer dismissed the petition on a finding that the tenant was in arrears on rent without justification. However, for some reason, the hearing officer made a gratuitous finding that the tenancy was not exempt because the rental of individual rooms meant that no dwelling was “separately alienable”.

Owens appealed to the rent board commission – presumably to avoid any collateral estoppel effect of this determination and renewed his argument for exemption under Costa-Hawkins/ The rent board unanimously affirmed the decision. Owens then petitioned for writ of mandate in the superior court, and the court affirmed as well, on the narrow issue of Costa-Hawkins preemption. The First District Court of Appeal affirmed.

The decision is problematic for several reasons. First, the broad scope of the petition related to many things having nothing to do with rent adjustments. As a result of the judicial powers doctrine, the rent board likely lacked the jurisdiction to render any relief. To render such a determination on a dismissed petition compounded the overreach. Finally, to the extent that most of this was about eviction controls (which Costa-Hawkins does not regulate), it is puzzling that Owens did not raise the argument that Section 8.22.350E of the Oakland Municipal Code exempts owner-occupied homes from eviction controls, if the owner shares “kitchen or bath facilities” with the tenants. While the opinion does not discuss whether Owens shares such facilities, it can almost be assumed from the description “single family home” that he and all the tenants shared the same half-and-half carton when making their coffees.

The rule of law is also somewhat hollow. The purpose of eviction controls is to prevent landlords from circumventing rent controls by the expediency of terminating the existing tenancy and raising rates on a new one. A finding that this is a multi-dwelling property for rent control purposes has little effect if Owens can capriciously terminate tenancies whenever he wants to increase the rents. Further, from a policy perspective, it is inconsistent that the institutional landlord of a single-family home can escape rent control, but a mom-and-pop owner-occupying landlord cannot. Nonetheless, Owens is a warning that landlords should be particularly cautious in renting multiple rooms under different leases.

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San Francisco Legislative Update (2020) COVID-19 Edition: Ordinance 114-20 Continues Suspension of Rent Increases Pending Eviction Moratorium

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Ordinance 114-20, passed as an emergency ordinance, re-enacts its predecessor Ordinance 68-20 to suspend the annual allowable rent increase for 60 days, per Section 2.107 of the San Francisco Charter (unless re-enacted again).

According to Section 2.107, an emergency ordinance is effectively immediately upon passage (which, for this ordinance was July 7, 2020). However, Ordinance 114-20 states that it is instead effective immediately after the expiration of Ordinance 68-20 (which is likely because the first emergency ordinance expired on June 23, 2020, before it this one was passed.

When in doubt, follow the charter. Ordinance 114-20 probably expires on the 61st day after passage – or September 6, 2020.

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San Francisco Legislative Update (2020) COVID-19 Edition: “Preston Amendment” Ordinance 93-20 Prohibits Evictions Based on Non-Payment of Rent Owed During Governor’s Moratorium

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San Francisco passed legislation, sponsored by Supervisor Preston, which prohibits evictions for non-payment of rent, for any rent due during Governor Newsom’s eviction moratorium, which is currently extended through September 30, 2020. Therefore, for rents due between the original March 16th order and September 30th (as may be further continued), San Francisco landlords cannot collect this rent (and the unit) via an unlawful detainer lawsuit.

Unsurprisingly, several industry groups – the San Francisco Apartment Association, the San Francisco Association of Realtors, the Coalition for Better Housing, and the Small Property Owners of San Francisco Institute have sued to overturn the ordinance.

The full text of Ordinance 93-20 is available here.

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Small Property Owners of San Francisco Conduct Virtual “Legal Q&A” Panel for June, Amid COVID-19 Shelter-in-Place Order

With the continuation of the shelter-in-place order during ongoing concerns over the COVID-19 pandemic, SPOSF once again conducted its monthly Q&A panel virtually. The June 2020 panel featured Scott Freedman and Justin Goodman of Zacks, Freedman & Patterson, PC. (Goodman is also a board member of SPOSF. His mustache, a pandemic work-from-home novelty, achieved its purpose in embarrassing Goodman’s boss, Freedman, during a shared public appearance, and was shaved shortly thereafter.)

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San Francisco Legislative Update (2020) COVID-19 Edition: Ordinance 68-20 Suspends Rent Increases Pending Eviction Moratorium

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Signed into law on April 24, 2020, but retroactive to April 7, 2020, Ordinance 68-20 temporarily suspends certain rent increases during the Mayor’s eviction moratorium prompted by the COVID-19 epidemic. The suspension applies to increases under Section 37.3(a) of the Rent Ordinance (which covers annual allowable increases, as well as any banked increases from previous years, and various passthroughs).

Now, it’s questionable whether even the Mayor’s emergency powers under the San Francisco Charter permit retroactive laws, though they may permit immediate ones. And otherwise, the authority of local governments to manipulate landlord’s state law procedural protections is strictly limited. Cities also lack authority to impose rental rate restrictions that prevent rents from keeping pace with inflation.

That said, Ordinance 68-20 contains specific references to the “anniversary date not being affected by deferral of the increase”. Likewise, it states that the right to impose the increase shall “immediately resume” when the moratorium expires. Likely, a landlord may send the increase, preserve the anniversary date, and simply not require the additional payment.

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Small Property Owners of San Francisco Conduct Virtual “Legal Q&A” Amid COVID-19 Shelter-in-Place Order

Amid the shelter-in-place order and the broader uncertainty surrounding the COVID-19 pandemic, the Small Property Owners of San Francisco unfortunately had to cancel their regularly-scheduled monthly meeting for April 2020. That tough decision came at a difficult time, when small property owners needed updates on rapidly-changing landlord-tenant law more than ever.

Fortunately, the SPOSF board were able to present a “virtual legal Q&A” featuring Paul Utrecht of Utrecht Lenvin, LLP and Costa-Hawkins.com’s own Justin Goodman of Zacks, Freedman & Patterson, PC.

The duo discussed the incredibly rapidly changing area of landlord-tenant law in context of the COVID-19 pandemic, including changes from every branch of government and at ever level of government.

The online video is available here.

Under normal circumstances, SPOSF holds monthly meetings at St. Mary’s Cathedral, located at 1111 Gough Street in San Francisco. You can join SPOSF by clicking here. Members have access to the full monthly newsletter.

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Legal Q & A: My Tenant Claims He Can’t Pay Rent Because of COVID-19. What do I do?

Question: My tenant just told me that he was let go at work because of the Shelter-in-Place Order and he can’t pay rent for April. Is he allowed to do that? Do I just lose the rent?

Answer: This is about to become a common question, as many are affected by COVID-19 and the related Shelter-in-Place Order. This is perhaps the most rapidly that landlord-tenant law has changed, and there are overlapping (sometimes inconsistent) rules emerging at the local, state and federal levels. But at least for the moment, there is a clear path forward for this particular issue.
Continue reading Legal Q & A: My Tenant Claims He Can’t Pay Rent Because of COVID-19. What do I do?

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Governor Newsom Issues Executive Order Prohibiting Price Gouging and Evictions for the Purpose of Evading Price Limits, Amid COVID-19 Quarantine

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Governor Newsom issued Executive Order N-28-20 on March 16, 2020, based on the sustained impact of COVID-19 (coronavirus) following his March 4, 2020 proclamation of a state of emergency.

Unfortunately, this proclamation is becoming an increasingly common tool to regulate housing supply and pricing, as California has witnessed frequent and significant regional and statewide emergencies in recent years. Among other things, it invokes Section 396 of the California Penal Code, which prohibits increasing rent above 10 percent for a period of 30 days following the proclamation of a state of emergency.

Its anti-price-gouging provisions also prevent evictions for the purpose of re-renting and evading the above price-limitations (but it does not apply to “an eviction process that was lawfully begun prior to the proclamation or declaration of emergency”. Executive Order N-28-20 extends the application of the eviction prohibition to May 31, 2020. It also empowers local governments to prevent evictions for non-payment of rent for both residential and commercial tenants.

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Residential Rent and Eviction Control Resources