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Airbnb Sues San Francisco over Recent Revision to “Airbnb Law”

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Airbnb has filed a lawsuit against San Francisco in Federal District Court, seeking to invalidate the recent expansion of enforcement tools to regulate short-term residential rental listings. Ordinance 104-16 now requires hosting platforms to verify that a residential unit is on the City registry prior to listing and to requires them to respond to requests for information from the City. Violations can lead to civil penalties of $1,000 per day, as well as certain criminal penalties.

Airbnb alleges that the new ordinance violates its rights under the Communications Decency Act, which “expressly preempts state and local laws that treat a website ‘as the publisher or speaker of any information provided by another information content provider’,” urging that, “instead of targeting speech, the City instead could simply enforce its existing short-term rental law directly against hosts who violate it”.

However, Airbnb also alleges that the new law violates its rights under the First Amendment, insisting that it is “a content-based restriction on advertising rental listings, which is speech”. Whether or not the new ordinance will survive judicial review as a constitutional economic regulation, it does seem inconsistent to advance a First Amendment argument while also disclaiming that listings are speech. And, in any event, simply verifying that a host has complied with the “Airbnb law” and obtained a listing number does not quite make the list of onerous restraints on speech. The Federal District Court also recently upheld the City’s buyout legislation, requiring a landlord to disclose certain rights to tenants concerning “buyout agreements” (offering money for the vacating of a rental unit) prior to having the discussion, against a constitutional challenge for restrictions on speech.

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San Francisco Legislative Update for 2016: Enhancing Enforcement Provisions for “Airbnb Law” with New Obligations for Hosting Platforms

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San Francisco will now require hosting platforms to verify that a residential unit is on the City registry prior to listing and to require them to respond to requests for information from the City.

Ordinance 104-16 represents another effort in the City’s ongoing “project” of striking a balance that allows short term listings without allowing abusive practices that siphon long-term residential housing stock. The Board of Supervisors specifically states that the intent of the ordinance is not to punish short-term rental hosts who are trying to lawfully comply with San Francisco’s short term rental laws, but rather to bring more short term rentals into compliance. It goes on to self-consciously note that the registration process has been difficult to navigate, directing the Office of Short-Term Rentals to make recommendations on how the City can improve the process. Perhaps the law will need to be revised again in the future, but that’s some customer service in the meantime.

You can read the full text of Ordinance 104-16 here.

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City Attorney Sues SF Academy of Art for “Widespread, Longstanding and Blatant Disregard” for the Planning Code

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City Attorney Dennis Herrera is suing the San Francisco Academy of Art for what the City describes as “widespread, longstanding, and blatant disregard for the San Francisco Planning Code”. The complaint charges the Academy with having “cavalierly changed the use of over 22 buildings in San Francisco in violation of the Planning Code” by “acquir[ing] buildings that are zoned and permitted for use as apartments and other residential purposes, only to convert them unlawfully to student dorms, depriving San Francisco of critical housing stock, especially affordable housing”.

One possible upside of dormitory use for one of the City’s largest property owners is the exemption under the Rent Ordinance for otherwise covered rental units operated as dormitories by an “institution of higher education”.

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Appellate Division Affirms San Francisco Housing Court on Borsuk

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Borsuk v. Appellate Division, the long-awaited reconsideration of the “Delta Motion”, led to a split of authority in the Second District Court of Appeals, allowing lower courts in California some latitude in evaluating jurisdictional challenges (i.e., motions to quash) to take the form of “mini trials”, requiring a landlord to prove up a cause of action for unlawful detainer before the tenant had even answered.

San Francisco’s Housing Court immediately took up the opportunity to deny these Delta motions to quash on procedural grounds. For now, it has the approval of the Appellate Division.

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Taylor v. Nu Digital Marketing, Inc.: When Is a Purchase Agreement Not a Purchase Agreement

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“The relationship created by the agreement must be characterized by reference to the rights and obligations of the parties and not by labels.”

The court in Taylor v. Nu Digital Marketing, Inc. affirmed the trial court, which waded through convoluted contract terms to find a landlord-tenant relationship in the midst of purchase-option contract.

When someone takes possession of a property under an option contract, as opposed to a standard lease or a purchase agreement, the usually bright line distinction becomes blurry: in either case, they are in possession. One significant difference is the remedy available upon default.

When a vendee on a purchase agreement defaults, the remedy of the seller to recover the property may be an action for ejectment. Ejectment, like most civil remedies, operates on a thirty-day summons, often taking a year or more to find a trial date. Unlawful detainers are considerably faster; the catch is that you must plead a cause of action for unlawful detainer, or you are not entitled to the summary remedy.

With about $15,000 in arrears, the plaintiff in Taylor was looking to recover the property quickly. Defendant resisted on the basis that it took possession pursuant to a purchase agreement, not a lease, and it could therefore not be dispossessed via an unlawful detainer.

The Third Appellate District looked through the labels to find that the “probationary installment payments” did not actually accrue to the down payment – the were just “rent”. Accordingly, it regarded the defendant as taking possession through a “lease” – default of which gave rise to a claim for unlawful detainer.

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Payment of Rent To Maintain Defense to Unlawful Detainers

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California AB 2312 is an effort to add a “rent payment bond” requirement for maintaining a defense to evictions based on failure to pay rent. The bill, authored by Assemblymen Gatto, is still under consideration, and has been criticized for conditioning a tenant’s right to counsel upon payment of rent. (The funds must be deposited into their attorney’s trust account, and the requirement wouldn’t apply if the tenant was not represented.) On the other hand, a common defense to non-payment unlawful detainer cases is a claim of habitability violations. And, if a tenant were to prevail – sometimes by even a small amount – the rent demand would exceed what the landlord was ultimately entitled to, and the landlord would lose and have to start again. A requirement like this would at least help ensure that these defenses were not pretextual.

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Tom v. City & County of San Francisco (2004) 120 Cal. App. 4th 674 – Constitutionally Protected Right to Privacy for TIC Agreements with Exclusive Rights of Occupancy

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Multiple owners of a multi-unit, tenant-occupied building will sometimes invoke the Ellis Act in order to terminate tenancies so that each owner can live in a particular unit in the building. While each owner would own a percentage of the entire parcel/building, each will enter a contract (known as a “TIC” or “tenancy-in-common” agreement), which will allow them to designate a specified unit to a particular owner.

In 2001, San Francisco sought to prohibit this practice by adopting Ordinance 161-01, amending the Subdivision Code to eliminate “exclusive rights to occupancy” (i.e., designating that a particular owner was allowed to use a particular unit) and requiring that TIC agreements be recorded for purposes of enforcement/regulation. The logic of the amendment was that, if multiple owners cannot exclude other owners from their own units, the TIC rights would essentially be valueless, and maintaining buildings as rental units would be the preferred use.

Then Mayor Willie Brown vetoed Ordinance 161-01, citing concerns as to its validity and wisdom, but the Board of Supervisors overrode his veto. TIC owners challenged Ordinance 161-01, alleging that it violated the Ellis Act, as well as their rights to privacy.

The First District Court of Appeals affirmed, in the published decision Tom v. City & County of San Francisco (2004) 120 Cal. App. 4th 674, finding a protected “autonomy privacy” interest in “choosing the persons with whom a person will reside, and in excluding others from one’s private residence”. Meanwhile, it found that the City’s choice to preclude homeowners from going out of the landlord business under the Ellis Act was not a sufficient countervailing interest justifying such an extreme privacy violation.

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