Two recent opinions on owner and relative move-in evictions analyze the murky area of “good faith”.
In DeLisi v. Lam, displaced tenants prevailed in a bad faith eviction lawsuit. Collin Lam and Kimberly Wong purchased a four-unit, fully tenant-occupied building in San Francisco’s Outer Richmond. They invoked the City’s owner move-in (OMI) provision to terminate the tenancy in Unit 2. Once they moved in, they did the same to recover Unit 1 for Kimberly’s brother Jordan under the relative-move-in (RMI) provision. The tenants of both units vacated, then sued, alleging that the termination notices were in bad faith, that Collin and Kimberly weren’t actually living there, and that the RMI was really about evicting long-term tenants, not the brother’s desire to occupy the unit.
The owners attested to their strong connection to the neighborhood and nearby relatives, stating that they chose Unit 2 because the ground floor would be better for baby and grandmother. They decided to move Jordan in after he’d lost his job a few months before.
Jordan did actually move in. However, his testimony created concerns for the jury. For example, he hadn’t discussed whether he’d be paying rent but “expected he probably would” (a violation of the RMI statute). He hadn’t been inside Unit 1 prior to moving in and didn’t know its layout. He and his girlfriend had been considering moving out of the area for work. The jury was unsympathetic to the explanation. Even though the owners and the brother did actually move in as required by law, they returned a verdict for the tenant and a final judgment $462,450!
In their appeal, the owners argued that the trial court’s application of the statutes allowed “tenants and juries to look behind landlords’ compliance with the RMI provisions in order to decide, based on guesses about the landlords’ motivations, whether they really acted for the right reasons, and to hold them liable for having ‘bad thoughts’ even though their actions otherwise satisfied the requirements of the law.”
Nevertheless, the Court of Appeal affirmed DeLisi v. Lam in an unpublished opinion, noting that the “good faith” requirement was an allowable, substantive limitation on evictions. It wasn’t enough to merely comply with the mechanical requirements of the Rent Ordinance. The court published the opinion soon after, following requests by several tenant attorneys. (Unpublished opinions only bind the parties, while published ones also bind the public.)
Meanwhile, in another part of town, Robyn and Ian Reynolds sued their former landlord, Cory Lau, who used the OMI statute to move into their apartment above his North Beach liquor store. At trial, the tenants were able to spin good facts into bad. Lau intended to move in so he didn’t have to commute for his seven-day/week, 12-hour/day work obligations from San Bruno, made all the more urgent because his own rent was increasing. This only prompted scrutiny over whether he lied about exactly how much he said his rent was going up when he explained his motivations to his tenants. The tenants’ attorney even had the jury consider whether Lau should have evicted another tenant, who was using Airbnb in violation of his lease. Lau reformed the (curable) behavior, but the tenants argued that he should have evicted the other tenant for fault and moved into a different unit than he wanted, with a different just cause than he intended. Although Lau ultimately did nothing wrong, the jury found him liable for $670,574!
The trial judge granted Lau’s motion for judgment notwithstanding the verdict. The Court of Appeal affirmed the judgment in an unpublished opinion, agreeing that “the ‘good faith’, ‘without ulterior reason’, and ‘honest intent’ requirements do not trigger a wide-ranging inquiry into the general conduct and motivations of an owner who seeks to recover possession of a unit.” The relevant inquiry is whether they moved into the apartment within three months and were still residing there.
Following a publication request from the San Francisco Apartment Association and the Small Property Owners of San Francisco, the Court of Appeal published Reynolds v. Lau. It found DeLisi v. Lam distinguishable (given the evidence that Jordan may not have intended to establish a long term principal residence) and found that, where a landlord’s “dominant motive for recovering possession is to occupy the unit as their principal residence for at least 36 continuous months, other ancillary reasons such as financial incentives or personal preferences generally may not be grounds for violation of the Rent Ordinance.”
Appellants bring to our attention a recently published opinion by our colleagues in Division Two of this court, DeLisi v. Lam. DeLisi affirmed a jury verdict finding the owners of a four-unit apartment building in violation of the San Francisco rent ordinance based on their eviction of an existing tenant to facilitate move-in by a relative. We find DeLisi distinguishable, as evidence was presented that the relative may not have intended to establish a long-term principal residence. (See id. at p. *11 [noting the relative had never visited the apartment when the eviction notice was served and was unaware of essential details of his occupancy, including the number of bedrooms in the unit, the amount of rent he would pay, and when he would move in].) Here, the evidence was uncontroverted that Lau and his fiancé sought to recover possession of 456 Broadway as their long-term primary residence, and have lived there since. We do not read DeLisi to suggest that an owner may violate the rent ordinance if he or she entertains other motives in addition to having a good faith intent to establish a long-term primary residence. So long as the owner’s dominant motive for recovering possession is to occupy the unit as their principal residence for at least 36 continuous months (§ 37.9, subd. (a)(8)(i)), other ancillary reasons such as financial incentives or personal preferences generally may not be grounds for violation of the rent ordinance.
A version of this article originally appeared in the October 2019 newsletter for the Small Property Owners of San Francisco.