Category Archives: Ellis Act

AB 1399 (2019): Heightened Regulations for Returning to the Rental Market Following Ellis Act Withdrawal

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AB 1399 is the product of Assemblymember Bloom’s efforts to prevent the perceived exploitation of the Ellis Act’s re-rental provisions by infamous landlord Anne Kihagi. (A 2017 Appellate decision found that she was not prohibited from re-renting in compliance with the Ellis Act by a stipulated settlement with the City of West Hollywood, and it condoned her re-rentals, to the extent they conformed to the law.)

AB 1399 amends the Ellis Act in three ways. First, a landlord was previously required to give a displaced-tenant the first right of refusal on re-renting a unit returned to the market within ten years of withdrawal. The existing penalty was punitive damages equal to six months of the contract rent. AB 1399 amends this to say that paying the penalty does not extinguish the owner’s obligation to honor the tenant’s rights.

Second, it aligns the dates of withdrawal for all units. The Ellis Act requires a 120-day notice period before the units are withdrawn. Qualified tenants are entitled to an extension. For other tenants, the landlord was permitted to grant an extension (to maintain rental income for each unit until all were withdrawn). This could result in two different categories of withdrawal dates, if the owner did not elect to extend non-qualified tenancies. Under AB 1399, the “date of withdrawal” (for purposes of tracking the post-withdrawal constraints) is the latest date of withdrawal of any unit.

Finally, it allows cities to require that a landlord returning any unit to the rental market during the period of constraints to return each unit, unless it was the principal place of residence to an owner or family member before withdrawal or it is the principal place of residence of an owner when the accommodations are returned to the market.

Even when these changes become effective on January 1, 2020, they will not immediately affect owners who have withdrawn from the residential rental market. Authorized provisions of the Ellis Act may be implemented by local governments but are not required. It is also currently unclear whether this will apply to re-rentals for properties withdrawn prior to AB 1399.

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Hilaly v. Allen: Tenant Successfully Defends Ellis Act Eviction with “Change to Terms of Tenancy” Defense, Following Landlord’s Reliance on Estoppel Statement

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“Allen had no contractual duty to complete the questionnaire. The parties indicated no shared understanding, discussions or advisement of the questionnaire’s binding nature. The questionnaire contained no express statement that the tenant would be bound by the assertions made in the questionnaire. The questionnaire was ambiguous on relevant terms, indicating that it was not the sort of communication that would lead to binding statements regarding terms and conditions of tenancy. And the record contains no indication that all parties were highly sophisticated or enjoyed similar bargaining power.”

Naseem and Naser Hilaly were residential landlords of a multiunit property in San Francisco. They purchased the building along with their son and his wife, who wanted to live together with each of their parents in the same property. Betty Allen was a long-term tenant who, prior to the sale of the building to the Hilalys, executed an estoppel statement describing that she did not have parking.

After failing to negotiate a buyout agreement, the Hilalys proceeded to withdraw the property pursuant to the Ellis Act. Allen’s mother lived with her during this period, and a visiting nurse parked in the curb cut of the street, blocking the garage that the Hilalys were parking in. The Hilalys left a note that said, “I’ve told you not to park here again”.
Continue reading Hilaly v. Allen: Tenant Successfully Defends Ellis Act Eviction with “Change to Terms of Tenancy” Defense, Following Landlord’s Reliance on Estoppel Statement

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AB 1795 (2019): Assemblymember Kamlager-Dove’s Amendment to the Unlawful Detainer Statutes Would Maintain “Public Records Mask” for Tenants Who Choose To Fight Ellis Evictions

Information about lawsuits is generally available to the public. And for tenants who have been evicted, this information is often used in credit checks for rental applications. (A landlord would understandably be interested in knowing if her applicant had just been evicted for non-payment of rent.) The unlawful detainer statutes have a specific provision governing the masking of eviction lawsuits from the public record. (Formerly, a limited civil eviction lawsuit would unmask automatically, unless a defendant prevailed in 60 days. A 2016 amendment inverted the rule, maintaining the mask unless the landlord prevailed in 60 days.)

AB 1795, however, would prevent the court clerk from allowing access to information about Ellis Act evictions, regardless of whether the landlord prevails in 60 days. Ellis Act evictions often feature a fight about wealth; the tenant has a non-transferable, valuable property interest in their rent-controlled tenancy, while the landlord wants possession of her valuable asset. In San Francisco, for instance, the City actively encourages tenants to hold over and fight Ellis Act evictions. (After all, there’s no better affordable housing than the exiting unit that already has a rent-controlled tenant in it.) But it is difficult to read this amendment as anything other than tacit encouragement from Sacramento for tenants to violate the law and fight an eviction with fewer consequences. A landlord would understandably be interested in knowing that her prospective tenant is likely to violate obligations other than paying rent, as well.

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AB 1399 (2019): Assemblymember Bloom’s Latest Attempt To Police Re-Rentals following Ellis withdrawal

Provoked by infamous landlord Anne Kihagi (whose aggressive reading of re-rental timing for withdrawn units was actually vindicated in the Court of Appeals), Assemblymember Bloom had introduced last year’s unsuccessful AB 2364 – seeking to require that landlords return to the market all at once or not at all. (By comparison, Kihagi was able to return units to the market that were unoccupied at the time she began the Ellis withdrawal, and was thus able to do so without price constraints.)

Gov. Newsom recently challenged the legislature at his “state of the State” address: “get me a good package on rent stability this year and I will sign it”. While many fresh ideas have already been advanced, AB 1399 appears to be another attempt at AB 2364.

As introduced, its language would allow cities to require Ellis-invoking property owners to return all units to the market at the same time. Many different configurations of properties are withdrawn under the Ellis Act, but for those where the owner (or their family) moves into a tenant-occupied unit, this change would either prevent rental of other units or force property owners to leave their own homes to rent units. One wonders how this bill would aid in easing the housing crisis, where it makes the process of putting existing units back on the market more onerous. (The language will likely need to be changed before the statute can advance.)

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Ballinger v. City of Oakland: Pacific Legal Foundation Sues City of “Relocation Assistance Payments”

The Ballingers, a military couple, leased their single family home in Oakland when they were reassigned to Washington D.C. for service. Anticipating they would return to the Bay Area within a few years, they negotiated a term lease that would become a month-to-month tenancy around that time. However, after they leased their home (but before they had planned to move back in), the City of Oakland instituted a “relocation assistance payment” regulation, requiring them to pay their tenants in order to terminate the tenancy and move back in.

The Pacific Legal Foundation represents the Ballingers in their lawsuit against Oakland, alleging that the ordinance constitutes a taking/exaction of private property and that it violates their rights under the Ellis Act.

However, relocation assistance payments that are reasonable have been upheld as consistent with the Ellis Act (cities are actually allowed to mitigate the adverse impacts of Ellis Act displacement, provided the payments do not impose a “prohibitive price“).

That said, the case law interpreting the mitigation payments addresses the Ellis Act only, not the 5th Amendment, so there may be something to the claim that taking money from a landlord to give to a tenant in exchange for allowing the landlord to retake possession of her property is an unconstitutional “taking”. And PLF may have to focus on the constitutional claims, rather than violations of state law, as their clients actually performed an “owner move-in” eviction rather than an Ellis Act eviction.

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Los Angeles Times Reports on Tenant Choices in Return of Ellis-Withdrawn Building to Rental Market

The Los Angeles Times reports on the decisions of tenants, displaced by the Ellis Act, to return to their former units later re-offered for rent.

While the Ellis Act is colloquially described as “going out of the rental business”, it actually sets the standards for cities to implement rules on withdrawing from the market and going back into business later. For instance, a displaced tenant may be re-offered their former unit if rented within ten years of withdrawal, and within five years, they benefit from their old rent-controlled rental rate.

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Legal Q & A: How Expensive Is an Ellis Act Eviction?

A. An Ellis Act eviction will cost a fair amount of money, time and your patience. Let’s start with the basics: the Ellis Act is a state law that requires cities to allow landlords to stop being landlords – specifically by withdrawing their property from the residential rental market. A landlord who withdraws their property can terminate tenancies. This requires an “eviction notice” and a handful of other documents, the validity of which are often measured with exacting standards. Landlords should hire qualified counsel to do this work. The first expense will therefore be your legal fees and tasks associated with preparing for a successful Ellis. These will vary with the size of your building, the quality of paperwork in the management file, and possibly the need to obtain insurance, adjust record title or even refinance with a suitable lender.
Continue reading Legal Q & A: How Expensive Is an Ellis Act Eviction?

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SF Chronicle Reports on Court of Appeal Reversal of Ellis Act Judgment for Property Owner so Jury Can Hear Evidence of Alleged “Sham Transfer” to Co-Owner

Update: Division Five has certified Coyne v. De Leo for publication.

The San Francisco Chronicle reports on a recent unpublished ruling from Division Five of the First District Court of Appeal, reversing a judgment in favor of an Ellis Act-invoking landlord, on the basis that the trial court improperly excluded evidence of a “sham transfer”.

The Ellis Act requires property owners to withdraw all “accommodations” (i.e., residential rental units) from the market and to terminate all such tenancies. A landlord may not terminate some accommodations and leave others. (This is a common sense rule that allows a landlord to “go out of business” but not to evade rent control by evicting low-paying tenants and keep the market rate ones.)

In Coyne v. De Leo, the owner (Coyne) invoked the Ellis Act on a four-unit building with a single “tenant”. Other units were occupied by family members and friends – including one friend, Maria Esclamado, who was a former tenant until Coyne made her an owner so that she could participate in the Ellis withdrawal and remain in her home.

The tenant (De Leo) wanted to introduce evidence about this “transfer of ownership” to the jury. He argued that the transfer – with seller financing, a monthly payment conspicuously similar to the former “rent” payment, and an eventual “quitclaim deed” back to Coyne when she moved – was suspicious.

The Chronicle quoted Coyne’s attorney, Justin Goodman, as saying that Esclamado “received title to the property and had all the benefits of title” while “Martin (Coyne) took all the risks”, predicting that Coyne would prevail at a retrial even with the evidence that was previously barred.

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How Long Does an Ellis Act Eviction Take?

The short answer is that it takes 120 days to terminate a tenancy, unless the tenant is at least 62 years old or is “disabled” (as defined by the Ellis Act and housing discrimination law), in which case, it takes a year.

The longer answer:
In general, month-to-month tenancies in California can be terminated on thirty days’ notice. Residential tenancies older than a year require sixty days instead. This is still true for any non-fault-based eviction in a city with eviction control. However, in 1999, the Ellis Act was amended so that tenants receive at least 120 days notice, with the option to extend. And, if at least one tenant claims an extension, the landlord can extend the withdrawal date of every other unit to match. (In other words, the landlord can “go out of business” as to the entire building at the same time.)

Of course, this just answers the question of how much notice your tenant receives before their tenancy is terminated. In San Francisco, the Ellis Act has become more of a political issue than a legal one. (Ellis-displaced tenants receive priority affordable housing, and they have received city-funded legal defense long before the passing of Proposition F.) More often than not, tenants hold over after their tenancies are terminated, aiming to defeat the eviction lawsuit and preserve their tenancy. Sometimes they are successful.
Even when the landlord is successful, they should expect to add five months of intense litigation to their timeline to recover possession.

Preparing for an Ellis Act eviction may require a review of the history of the tenancy (including changes in occupancy), clarification of the form of record ownership, changes in insurance coverage, and even refinancing, if the lender won’t allow Ellis evictions. In other words, the best time to start this process was yesterday. The second best time is right now.

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Will a “Protected Tenant” Prevent Me from Using the Ellis Act in San Francisco?

No, it will only delay your efforts by about eight months. The concept of a “protected tenant” has nothing to do with the Ellis Act. The term comes from one of San Francisco’s other just causes for eviction – the “owner/relative move-in eviction”. Cities may regulate the substantive grounds for eviction of residential tenants, but for constitutional reasons, they must allow at least some mechanism for an owner to live in their own home (or else the tenant’s permanent physical occupation is a “taking” in violation of the Fifth Amendment).

However, San Francisco has been given significant leeway in preventing certain kinds of tenants from being the subject of owner move-in evictions (the most recent being the expanded eviction protection for “educators”, who may not be evicted during a school term). The OMI/RMI statute has evergreen protections as well. For instance, if a tenant is elderly (60+) or disabled, and has lived there for ten years, they cannot generally be the subject of an OMI/RMI. (A tenant also earns this protection if they are “catastrophically ill” and have lived there for only five.)

Now, these provisions do not apply if the landlord only owns one unit in the building (e.g., a condominium) or where the landlord already lives in the building, and each other unit is occupied by a “protected tenant”, and the landlord wants to relative move-in their 60+ relative. (The landlord (or their listing broker) will commonly serve a special form of estoppel certificate asking about a tenant’s protected status. Failure to respond will actually prevent the tenant from raising the defense.)

The Ellis Act, on the other hand, is the only substantive ground for eviction regulated at the state level, and it provides landlords the “unfettered right” to go out of business. Tenants who are at least 62 or are disabled and who have lived in their rental units for at least a year may make a one time claim of extension of the termination date of their tenancy (from 120 days to a full year from the initial filling of paperwork).

While there are no absolute defenses to the Ellis Act, the road to going out of business remains perilous. Especially where it may take a full year to test your paperwork, there is no substitute for qualified counsel.

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