Category Archives: Ellis Act

SF Chronicle: “SF Tenant-Protection Law Dies Quietly”

The San Francisco Chronicle reports on the Campos enhanced relocation payment “law die[d] quietly” last week. The “law” in question was actually a pair of efforts in 2014 and 2015, introduced by then-Supervisor Campos, which would increase the relocation assistance payment owed to tenants to be displaced by the Ellis Act, from an inflation-adjusted payment (roughly equal to first and last month’s rent and deposit for a replacement apartment) to a 24-month rent subsidy, compensating for the difference between the displaced tenant’s former rent-controlled rate and fair market value.

The 2014 ordinance was essentially a blank check, where the rent differential could easily reach six figures per unit. Property owners quickly challenged Ordinance 54-14 in both state court (Jacoby v. CCSF) and federal court (Levin v. CCSF). Each court determined that Ordinance 54-14 was invalid. However, the court in Jacoby found that the payment was not “reasonable” under the existing standard for mitigation payments (set forth in Pieri v. City & Cty. of San Francisco (2006) 137 Cal. App. 4th 886), while the Levin court made a determination on constitutional takings grounds, finding the payment was an “exaction” unrelated to the owner’s choice to exit the residential rental market. (It found that the adverse impacts that the payment sought to alleviate were not caused by the landlord’s choice to use the Ellis Act, but by “market forces unrelated to the impact of the property owner’s use of the property”.)

San Francisco tried to institute enhanced mitigation payments again in 2015, with Ordinance 68-15. The second ordinance grafted itself onto the first one (creating some confusion about how and when it was to be applied), capping the payment at $50,000 per unit and providing an administrative review process for landlords who could not afford the increased payment. Again, property owners challenged the ordinance as conflicting with the Ellis Act.

The trial court in Coyne v. CCSF found that the changes did not solve the preemption problems, and reached the same conclusion. The First District Court of Appeal later reviewed Jacoby and Coyne together, finding that the enhanced mitigation payment ordinance imposed a “prohibitive price” on a property owner’s ability to exit the residential rental market, in the published opinion Coyne v. City & Cty. of San Francisco (2017) 9 Cal. App. 5th 1215.

The City (as well as amicus curiae) sought a depublication order from the Supreme Court of California, urging that Coyne v. CCSF created a new preemption standard and, by referencing Levin, improperly extended exactions takings jurisprudence. However, in a unanimous ruling, the Supreme Court denied the requests to depublish and further declined to review the matter on its own motion.

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San Francisco Legislative Update (2017): Children Now Entitled to Ellis Act Relocation Assistance Payments Following Danger Panda Decision

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The First District Court of Appeal recently vindicated a landlord’s efforts to terminate a tenancy pursuant to the Ellis Act, where both the Trial Court and the Appellate Division found the notice of termination of tenancy invalid, as the landlord paid only the adults and not the child who occupied the unit. That case, Danger Panda v. Launiu interpreted the term “tenant” in the section of the Rent Ordinance requiring relocation payments to “tenants”, determining that this was a term of art with a specific import: “Construing section 37.2(t) according to its plain language, a tenant is a person who is entitled to occupy a residential unit (1) to the exclusion of all others and (2) pursuant to a written agreement; oral agreement; sub tenancy approved by the landlord; or sufferance.” The Court noted, however, that it was only interpreting that term, not considering whether the Board of Supervisors had the authority to confer a relocation benefit on a child.

Supervisor Ronen picked up this cue, introducing Ordinance 123-17, which requires payment to every “Eligible Tenant”, defined as “each authorized occupant of the rental unit regardless of the occupant’s age”. Danger Panda resolved the uncertainty in whether minors were entitled to Ellis Act relocation assistance payments (as they are for other non-fault evictions under the Rent Ordinance). Interestingly, Ordinance 123-17 may resolve further uncertainty about whether a landlord is required to pay persons with whom she has no privity, but who nonetheless occupy a rental unit.

Ordinance 123-17 becomes effective July 22, 2017, and the full text is available here.

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Danger Panda v. Launiu – First District Court of Appeal Defines “Tenant” under the Rent Ordinance To Exclude Minors

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“Insisting that a ‘tenant’s child may be a tenant protected under the Rent Ordinance,’ defendants direct our attention to Mosser Companies v. San Francisco Rent Stabilization & Arbitration Bd. (2015) 233 Cal.App.4th 505 (Mosser Companies) and T & A Drolapas & Sons, LP v. San Francisco Residential Rent Stabilization & Arbitration Bd. (2015) 238 Cal.App.4th 646 (Drolapas) . . . Defendants mistakenly rely on Mosser Companies and Drolapas. The primary issue in both of these cases was how to interpret statutory language in the Costa-Hawkins Act, specifically, the words ‘occupant’ and ‘possession’ in Civil Code section 1954.53(d)(2). (Mosser Companies, supra, 233 Cal.App.4th at pp. 512-513; Drolapas, supra, 238 Cal.App.4th at pp. 652-653.) The present case does not involve a proposed rent increase under the Costa-Hawkins Act. Beyond that, the question we address is not whether David is an occupant or in possession of Unit 308A. The issue here is whether David’s status as a minor precludes him from being a ‘tenant’ for all purposes under section 37.2(t) of the Rent Ordinance.”

Danger Panda, LLC is the owner of a residential property in the Mission District. Over three years ago, it begin the process of invoking the Ellis Act to terminate all residential tenancies in the building. The Ellis Act is a state law that allows property owners to “go out of the rental business” and evict their tenants, so long as they comply with local eviction control ordinances. San Francisco’s ordinance requires property owners to pay “relocation assistance”, to help displaced tenants with moving expenses and deposits for their new home.
Continue reading Danger Panda v. Launiu – First District Court of Appeal Defines “Tenant” under the Rent Ordinance To Exclude Minors

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Infamous San Francisco Landlord Anne Kahigi Sent to Jail for Contempt

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WeHoVille.com reports that infamous landlord Anne Kahigi has been ordered to jail for five days for violating an injunction in a case by a former tenant of one of her West Hollywood apartments, who is suing her for violating the Ellis Act. The former tenant’s lawsuit alleges that she violated the Ellis Act by re-renting the property.

The Ellis Act – which allows property owners to terminate tenancies in a building by “going out business” – actually does permit re-renting under certain circumstances (like offering the unit to the displaced tenant at the rent-controlled rental rate). However, re-rental within two years may subject the landlord to prosecution by the city and liability to the tenant.

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First District Affirms San Francisco Housing Court on Small Property Owners’ Challenge to Enhanced Relocation Assistance Payment Ordinance: Coyne v. CCSF

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“We conclude the prohibitive price standard is the appropriate standard to determine conflict preemption under the Ellis Act. It is the measure appellate courts consistently adopt to determine if a challenged ordinance contradicts the state law.”

Today, Division Five of the First District Court of Appeal affirmed Judge Quidachay of the San Francisco Housing Court, who previously held that San Francisco’s enhanced relocation assistance payment ordinance was not a “reasonable” means of mitigating the impact of tenant displacement by the Ellis Act. In 2015, plaintiffs, including individual landlords and the Small Property Owners of San Francisco, argued in Coyne v. CCSF that an enhanced relocation assistance payment regime was preempted by the Ellis Act. The payment amounted to a subsidy of a tenant’s new rent for two years after displacement under the Ellis Act.

Division Five affirmed the ruling, but determined that the correct standard was whether a local ordinance places a “prohibitive price” on a landlord’s ability to exit the rental market. “Like provisions in past City-enacted ordinances which have been invalidated, the City’s Rental Payment Differential obligation places conditions on a landlord’s right to go out of business that are not found in the Ellis Act. The Ellis Act contains no requirement that obliges a landlord to pay their former tenants future rental subsidies so that they can leave the residential rental business.” Division Five agreed with its colleagues in Division Three, which recently applied the “prohibitive price” standard to invalidate San Francisco’s prohibition on the merger of rental units for 10 years after an owner has invoked the Ellis Act.

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Assembly Members Chiu and Bloom Introduce AB 982 – Extending Withdrawal Date to One Year for All Occupants

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This week, Assembly Members Chiu and Bloom introduced AB 982, an amendment to Section 7060.4 of the Ellis Act, dictating that, when a property is withdrawn from the residential rental market under the Ellis Act, the termination date of all tenancies is one year from the date of filing the “notice of intent to withdraw” with the city.

Currently, the default withdrawal date is 120 days, and qualified tenants may claim an extension to a full year if they are at least 62 years old or are disabled. The amendment would simply eliminate the “qualified claim” requirement, providing one-years’ notice for all occupants.

If the amendment passes, this would be the second time the withdrawal date has been changed since the Ellis Act was enacted in 1986. Originally, the Ellis Act provided for 60 days’ notice of termination, in line with the maximum period of notice of termination for periodic residential leases under state law.

Effective January 1, 2000, SB 948 (1999) required 120 days’ notice, unless a qualified tenant claimed an extension, in which case the property owner had to comply with additional conditions for withdrawal of the property, including the extension of the withdrawal date to a full one-year for rental units with a qualified tenant.This amendment would essentially restore the original text, without the conditions and the variable withdrawal date.

The logic of this amendment is somewhat opaque, given that the class of tenants that would be protected is the one that is per se less susceptible to the adverse impacts of displacement (as they are neither disabled nor elderly). Time will tell whether Assembly Members Chiu and Bloom find the political will for this amendment.

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SFAA v. CCSF – First District Court of Appeals Affirms Challenge to San Francisco Planning Code Ellis Act Discrimination

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“[R]ather than regulating the particulars of a landlord’s proposed merger (or demolition or conversion) of a residential unit, section 317(e)(4) prohibits a landlord withdrawing a residential unit from the rental market from merging the unit with another unit for 10 years. In doing so, section 317(e)(4) imposes a penalty on the very class entitled to protection under the Ellis Act – to wit, landowners seeking to exit the residential rental business. As such, under the legal authority cited above, section 317(e)(4) is indeed invalid.”

Division Three of the First District Court of Appeal affirmed the San Francisco Superior Court’s determination that San Francisco may not deny applications to merge dwelling units, under Planning Code section 317(e)(4), by property owners who have invoked the Ellis Act.

In San Francisco Apartment Association v. City and County of San Francisco, the SFAA challenged San Francisco Ordinance 287-13, which regulated the merger (i.e., joining) of two existing dwelling units, and which specifically prohibited approval for such merger when there had been a non-fault eviction within the ten years prior to the application (or an owner/relative move-in eviction within five years).

The then-existing version of San Francisco Planning Code Section 317(e)(4) provided that, “The Planning Commission shall not approve an application for merger if any tenant has been evicted pursuant to Administrative Code Sections 37.9(a)(9) through 37.9(a)(14) where the tenant was served with a notice of eviction after December 10, 2013 if the notice was served within ten (10) years prior to filing the application for merger.”

The challenge focused exclusively on the Ellis Act (as opposed to other non-fault evictions under the Rent Ordinance) because the Ellis Act is a state (not local) law (Cal. Gov., §§7060, et seq.) that “‘completely occupies the field of substantive eviction controls over landlords’ desiring to exit the residential rental market.”

Courts have traditionally viewed substantive eviction controls as the purview of local governments, while viewing state law (e.g., the unlawful detainer statutes) as occupying the field of procedural rules for evictions. This ruling illustrates the Ellis Act as an exception.

Division Three noted that, “the issue is whether the Ordinance enters into the field of ‘substantive eviction controls over landlords’ that has been reserved for the State”, essentially scrutinizing the impact of local laws imposing a penalty on the exercise of this particular type of eviction. In other words, cities can otherwise enumerate the allowable bases to terminate residential tenancies, but they must include the Ellis Act and they may not discriminate against it.

This decision potentially opens the door to challenges to a variety of Ellis Act “penalties”, including the recent “Accessory Dwelling Unit” ordinance, which allows property owners to create dwelling units out of unused space in existing properties… unless they’ve invoked the Ellis Act within the last ten years.

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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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Oakland Considering Expanding Required Ellis Relocation Payments

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The East Bay Express reports on the Oakland City Counsel’s proposed amendment to the rent ordinance, which would expand the payment of relocation assistance when tenants are displaced by the Ellis Act. Currently, only low income tenants receive relocation assistance of roughly $8,000 per unit (plus $2,500 for homes with minors, seniors and disabled tenants). The amendment would expand this payment to apply to all displaced tenants, regardless of income level.

This expansion would track a 2003 amendment to the Ellis Act. As the First District Court of Appeals noted, in the case Pieri v. City and County of San Francisco, this amendment removed the limitation that these payments only be given to low income tenants. In that case, the Pieri court upheld a San Francisco ordinance, similarly expanding the required relocation payments to all tenants displaced by the Ellis Act, finding the amount of that payment “reasonable”.

And, while there are certainly limits on what constitutes a “reasonable” relocation payment, the East Bay Express notes that the legislative intent is to allow “displaced renters cover the first and last month’s rent for new apartments . . . and help with other fees and expenses associated with moving in to a new place”. Where Oakland is now the fourth most expensive rental market in the country, these dollar amounts seem to stand a good chance of being “Pieri reasonable”.

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Ellis Eviction from the Landlords’ Perspective

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The SF Chronicle explores the story of a Duboce Triangle family trying to recover possession of the second unit in their home from a decades’ old, long-term tenant, with the Ellis Act.

The tenant is paying $365 per month for the two-bedroom unit, and while the landlords have offered a six-figure payment to get the place back, the Ellis Act currently requires a payment of only about $5,500, following the recent, successful challenge to San Francisco’s second attempt to increase the relocation payment amount, earlier this month.

While the Chronicle notes the “irresistible narrative” of one of the owners – a curator at the De Young – evicting an artist, Zacks & Freedman’s Andrew Zacks was skeptical that the tenant added to the “artistic fiber” of the City, challenging sympathizers to “try to find him on the Internet”.

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