Category Archives: Ellis Act

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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Ellis Protesters Succeed in “Bank Shaming”

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SocketSite reports that First Republic Bank will no longer knowingly finance “displacement mortgages“. The bank announced that their loan application will now question whether the prospective borrower plans to invoke the Ellis Act to terminate tenancies in the building.

This news follows a protest at the bank’s headquarters in San Francisco this afternoon, where supporters gathered around the remaining occupants of a Coleridge Street property that was withdrawn from the rental market earlier this year, to chastise the bank for writing loans for buildings – like the one on Coleridge Street – that have been Ellis’ed.

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Ellis Act Gets Attention of U.S. Representative Waters

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Congresswoman Maxine Waters, who represents California’s 43rd District, has called for an end to the Ellis Act on a statewide level.

In her letter to the President pro Tempore and Speaker of the California State Senate, she urges that, during California’s worst housing crisis in history, the Ellis Act is being used by real estate speculators for mass evictions of mostly elderly tenants, instead of for small time landlords who simply seek to retire from the rental business. Waters’ district is located in Los Angeles County, where, she notes, there were 725 Ellis Act evictions in 2014 alone (compared to, for instance, 113 in San Francisco that year).

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City “Complying” with New Ellis Act Enhanced Relocation Assistance Law

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Under the new enhanced Ellis Act relocation assistance payment law passed by the Board of Supervisors last month, a landlord seeking to withdraw rental units from the rental market must pay up to $50,000, per rental unit, based on the “market rate differential” that the displaced tenant faces on the open rental market.

To determine this number, the new law requires the City Controller to provide market rate data for studios, one-bedrooms, two-bedrooms and three-bedroom apartments. This number, minus the tenant’s rent, times 24 months is the new “relocation payment”.

A previous attempt by the Board of Supervisors to require that landlord’s pay two years worth of rent subsidy was overturned last October in Levin v. CCSF. In an apparent effort to address the concerns of Judge Breyer, the Board of Supervisors capped the new relocation payment (which, under the previous version, could have easily been six-figures) at $50,000, and they require that a tenant provide their landlord with a signed declaration where they promise to use the funds for housing after they’re displaced.

The new law came online on June 14, 2015, and it required the Controller and the Rent Board to produce market data and the Declaration form, respectively, by June 19, 2015. While the Rent Board’s official position at the beginning of last week is that the City was not required to comply with the law, pending its appeal of Levin v. CCSF, it released this statement on Friday, in time to provide the necessary documents and data.

However, they are offered “for informational purposes only”. While there wasn’t a Schoolhouse Rock episode specifically about what happens when your city legislature passes a sequel to a law under review by the 9th Circuit, the subtext here seems to be that a landlord should comply anyway, unless and until the new law is also successfully challenged in the judicial branch.

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San Francisco’s Proposition G: “Anti-Speculator” Transfer Tax on Multi-Unit Property

San Francisco’s Proposition G would impose a five-year descending transfer tax rate on multi-unit residential property in an effort to deter speculation. Tenants cannot be evicted merely because building is sold, so the aim of this measure is to stop the use of the Ellis Act to terminate tenancies and sell owner-occupied Tenancy-in-Common units. Proposition G follows San Francisco’s recent effort to frustrate use of the Ellis Act by significantly increasing the statutory relocation assistance payment. San Francisco has also attempted to undermine TIC sales directly by eliminating contractual exclusive rights of occupancy.

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