Category: San Francisco Rent Board

This week, San Francisco landlords, along with the Small Property Owners of San Francisco Institute, filed a Petition with the San Francisco Superior Court to challenge the propriety of San Francisco Ordinance 68-15 – requiring enhanced relocation payments to tenants where a landlord seeks to “go out of the rental business” under the Ellis Act.

The challenge alleges the same defects that found its predecessor (Ordinance 54-14) to be an unconstitutional “exaction” (a taking without just compensation) in Levin, et al. v. CCSF last year and preempted by the Ellis Act and retroactive in violation of due process in Jacoby, et al. v. CCSF earlier this year.

Last week, the Board of Supervisors, led by Supervisor Kim, proposed legislation that would make several significant changes to the Rent Ordinance, providing clarity to some of the more vague articulations of tenant protections and also imposing some onerous burdens on landlords. For instance, while a termination notice must claim authority under one of the Rent Ordinance’s “just causes” for eviction, landlords would be required to state that the particular just cause is her “dominate motive” in terminating the tenancy. (No clarification on what happens if the landlord has two reasons.) Another would require landlords terminating tenancies under the Ellis Act to inform tenants of their rights to re-rent from successors-in-interest, as well as the current owners, if their units are ever placed back on the rental market. As Ellis Act termination notices generally take one year to ripen, this change could potentially void notices already in the pipeline.

The proposed amendment would also add a substantive change that would clarify the blurry line between municipal ordinances and Costa-Hawkins. The language of Costa-Hawkins provides that, where an existing tenancy is terminated following service of a (non-fault) termination notice or a notice of change to terms in tenancy, the unit loses its “de-control” status, and it becomes subject to rent increase limitations. This language was most likely included in the mid-90s so that there would not be a big rush to empty out rental units that were de-controlled-as-such, but which were grandfathered in by the existing rent-controlled tenancies that pre-dated Costa-Hawkins. In other words, the intent of the grandfathering provision was probably just to buffer the current tenancy, not to regulate subsequent tenancies in de-controlled units. And, while this is the stated interpretation of the Rent Board (see, AT150049), it is not supported by the plain language of Costa-Hawkins, which does not qualify the conditional protection. The proposed law would explicitly state that all new tenancies following a landlord’s notice would be subject to rent control, not simply the one immediately following the grandfathered tenancy.

The City of San Francisco recently passed Ordinance 68-15, requiring enhanced relocation payments for non-fault evictions based on the Ellis Act – their second attempt in two years to conform required relocation payments to the differentials in rental rates that displaced tenants will face on the open market. This attempt is an effort to address the concerns of the courts in Levin v. CCSF and Jacoby v. CCSF, each of which recently invalidated the prior attempt.

The new law, operative June 14, 2015, was bizarrely made retroactively applicable as of June 1, 2014, by grafting the new law onto the old framework. Despite the retroactivity, the City has chosen not to enforce the new law, pending the outcome of their appeal on the prior law – although it is not clear why. As a result, the Rent Board, which is required to provide “tenant declaration” forms for landlords to give to tenants prior to initiating an Ellis withdrawal, has no declaration forms available to allow landlords to comply.

ABC-7 News’ I-TEAM explores the San Francisco Housing Crisis from the rarely-told perspective of a local landlord. Attorney Andrew Zacks explains how the pendulum has swung too far against landlords in San Francisco. Mayor Ed Lee responds that the City emphasizes fairness, and the solution is more affordable housing. Lee recently stood behind this position, encouraging an unprecedented housing bond to subsidize affordable housing for San Francisco’s middle class.

Last week, the Appellate Division of the San Francisco Superior Court provided some much needed clarity on the provision of the San Francisco Rent Ordinance that requires a landlord to notify tenants of certain information about the proposed withdrawal of their rental units, in Naylor v. CCSF

Prior to withdrawing rental units under the Ellis Act, a landlord must serve termination notices on the tenants. The court ruled that, while the landlord is required to notify the tenants of their rights to re-rent the units from the landlord (if those units are put back on the market within ten years), he is not required to inform the tenants that they have these same rights against future owners of the property, because the Rent Ordinance does not require him to.

That said, the requirements of initiating and carrying out a withdrawal of residential units from the San Francisco rental market is highly technical, and challenges to the sufficiency of notice can be comically granular. (Or, in the words of the court, the nature of the disputes can be “quite focused”.) While Naylor seems to suggest (at least in dicta) that the proper measure of sufficiency is “strict compliance” with the noticing requirements, sometimes even that isn’t enough. Last week, the San Francisco Housing Court held that the landlord in Halprin v. Wolkenstein did not properly comply with the withdrawal provisions because, while he tendered relocation checks along with the notice of termination – as required by the Rent Ordinance – the tenants did not pick up the certified letters, containing those checks, from the post office, when they missed the original delivery.

This leads to “damned if you do” situations, where a landlord could find herself arguing that she complied by sending the tenants “replacement checks”, so that they would receive their relocation payments in time to spend that money relocating, but where the tenants argue that this replacement payment did not “strictly comply” with the Rent Ordinance because it came after the notice of termination.

And this is a tough break for a landlord who waited the required one year before testing the sufficiency of her compliance with the Rent Ordinance and who must start over again from scratch – tougher still when the earth can move under her feet in the middle of the process. As Surreal Estate posted last week, the Board of Supervisors passed a diluted version of last year’s Campos Amendment, increasing the standard relocation payment due to tenants from roughly $5,500.00 per tenant to $50,000.00 per rental unit. It is unclear based on the current language how a landlord, who has already started the withdrawal process under the current rules, is expected to retroactively comply with the new ones.