“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.
Justin Goodman’s thoughts on AB 1506 – an assembly bill aimed at repealing the Costa-Hawkins Rental Housing Act – were featured in the March 2017 Newsletter of the Small Property Owners of San Francisco.
The non-profit SPOSF Institute describes its mission as providing owners of small rental properties in San Francisco with the tools and information necessary to conduct business successfully in a difficult regulatory climate, through educational programs, publications, and workshops that seek to help members better understand their rights and obligations, how to work constructively with city and state officials, and how to deal effectively with their tenants. SPOSF also seeks to protect the rights of small property owners against unfair and burdensome regulations through legal advocacy.
SPOSF holds monthly meetings at St. Mary’s Cathedral, located at 1111 Gough Street in San Francisco. You can join SPOSF by clicking here. Members have access to the full monthly newsletter.
San Francisco may soon prohibit transient use of residential hotels (also known as “SRO” (single room occupancy) units). Sponsored by a swell of Supervisors – Aaron Peskin, Jane Kim, Ahsha Safai, Jeff Sheehy, Malia Cohen, Hillary Ronen, Norman Yee, and London Breed – the proposed Ordinance, if passed, would amend Administrative Code, Chapter 41 (i.e., the Hotel Conversion Ordinance) to prohibit the “conversion” of SRO units to Tourist or Transient Use, defined as “any use of a guest room for less than a 32-day term of tenancy by a party other than a Permanent Resident”.
By hosting guests instead of providing housing to residents, SRO owners can avoid the creation of a tenancy and the application of local eviction and rent controls to the units.
SFGate reports that the Academy of Art University has reached a settlement of the lawsuit by the City for unlawful conversion of housing units. According to SFGate, the Academy has agreed that it will do the following:
•Pay the city $20 million in fines and fees over five years — $7 million of which would go into a city fund to buy rent-controlled apartment buildings and maintain them as low-cost housing.
•Provide and maintain at least 160 units of low-income housing for senior citizens on two adjacent sites that the academy owns on Nob Hill near Chinatown. Some of the units would be new construction. The Mayor’s Office of Housing and Community Development estimates the deal will be worth $40 million to the city over the 66-year life of the agreement.
•Shut down school operations at three sites the academy owns, at 2295 Taylor St. on Russian Hill, at 2340 Stockton St. near Fisherman’s Wharf, and at 700 Montgomery St. in the Financial District.
•Limit future enrollment to the amount of housing that the academy has on hand.
It is not uncommon tenants of non-residential rental spaces to actually be living in the unit. These occurrences can range from the innocent (landlord doesn’t realize they never obtained a certificate of final completion on the new construction) to the handshake deal (tenant renting a logically divisible portion of a single family home with its own sink and stove) to the aggressive, unapproved highest use of a property.
In the wake of the tragic Ghost Ship fire, Bay Area landlords are cracking down on unpermitted use. The SF Chronicle reports on a use of a warehouse as an apartment/dance studio, and a landlord’s efforts to terminate the tenancy and end the unpermitted use.
In this particular case, the landlord is relying on a 30-day notice of termination. Generally, an established residential tenancy requires a 60-day notice, and, in San Francisco, also requires “just cause” (for instance, that the landlord is taking it off of the residential rental market or has permits to demolish the space).
It has been evident for some time that an unpermitted space may still be subject to residential rent control ordinances if it is rented to a residential tenant for residential use. A recent Appellate Division case out of Los Angeles has also clarified that a landlord may not enforce conventional lease obligations – like paying rent – against a residential tenant in an unpermitted unit, because the contract is considered void.
It is very likely that a court would consider the residential use of this dance studio sufficient to earn the hallmarks of residential tenancies in San Francisco – namely, that they require just cause to terminate. (It would follow that, under state law, 60 rather than 30 days’ notice to vacate for residential tenancies would be required.) The landlord may need conditional use to remove the “unauthorized unit” or have to invoke the Ellis Act to remove the building from the residential rental market.