640 Octavia, LLC v. Pieper delivers a long overdue analysis of an owner’s “bona fide intent to withdraw” in the context of Ellis Act evictions. The Ellis Act was enacted in 1985 in response to the Supreme Court decision Nash v. City of Santa Monica (1984) 37 Cal.3d 97, which found that a city’s police power permitted it to eliminate the ability of landlords to terminate a tenancy in conjunction with exiting the rental market, unless the city permitted it. In that case, Santa Monica would only issue a demolition permit if “(1) the building is not occupied by persons of low or moderate income, (2) cannot be afforded by persons of low or moderate income, (3) removal will not adversely affect the housing supply and (4) the owner cannot make a reasonable return on his investment.”
The California legislature was quick to respond by enacting the Ellis Act to alleviate the plight of landlords and guarantee a “fundamental right” to cease doing business as a landlord. However, it took nearly two decades before the Supreme Court dictated the rubric for use of the Ellis Act in the context of a tenant’s defense of retaliation. In Drouet v. Superior Court (2003) 31 Cal. 4th 583, the Supreme Court determined that a landlord was permitted to retaliate, so long as they had a bona fide intent to exit the rental market. (As a practical example, “mom and pop” landlords should be permitted to exit the rental market even though their tenants complain about housing defects. (In fact, they can exit because of those complaints.)
Drouet set the framework for entry of judgment for the landlord as a matter of law, but remanded to the trial court to determine whether the particular case met the standard. It took another two decades to put that standard into practice.
In 640 Octavia, the Court rejected the evidentiary significance of two themes of arguments by the tenants. First, the Court clarified the primacy of a plaintiff’s establishing a bona fide intent to withdraw in the face of a retaliation defense under Drouet. Essentially, there is no “retaliatory withdrawal defense” when a landlord seeks to go out of business.
Continue reading “640 Octavia, LLC v. Pieper – Court of Appeal delivers guidance on summary judgment in Ellis Act unlawful detainers”
