SF Gate reports on a lawsuit by City Attorney Dennis Herrera against the owner and master tenant of a mixed use property in the Outer Mission, where 20 people rented space in a “windowless basement” below a Laundromat. The City brought the lawsuit after uncured violations of City fire, electrical and plumbing cods, and operating a public-nuisance building. The violations evoke last year’s Ghost Ship fire in Oakland.
San Francisco Business Times reports on exploring “legislation that would allow the city and county of San Francisco to impose a vacancy tax on property owners to help mitigate the impacts of the widespread practice of warehousing valuable residential and commercial units”.
Landlords sometimes keep units vacant to avoid the burdens of rent and eviction control regulation. However, these “ghost units” do contribute to the scarcity of housing.
Having “only” increased by 4.5% in 2015, early 2017 rents have reportedly dropped 8% since the same time last year, and SocketSite reports that San Francisco rents have fallen back down to 2014 levels.
Only time will tell if this is a function of peak unaffordability, the inevitable realization of the development pipeline from the recent housing boom, or a decline in the number of San Francisco residents with jobs.
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.
Mountain View’s Measure V seeks to impose rent control on pre-1995, multi-unit buildings (keyed to CPI but nonetheless between 2 and 5%). It also requires “just cause” for evictions. However, shortly after Measure V was approved by Mountain View voters, the California Apartment Association filed a lawsuit challenging its constitutionality, among other things, on the basis that it constitutes an “‘unlawful taking’ under the United States and California constitutions”.
Part of the dispute is that, in an effort to ease the burden of recent rent increases, Measure V rolls back rents to October 19, 2015 levels. It is difficult to imagine why this should be a problem, as retroactive rent ceilings were approved in the seminal case, Birkenfeld v. City of Berkeley (1976) 17 Cal. 3d 129. Further, fighting over the end of 2015 as a benchmark may be futile, as this actually seems to have marked a turning point in the market. Birkenfeld also approved rent ceilings themselves, so long as they provided a “just and reasonable return”. The “CPI standard” employed by Measure V seems to have been sufficient in several Bay Area cities.
Further, a takings claim on the mere imposition of a rent control regime is a tough sell. While the eviction protections will remain intact during the challenge, a “physical takings” argument is unlikely to be successful where landlords have some method (like an owner move-in eviction) to recover possession for personal use (and the “just cause for eviction” provisions will go into effect notwithstanding the injunction). Meanwhile, “regulatory takings” require evidence of significant diminution in value. However, the disruptive effect of rent control on markets tends to actually increase the prices of rental property over time.
The most interesting thing about this lawsuit may be the allegation by Daniel DeBolt of the Mountain View Tenants Coalition (a group that promoted Measure V) that the City of Mountain View won’t be defending the measure against the California Apartment Association. Although, he has indicated that the Mountain View Tenants Coalition will defend the measure itself when it is allowed to intervene.
California AB 2819, which will take effect on January 1, 2017, now maintains the public records mask on limited unlawful detainer actions (under Cal. Code Civ. Proc., §1161.2) unless a plaintiff prevails in 60 days. (Currently, the statute automatically unmasks the record, unless a defendant prevails in 60 days).
It also adds a Section 1167.1 to the unlawful detainer statutes, which will allow a court to dismiss an unlawful detainer action unless a proof of service is filed within 60 days.
The new provisions are a result of efforts by Assembly Member David Chiu, who urged that “Tenants who prevail in eviction lawsuits should not be placed wrongfully on tenant blacklists”.
The changes shift the balance from the public policy promoting open access to public records in favor of protecting tenants from the stigma of having an eviction on their “record” (whether or not they ultimately prevailed). (The past few years has seen an increase in evictions, which is arguably tied more to increase in housing costs more than an increase in violative behavior.)
On the other hand, landlords have an interest in learning about the eviction history of their prospective tenants. The new law also creates an incentive for defendants to stall the unlawful detainer “summary proceeding” for at least 60 days, to trigger the maintaining of the mask.
San Francisco’s attack on property rights suffered yet another defeat today thanks to the efforts of lawyers at ZFP Law. Legislation designed to limit owners’ ability to recover possession of rental units for their own use or occupancy or to recover possession to make repairs or improvements was declared invalid by a San Francisco Superior Court judge.
The Law: In May of this year, the City amended the Rent Ordinance such that landlords who want to recover possession of rental units – such as owner/relative move-in, condo conversion sale, removal from housing use, capital improvements, or rehabilitation work – where the tenants have school-age children or are employed, in any way, by a school or school system, could not terminate the tenancies except during the Summer recess. (Ordinance 55-16) For example, a landlord who wants to move her ailing, elderly mother into a unit in her building on September 1 would have to wait until next May. The legislation was sponsored by Supervisors Campos, Kim, Mar, Avalos, Cohen, and Breed, and passed unanimously with the Mayor’s signature.
The Case: The San Francisco Apartment Association and Small Property Owners of San Francisco Institute retained Zacks, Freedman & Patterson to challenge the law, and the lawsuit was filed on June 10, 2016.
The Decision: On August 31, 2016, the San Francisco Superior Court issued an order invalidating the City’s ordinance, concluding that, “Since the Ordinance only regulates when some tenancies may be terminated based on who the tenants are, the Court agrees with Petitioners that it is preempted because it enters the fully-occupied field of the ‘timing of landlord-tenant transactions’ which ‘is a matter of statewide concern not amenable to local variations’”.
ZFP Law shareholder Andrew Zacks argued the matter with the assistance of senior litigator James Kraus. Said Zacks, “The judicial system is currently the only hope for vindicating the rights of property owners under the assault of short-sighted, ill-advised, counter-productive, and illegal San Francisco legislation. After 30 years of failed housing policies that have contributed to some of the highest housing prices in the world, San Francisco needs to explore new solutions. We are grateful that the Court acknowledged our primary argument that San Francisco laws must conform to the requirements of California law.”
San Francisco Apartment Association director Janan New added, “Much farther-reaching than the laudable goal of preventing displacement of teachers, the legislation actually made it illegal for a property owner to make necessary capital improvements to their building for nine months out of the year. It was written so broadly that it also prevented property owners from making major rehabilitations to their property anytime from September to June, and made it illegal for a homeowner to move into his or her own home for three quarters of the calendar year, even if the homeowner himself is a San Francisco teacher or school employee. We thank the Court for rightfully striking down the ordinance.”
Zacks, Freedman & Patterson, PC is a law firm dedicated to advocating for the rights of property owners. With experience and knowledge in rent control issues, zoning, permitting, transactional disputes and other real estate matters, Zacks, Freedman & Patterson, PC has successfully advocated its clients’ positions before local administrative tribunals and at all levels of the State and Federal courts, including the U.S. Supreme Court. For more information, call (415) 956-8100 or visit www.zfplaw.com.
SF Gate reports on the sinking and tilting of SOMA’s Millennium Tower, which has settled 16 inches since its completion in 2008. Theories vary, with some saying this is due to the choice not to drill piles into the bedrock and others shifting the blame to excavation at the adjacent Transbay Transit Center.
Meanwhile, rental housing is down as well (metaphorically)
Airbnb has filed a lawsuit against San Francisco in Federal District Court, seeking to invalidate the recent expansion of enforcement tools to regulate short-term residential rental listings. Ordinance 104-16 now requires hosting platforms to verify that a residential unit is on the City registry prior to listing and to requires them to respond to requests for information from the City. Violations can lead to civil penalties of $1,000 per day, as well as certain criminal penalties.
Airbnb alleges that the new ordinance violates its rights under the Communications Decency Act, which “expressly preempts state and local laws that treat a website ‘as the publisher or speaker of any information provided by another information content provider’,” urging that, “instead of targeting speech, the City instead could simply enforce its existing short-term rental law directly against hosts who violate it”.
However, Airbnb also alleges that the new law violates its rights under the First Amendment, insisting that it is “a content-based restriction on advertising rental listings, which is speech”. Whether or not the new ordinance will survive judicial review as a constitutional economic regulation, it does seem inconsistent to advance a First Amendment argument while also disclaiming that listings are speech. And, in any event, simply verifying that a host has complied with the “Airbnb law” and obtained a listing number does not quite make the list of onerous restraints on speech. The Federal District Court also recently upheld the City’s buyout legislation, requiring a landlord to disclose certain rights to tenants concerning “buyout agreements” (offering money for the vacating of a rental unit) prior to having the discussion, against a constitutional challenge for restrictions on speech.