AB 1399 (2019): Heightened Regulations for Returning to the Rental Market Following Ellis Act Withdrawal

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AB 1399 is the product of Assemblymember Bloom’s efforts to prevent the perceived exploitation of the Ellis Act’s re-rental provisions by infamous landlord Anne Kihagi. (A 2017 Appellate decision found that she was not prohibited from re-renting in compliance with the Ellis Act by a stipulated settlement with the City of West Hollywood, and it condoned her re-rentals, to the extent they conformed to the law.)

AB 1399 amends the Ellis Act in three ways. First, a landlord was previously required to give a displaced-tenant the first right of refusal on re-renting a unit returned to the market within ten years of withdrawal. The existing penalty was punitive damages equal to six months of the contract rent. AB 1399 amends this to say that paying the penalty does not extinguish the owner’s obligation to honor the tenant’s rights.

Second, it aligns the dates of withdrawal for all units. The Ellis Act requires a 120-day notice period before the units are withdrawn. Qualified tenants are entitled to an extension. For other tenants, the landlord was permitted to grant an extension (to maintain rental income for each unit until all were withdrawn). This could result in two different categories of withdrawal dates, if the owner did not elect to extend non-qualified tenancies. Under AB 1399, the “date of withdrawal” (for purposes of tracking the post-withdrawal constraints) is the latest date of withdrawal of any unit.

Finally, it allows cities to require that a landlord returning any unit to the rental market during the period of constraints to return each unit, unless it was the principal place of residence to an owner or family member before withdrawal or it is the principal place of residence of an owner when the accommodations are returned to the market.

Even when these changes become effective on January 1, 2020, they will not immediately affect owners who have withdrawn from the residential rental market. Authorized provisions of the Ellis Act may be implemented by local governments but are not required. It is also currently unclear whether this will apply to re-rentals for properties withdrawn prior to AB 1399.