Danger Panda v. Launiu – First District Court of Appeal Defines “Tenant” under the Rent Ordinance To Exclude Minors

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“Insisting that a ‘tenant’s child may be a tenant protected under the Rent Ordinance,’ defendants direct our attention to Mosser Companies v. San Francisco Rent Stabilization & Arbitration Bd. (2015) 233 Cal.App.4th 505 (Mosser Companies) and T & A Drolapas & Sons, LP v. San Francisco Residential Rent Stabilization & Arbitration Bd. (2015) 238 Cal.App.4th 646 (Drolapas) . . . Defendants mistakenly rely on Mosser Companies and Drolapas. The primary issue in both of these cases was how to interpret statutory language in the Costa-Hawkins Act, specifically, the words ‘occupant’ and ‘possession’ in Civil Code section 1954.53(d)(2). (Mosser Companies, supra, 233 Cal.App.4th at pp. 512-513; Drolapas, supra, 238 Cal.App.4th at pp. 652-653.) The present case does not involve a proposed rent increase under the Costa-Hawkins Act. Beyond that, the question we address is not whether David is an occupant or in possession of Unit 308A. The issue here is whether David’s status as a minor precludes him from being a ‘tenant’ for all purposes under section 37.2(t) of the Rent Ordinance.”

Danger Panda, LLC is the owner of a residential property in the Mission District. Over three years ago, it begin the process of invoking the Ellis Act to terminate all residential tenancies in the building. The Ellis Act is a state law that allows property owners to “go out of the rental business” and evict their tenants, so long as they comply with local eviction control ordinances. San Francisco’s ordinance requires property owners to pay “relocation assistance”, to help displaced tenants with moving expenses and deposits for their new home.

One unit in the property is occupied by a small family, including a minor child – “David”. Danger Panda served notices of termination of tenancy under the Ellis Act and paid relocation assistance to each adult occupant. Following the notices, the tenants received a full year in their unit before the expiration of their tenancy. They nonetheless remained in possession and defended an eviction lawsuit, arguing that David should have received a relocation assistance check as well.

In the lawsuit, Danger Panda argued that San Francisco’s Rent Ordinance only requires payments to “tenants”, and David was not a “tenant”. It also argued that the ordinance caps the dollar amount of these payments at three tenants per unit (currently $18,858.07 or three times the $6,286.03 payment per tenant). Had it also paid David, it would have shorted each other occupant.

The Superior Court agreed with the tenants, granting their “Delta Motion To Quash” and finding that David’s “right to occupy the premises with his parents/grandmother” required that he receive a relocation assistance payment.

Danger Panda sought review from the appellate division of the Superior Court, which echoed the trial court’s reasoning to conclude that David had a right to occupy the unit, therefore he was a “tenant” – and tenants are entitled to relocation assistance payments.

Danger Panda then applied for certification to transfer the matter to the Court of Appeal, which reversed the lower court decision. First, it held that an occupant who does not have the right to exclusive possession and an obligation to pay rent is not a “tenant” under the Rent Ordinance. Every tenant is an occupant, but not every occupant is a tenant. Second, it concluded that only “tenants” are entitled to receive relocation payments under the Ellis Act. David could not be required to pay “rent”, therefore he was not a tenant and he was not entitled to pay rent. More than three years after this lawsuit began, the Court of Appeal has now remanded to the trial court so the lawsuit can resume and proceed on the merits.

The Ellis Act is implemented in San Francisco in Rent Ordinance Section 37.9A, which defines specific procedures and requirements for Ellis Act evictions that differ from every other non-fault basis for eviction in San Francisco. While other non-fault evictions require payment to “Eligible Tenants”, which includes “any authorized occupant of a rental unit, regardless of age, who has resided in the unit for 12 or more months”, Section 37.9A simply relied upon the general definition of “tenant” in the Rent Ordinance, which, according to the court in Danger Panda, is a “definition [that] has remained unchanged since 1980”.

That said, the court also “emphasize[d] that the question before us is not whether the San Francisco Board of Supervisors has the authority under the Ellis Act to confer a section 37.9A(e) relocation benefit on a child. Rather, we hold only that a minor is not a tenant entitled to a separate relocation payment under Rent Ordinance, section 37.9A(e), as currently
written”. San Francisco does have authority to mitigate the adverse impacts of displacement on tenants, which probably includes the requirement that landlords pay Ellis Act relocation assistance to minors as well.

Sure enough, efforts are already underway to amend Section 37.9A to state as follows: “The landlord shall be required to pay a relocation benefit on behalf of each authorized occupant of the rental unit regardless of the occupant’s age (‘Eligible Tenant’). The amount of the relocation benefit shall be $4,500 per Eligible Tenant, one-half of which shall be paid at the time of the service of the notice of termination of tenancy, and one-half of which shall be paid when the Eligible Tenant vacates the unit.”