SF Chronicle Reports on Court of Appeal Reversal of Ellis Act Judgment for Property Owner so Jury Can Hear Evidence of Alleged “Sham Transfer” to Co-Owner

The San Francisco Chronicle reports on a recent unpublished ruling from Division Five of the First District Court of Appeal, reversing a judgment in favor of an Ellis Act-invoking landlord, on the basis that the trial court improperly excluded evidence of a “sham transfer”.

The Ellis Act requires property owners to withdraw all “accommodations” (i.e., residential rental units) from the market and to terminate all such tenancies. A landlord may not terminate some accommodations and leave others. (This is a common sense rule that allows a landlord to “go out of business” but not to evade rent control by evicting low-paying tenants and keep the market rate ones.)

In Coyne v. De Leo, the owner (Coyne) invoked the Ellis Act on a four-unit building with a single “tenant”. Other units were occupied by family members and friends – including one friend, Maria Esclamado, who was a former tenant until Coyne made her an owner so that she could participate in the Ellis withdrawal and remain in her home.

The tenant (De Leo) wanted to introduce evidence about this “transfer of ownership” to the jury. He argued that the transfer – with seller financing, a monthly payment conspicuously similar to the former “rent” payment, and an eventual “quitclaim deed” back to Coyne when she moved – was suspicious.

The Chronicle quoted Coyne’s attorney, Justin Goodman, as saying that Esclamado “received title to the property and had all the benefits of title” while “Martin (Coyne) took all the risks”, predicting that Coyne would prevail at a retrial even with the evidence that was previously barred.

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