Legal Q & A: How Expensive Is an Ellis Act Eviction?

A. An Ellis Act eviction will cost a fair amount of money, time and your patience. Let’s start with the basics: the Ellis Act is a state law that requires cities to allow landlords to stop being landlords – specifically by withdrawing their property from the residential rental market. A landlord who withdraws their property can terminate tenancies. This requires an “eviction notice” and a handful of other documents, the validity of which are often measured with exacting standards. Landlords should hire qualified counsel to do this work. The first expense will therefore be your legal fees and tasks associated with preparing for a successful Ellis. These will vary with the size of your building, the quality of paperwork in the management file, and possibly the need to obtain insurance, adjust record title or even refinance with a suitable lender.

The Ellis Act also allows cities to “mitigate any adverse impact on persons displaced”. Courts have interpreted this to allow cities to require payments of thousands of dollars per tenant (with the assumption the tenant will need security deposit and a moving truck). However, San Francisco was not permitted to require landlords to subsidize the rent differential of displaced tenants. That kind of mitigation ordinance imposed a “prohibitive price” on a landlord’s exercise of the Ellis Act.

Under San Francisco’s mitigation ordinance, as of 2018, each tenant must receive $6,632.39, and each elderly/disabled tenant must receive an additional $4,421.58 (and these amounts increase every March 1st). Depending on the size of the building and the number of occupants, a landlord may pay five or even six figures worth of relocation assistance along with the tenancy termination paperwork.

And while the paperwork terminates the tenancy, it is no guarantee the tenants will leave – particularly in a city like San Francisco, which recently expanded its free eviction defense services to tenants. In some cases, tenants will aggressively oppose eviction lawsuits to fight for their valuable, rent-controlled tenancies. While unlawful detainer/eviction lawsuits are considered “summary proceedings“, jury trials can easily hit five figures in legal fees, as a landlord spends several months litigating, even after the eviction notice expires.

The notice period takes from 120 days to a year, during which the landlord can collect rent. And where only some units are occupied by elderly/disabled tenants, landlords can choose to extend the other tenancies so that each unit is paying rent for the full year. (This may be helpful for landlords who can’t renovate or demolish a partially-occupied building anyway.) However, landlords should also consider the loss of income following the conversion to non-rental property – and particularly the fact that a (former) landlord may collect no rent during a period of unlawful detention. (The only thing worse than six months of eviction litigation is the fact that money is going out the door but not coming in.)

Ellis Act eviction timelines are often measured in years, not months, and they require a significant investment of time and money. There are other “just causes” for eviction that landlords may be qualified to attempt. For some landlords, the Ellis Act is the only way to escape the harsh consequences of rent control, and for those landlords, the cost is well worth it.

Contact us for a consultation to evaluate your options.