SFAA v. CCSF – First District Court of Appeals Affirms Challenge to San Francisco Planning Code Ellis Act Discrimination

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“[R]ather than regulating the particulars of a landlord’s proposed merger (or demolition or conversion) of a residential unit, section 317(e)(4) prohibits a landlord withdrawing a residential unit from the rental market from merging the unit with another unit for 10 years. In doing so, section 317(e)(4) imposes a penalty on the very class entitled to protection under the Ellis Act – to wit, landowners seeking to exit the residential rental business. As such, under the legal authority cited above, section 317(e)(4) is indeed invalid.”

Division Three of the First District Court of Appeal affirmed the San Francisco Superior Court’s determination that San Francisco may not deny applications to merge dwelling units, under Planning Code section 317(e)(4), by property owners who have invoked the Ellis Act.

In San Francisco Apartment Association v. City and County of San Francisco, the SFAA challenged San Francisco Ordinance 287-13, which regulated the merger (i.e., joining) of two existing dwelling units, and which specifically prohibited approval for such merger when there had been a non-fault eviction within the ten years prior to the application (or an owner/relative move-in eviction within five years).

The then-existing version of San Francisco Planning Code Section 317(e)(4) provided that, “The Planning Commission shall not approve an application for merger if any tenant has been evicted pursuant to Administrative Code Sections 37.9(a)(9) through 37.9(a)(14) where the tenant was served with a notice of eviction after December 10, 2013 if the notice was served within ten (10) years prior to filing the application for merger.”

The challenge focused exclusively on the Ellis Act (as opposed to other non-fault evictions under the Rent Ordinance) because the Ellis Act is a state (not local) law (Cal. Gov., §§7060, et seq.) that “‘completely occupies the field of substantive eviction controls over landlords’ desiring to exit the residential rental market.”

Courts have traditionally viewed substantive eviction controls as the purview of local governments, while viewing state law (e.g., the unlawful detainer statutes) as occupying the field of procedural rules for evictions. This ruling illustrates the Ellis Act as an exception.

Division Three noted that, “the issue is whether the Ordinance enters into the field of ‘substantive eviction controls over landlords’ that has been reserved for the State”, essentially scrutinizing the impact of local laws imposing a penalty on the exercise of this particular type of eviction. In other words, cities can otherwise enumerate the allowable bases to terminate residential tenancies, but they must include the Ellis Act and they may not discriminate against it.

This decision potentially opens the door to challenges to a variety of Ellis Act “penalties”, including the recent “Accessory Dwelling Unit” ordinance, which allows property owners to create dwelling units out of unused space in existing properties… unless they’ve invoked the Ellis Act within the last ten years.