By: Jeffrey V. Ta
Generally, the Ellis Act allows landlords to evict all their tenants when they leave the rental business, without having to show the usual legal grounds for eviction. The Act allows local governments to require “reasonable” relocation assistance. Courts have upheld a 2005 San Francisco Ordinance that entitles displaced tenants to $4,500, adjusted annually for inflation.
On April 14, 2014, the City and County of San Francisco enacted ordinance No. 54-14 to “mitigate adverse impacts of tenant evictions” under the Ellis Act. The Ordinance entitles a tenant evicted under the Ellis Act to an increased relocation payment set as the greater of the existing relocation payment or the new enhanced amount –“the difference between the tenant’s current rent and the prevailing rent for a comparable apartment in San Francisco over a two year period.” The current market rent is to be determined by the City of Controller’s Office based on market data reasonably reflecting a representative sample of San Francisco rental apartments. Given the current rental market, the rent differential is exponentially greater than the existing relocation benefits tenants are entitled to under the 2005 Ordinance. And, the Ordinance places no caps on the size of the payout and no constraints on the tenant’s use of the payout.
The 2014 Ordinance was challenged in federal court by Levin v. City and County of San Francisco (N.D. Cal. 2014, No. 3 3:14-cv-03352-CRB and in state court by Jacoby v. City and County of San Francisco (CGC-14-54079). The Levin Court viewed the 2014 Ordinance as an uncompensated taking of the plaintiff’s property, and enjoined the City from enforcing the 2014 Ordinance and stayed its decision to allow the City to appeal.
The Jacoby Court took judicial notice of the Levin decision, and concurred with the decision in the district court case, and held the payments under the 2014 Ordinance were not reasonable as they are disproportionately higher than the compensation contemplated by the Legislature in enacting and amending Govt. Code 7060 and found the ordinance preempted by the Ellis Act. The Jacoby Court also enjoined the City from enforcing the ordinance.
Following the Levin and Jacoby decisions, the City enacted ordinance 68-15, which mirrored the 2014 Ordinance, but capped a landlord’s payout of any Rental Payment at $50,000 and required tenants to use the relocation payment solely for “Relocation Costs.” Although the Ordinance took effect on June 14, 2015, the Ordinance has not been enforced by the City, which took the position that the amended ordinance is covered by the Levin decision and therefore, the City would not enforce the amended ordinance until permitted to do so by the court.
In response to the amended ordinance, property owners Martin Coyne, Howard Weston, Edmund A. Chute, and a non-profit corporation, the Small Property Owners of San Francisco Institute [collectively “Coyne”] filed a petition of for writ of mandate and complaint for declaratory relief on the ground that the amended ordinance deprives them of their Ellis Right to go out of the residential rental business. The superior court ultimately enjoined the City from enforcing the amended ordinance and held the Ellis Act preempted procedural elements of the amended ordinance because the ordinance “places several impermissible and unauthorized obstacles before a landlord who seeks to invoke the Ellis Act to exit the rental market.” The City appealed the Coyne and Jacoby decisions. Both appeals were consolidated by a joint motion made by the parties.
The Court of Appeal affirmed stating that the amended ordinance’s relocation payments was “a form of ransom which interferes and places an undue burden on landlords who simply seek to go out of business”, and that it imposed a “prohibitive price” on landlords who exercise their rights under the Ellis Act. The City argued that the amended ordinance was authorized by language in the Ellis Act which allowed the City to protect tenants from “any adverse impact” caused by a landlord’s decision to go out of the rental business.” Notably, the court said the “adverse impact” on evicted SF tenants was not caused by the landlord’s decision, but instead by the City’s “policy to impose residential rent control.”
The court’s decision can be found at : www.courts.ca.gov/opinions/documents/A145044.PDF