Friday, June 22, 2018

How Preemptive Is the Ellis Act?

On June 20, 2018, California Supreme Court denied review of Small Property Owners of San Francisco Institute v. City & County of San Francisco (2018) 22 Cal.App.5th 77, thus affirming its holding, striking a 10-year ban on alterations of non-conforming units following the Ellis Act evictions.  The decision was reached on the preemption argument of the Ellis Act (Cal. Gov. Code § 7060 et seq.).  How often it is a winning argument, and how universally its preemption is applied? Let us take a look at a few recent decisions.

SPOSFI v. CCSF, Id., stricken down the  5-10 year waiting period ordinance on renovations of units following non-fault evictions (S.F. Planning Code, Section 181), and did it on the argument that the scope of the non-fault evictions included evictions under the Ellis Act, thus interfering on municipal level with the Act's preemptive nature of occupying the field statewide. Similarly in 2016, the San Francisco Apartment Association won in striking down S.F. Planning Code, Section 317(e)(4), which was proposing a 10-year ban on mergers after Ellis Act evictions. SFAA v. CCSF (2016) 3 Cal.App.5th 463. So far, things seemed to be in sync. These must be "substantive" interferences with the Ellis Act, because "procedural" interferences are clearly allowed. See, Pieri v. CCSF (2006) 137 Cal.App.4th 886; Gov. Code 7060.1.  If you have read and compared these decisions, I think you would agree that drawing a line between which ban is procedural and which substantive is not a simple task.

How about a similar ban delaying condominium conversions for 10 years after a buyout?  This one survives the challenge. In SFAA v. CCSF (9th Cir. 2018) 881 F.3d 1169, a similar 10-year ban on prohibiting condo-conversions following buyouts was upheld as constitutional. This decision was concerned with the condo-conversions and not the Ellis Act. It might be also attributed to Gov. Code, Section 7060.7(a), explaining that the legislative intent behind the Ellis Act was not to interfere with local governmental authority over regulation of condo conversions (as explained in Reidy v. CCSF (2004) 123 Cal.App.4th 580, 591, as modified on denial of reh'g (Nov. 23, 2004)), but the very next subsections, 7060.7(b) and (c), would have applied to the decisions on units’ mergers and alterations, and yet they did not. See and compare, Gov. Code §§ 7060.1(b) & (c), 7060.2, and 7060.4, for the same reasoning.  Section 7060.2 anticipates 10 years as an acceptable period of time for accommodations.

What if the owners attempted first to condo-convert (thus making certain promises and concessions to the city in the process of applying for conversion), but then change their mind and terminate tenancies under the Ellis Act? In this case Ellis Act was held as not preempting prior arrangements. Lincoln Place Tenants Ass'n v. City of Los Angeles (2007) 155 Cal.App.4th 425, 451, as modified on denial of reh'g (Oct. 10, 2007).  What if the condo conversion was already achieved? Same result, no Ellis rights to withdraw. Valnes v. Santa Monica Rent Control Bd. (1990) 221 Cal.App.3d 1116.  The only exception is if the owners made an agreement between themselves, that will work. Daro v. Super. Ct. (2007) 151 Cal.App.4th 1079, 1100, as modified on denial of reh'g (July 3, 2007) [owners agreeing between themselves to condo-convert after proceeding with the Ellis Act, does not affect their right to Ellis Act].

As a final note on what could affect the otherwise universal right to Ellis -- recently, an allegation of a change in the terms of the lease agreement, has been successfully applied in a 2017 trial. It would be interesting to see this case analyzed on an appeal, but I am unaware if the appeal was filed (it could be a limited jurisdiction case, and so it is masked from the public view).



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