Ellis Act

The Ellis Act (California Government Code Chapter 12.75)^[1] is a California state law that allows landlords to evict residential tenants to "go out of the rental business" in spite of desires by local governments to compel them to continue providing housing.

Summary

The Ellis Act prohibits local entities, such as cities, from having rent control ordinances that prevent owners of housing from evicting tenants if the landlord is required to continue providing housing. The Act does not limit ordinances that control landlords who continue renting. For example, an ordinance may prevent a landlord from evicting a tenant and then renting to another tenant.

To take advantage of the Ellis Act, a landlord must terminate all residential tenancies and withdraw all "accommodations," which roughly means all "residential rental units." The landlord cannot, for instance, terminate the tenancies of rental units with lower, rent-controlled, rents and maintain market rate tenancies at the same time.

Local entities are permitted to place various restrictions on the landlord's ability to go out of business. For instance, cities may require landlords to file a "notice of intent to withdraw," provide the city with information about the tenancy (such as names of tenants, dates of commencement, and rental rates). Cities may require the payment of relocation assistance "to mitigate any adverse impact on persons displaced" or an extension of the termination date of tenancies from the standard 120 days to a full year from the commencement of the withdrawal process if tenants claim to be at least 62 or disabled.

The city may also impose restrictions against the future rental use of the property. It may require that if the landlord offers the withdrawn units for lease within ten years of withdrawal, the unit must be offered to the displaced tenant(s), and that if the unit is offered within the first five years, it must be offered to the displaced tenant(s) at the former rental rate.

Examples

Implementing statutes vary by city and so there are different requirements in each jurisdiction:

• San Francisco requires compensation, which increases along with CPI. As of 2016, it was $5,894 per tenant, with an additional $3,929.74 per disabled or elderly tenant, capped at $17,683.86 per unit. A pair of efforts by San Francisco Supervisor David Campos in 2014 and 2015, to increase the relocation payment to provide for two years of market rate subsidy to displaced tenants, was found to be "unreasonable" and pre-empted by the Ellis Act. An amendment to the Ellis Act for San Francisco County was proposed in 2014 in the California State Legislature, SB1439 ^[2] If enacted, SB 1439 would require property owners who have filed an Ellis eviction to wait five years before doing so with another building.^[3] The measure did not pass.^[4]
• Santa Monica requires an owner get a reoccupation permit before the building can be used for any purpose after Ellis Act evictions.^[5]
• Los Angeles applies rent control provisions to units built on the same property up to five years later.^[6]

Application

If withdrawn residential units can no longer be rented, property owners invoking the Ellis Act often sell apartments as individual tenancy-in-common ("TIC") units. Some cities, such as San Francisco, impose strict restrictions on withdrawn property (such as preventing condominium conversion or the adding of "accessory dwelling units"). However, a 2016 decision by the First District Court of Appeals upheld a challenge against San Francisco's ordinance preventing Ellis Act "mergers" of units and found that state law occupies the field of substantive eviction controls "for owners attempting to withdraw units from the residential rental market" and suggested that the Ellis Act may impose a limit on post-withdrawal "penalties" that seek to discourage the use of that right under state law.

History

The Ellis Act is named after Republican State Senator (1981-1988) James "Jim" L. Ellis, a former representative of San Diego.

Nash v. City of Santa Monica (1984) 37 Cal. 3d 97 was a decision by the California Supreme Court that landlords may not evict tenants to stop being a landlord. The California legislature passed the Ellis Act in response.^[7] That case was Nash v. City of Santa Monica (1984) 37 Cal.3d 97.

Criticism and response

Tenant groups in San Francisco and Los Angeles claim that California landlords commonly misuse the Ellis Act "to bypass rent control"^[8][9] and to cash in during peak housing market periods^[10] by managing rent-stabilized properties to vacancy, when they might demolish buildings to build pricey condominiums, retenant newly-vacated units at top-market rents, or resell buildings at much higher prices than they bought, once they are no longer value-encumbered by the presence of long-term, rent-stabilized tenants.

The Ellis Act has been the focus of many tenants rights groups other anti-eviction movements in San Francisco. On November 2014, Proposition G was proposed to add a tax on real estate speculation to slow down the number of no-fault evictions caused by the Ellis Act.^[11] Groups have argued that the rising number of evictions because of the Ellis Act is contributing to the gentrification of San Francisco.

References