The Ellis Act allows owners of residential real estate to take their properties off the rental market if they fulfill certain conditions, including the removal of all units at the property from the rental market. A recent case entitled Hilaly v. Allen clarified one of the specific conditions precedent to an Ellis Act “eviction” and discussed the impact of a residential estoppel in the context of such eviction. (2019 WL 2500495, Filed May 21, 2019).
As part of any Ellis Act eviction process: (1) the tenants must be notified of the intent to withdraw the unit, (2) the tenants must have sufficient move out time (one year in the case of an eligible or disabled tenant), and (3) during the notice period, the tenancy must continue on the same terms and conditions as existed prior to the notice of removal from the rental market. In Hilaly, the owner of the San Francisco property (Hilalys) decided to recover possession of its property and issued an Ellis Act eviction notice to the tenants at the property, which included an elderly and disabled tenant named Allen.
Allen had an oral lease at the property with the prior owner for an apartment and use of a garage and driveway at the property. During the Hilalys purchase of the property, a questionnaire was issued to Allen with no explanation of its significance. The questionnaire included a question whether parking was included at the property and if so, what was the space number. Allen stated no to the question because, although she had driveway and garage rights, she didn’t have the right to a numbered parking space. The Hilalys thereafter closed on the property and later issued this Ellis Act eviction notice to the tenants. During the one-year notice period (as to Allen’s lease due to age and disability), the Hilalys started using the driveway and blocked Allen’s access to use the same.
Allen set out to defeat the Ellis Act eviction on the premise that the owner changed a tenancy term when they blocked Allen’s access to the driveway and garage during the one year notice period. The Hilalys argued that the Ellis Act confers a landlord with the unfettered right to leave the residential rental business and the requirement to maintain the tenancy on the exact same terms contradicts settled law which bars habitability defenses to an Ellis Act eviction. As such, the removal of the driveway rights, even if it made the premises less habitable, did not negate her right to possession and was not a defense to the Ellis Act eviction. The Court agreed with the premise that a withdrawing owner is relieved of affirmative repair obligations during the notice period, but also found that a landlord must refrain from taking affirmative steps to reduce an elderly or disabled tenant’s leasehold during the notice period. The Court agreed with Allen and found that the owners unlawfully changed a term of Allen’s tenancy during the one-year notice period, and as such, allowed for an affirmative defense to the eviction.
The Hilalys also alleged that even if the Ellis Act supported such a defense for “change in tenancy terms”, Allen was barred from using such a defense based upon Allen’s answer to the questionnaire stating no parking or driveway rights were included in her lease. Therefore, there was not a change in a term of tenancy since she confirmed no such rights existed. The Court again held for Allen stating that this questionnaire was not a contract and Allen was not bound by contract to complete the questionnaire. Also, the questionnaire did not state that Allen’s answers would be binding on her leasehold. The Court in Hilaly differentiated an estoppel in a commercial context stating that a commercial estoppel binds the tenant to its factual statements, in part because the parties in a commercial transaction have more equal bargaining power and share a widespread understanding that estoppel certificates are binding and relied upon.
The Hilaly case illustrates that a landlord must conform to very strict procedures to ensure an Ellis Act eviction will not be defeated, including that any term of the lease must remain the same during the required notice period. Further, the Court in Hilaly confirmed that an informal “estoppel” in a residential context carries less weight than an estoppel in a commercial context and that a residential tenant may not be held accountable for statements made within said estoppel.
Authored by Reuben, Junius & Rose, LLP Attorney, Lindsay Petrone
The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient. Readers should consult with legal counsel before relying on any of the information contained herein. Reuben, Junius & Rose, LLP is a full service real estate law firm. We specialize in land use, development and entitlement law. We also provide a wide range of transactional services, including leasing, acquisitions and sales, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.