A proposed ordinance making its way through the Board of Supervisors would significantly restrict the ability of owners of newer rental properties to evict their tenants, which would then cause an indirect restriction on condominium sales. Currently, the city’s Residential Rent Stabilization and Arbitration Ordinance places strict controls on rental rates (rent control) and also restricts the ability to evict a tenant to a list of “just causes” for owners of rental properties constructed before June 13, 1979. Owners of rental properties constructed after that date are able to freely set rents and evict tenants for any reason that is otherwise permitted by state and federal law. The proposed ordinance would place the “just cause” eviction restrictions upon these post-1979 properties as well. It would not, however, impose rent control on these units. In other words, owners of post-1979 properties would continue to be able to set rents without restriction. However, tenants would be essentially entitled to “lifetime” leases, as long as there is no “just cause” for eviction, as defined by the ordinance.
Commonly asserted “just causes” for eviction include:
• Non-payment of rent or habitual late payment of rent;
• Breach of a rental agreement or lease;
• Owner move-in or an owner’s relative move-in;
• To perform capital improvements which will make the unit temporarily uninhabitable while the work is being done;
• To perform substantial rehabilitation of a building that is at least 50 years old, provided that the cost of the proposed work is at least 75% of the cost of new construction;
• To withdraw the rental units from the rental market under the Ellis Act;
• Creation of a nuisance or substantial interference with the landlord or other tenants in the building; and
• To demolish or permanently remove a rental unit from housing use.
One of these “just causes,” or any of the others specified in the ordinance, would be the only legal reasons to justify the eviction of a tenant in post-1979 properties if the ordinance passed. However, as a practical matter, it is often difficult to convince a court to find in favor of a “just cause,” and landlords typically pay substantial settlements to tenants that are fighting an eviction, even if the eviction is lawful, in order to expedite the eviction and avoid protracted legal battles.
Supervisor David Chiu introduced an amendment to the draft ordinance during the last Land Use and Economic Development Committee hearing that would benefit condominium developers that are forced to rent their units for a time before selling due to market conditions. Under the amendment, a new “just cause” for eviction would be added that would allow eviction when the landlord intends to sell the unit, so long as the tenant has been notified of the landlord’s intent to sell the unit in the future, and that the landlord either give 90 days notice prior to the eviction or pay the tenant’s relocation costs. This is a significant change, as condominium developers will be able to rent units during the downturn in the housing market without the risk of being stuck with long-term leases when the sales market picks up again. However, any owner of a newly-constructed residential building who has, as of the date of the ordinance, rented out condo units to tenants with the intention of later evicting the tenant to sell the condo must notify the tenant within 90 days of the passage of the ordinance of such intention.
On the other hand, owners of individual condo units that are rented out (as opposed to developers of an entire project), however, would have no ability to evict a tenant in order to sell their unit. That is, they could be stuck as a landlord unless they can find a buyer who is willing to purchase the unit subject to the lease, and then commence an owner move-in eviction process.
Beyond merely restricting evictions to listed “just causes” for post-1979 rental properties, the ordinance would also require a “just cause” in order to remove any housing services, such as garages, laundry rooms or decks. Property owners would be required to pay relocation expenses of up to $14,825 per unit (based on the number of tenants) for certain evictions – and more if the tenant is elderly, disabled or the household includes a minor. Also, an owner cannot increase the rent unreasonably with the intent to force their tenant to move out. This limitation on rental increases could give rise to significant litigation over whether the rent was “reasonably” increased, and what the owner’s true motive was.
Due to the way the ordinance is drafted, it may have other effects on post-1979 properties. If you have any questions regarding your rental property, or have questions regarding the ordinance, contact Kevin Rose or John Kevlin at 415-567-9000. We will continue to keep you updated on the progress of this proposed ordinance.
Vacant Property Registration Ordinance Materials Released
We reported to you a few months back that a new ordinance was passed by the Board of Supervisors last summer that placed substantial new requirements on owners of vacant buildings. The ordinance became effective October 1st, and the Department of Building Inspection is now taking steps to implement it. The Department sent out letters to owners of properties it believes are vacant this month, requesting they submit a registration form for their property. The registration form, along with the notification letter and other materials are located at “http://sfdbi.org/index.aspx?page=449.” Failure to comply will subject owners to increased fees and enforcement action. Contact John Kevlin at 415-567-9000 or if you have any questions about your building’s compliance.
Real Estate Stimulus Hearing Schedule ***Updated***
The real estate development industry needs this stimulus! Make sure you voice your support at one of these future hearings:
December 10 – Planning Commission (rescheduled from December 3)
December 19 – Building Inspection Commission
January – Board of Supervisors Land Use and Economic Development Committee