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From the March 2006 Newsletter:
By David Fix
On February 21, 2006, the California Court of Appeals upheld the San Francisco ordinance sponsored by Supervisor Aaron Peskin in 2005 requiring owners to pay “relocation” expenses to every tenant when an owner invokes the Ellis Act to exit the rental property business. SPOSF sponsored the challenge to Peskin’s amendment in March, 2005. San Francisco Superior Court granted the petition in favor of SPOSF’s challenge. However, the state Appellate Court overturned the Superior Court’s decision. SPOSF, in conjunction with the attorneys for the case, will review whether to pursue the case in the California Supreme Court.
Supervisor Peskin’s measure requires that every tenant in San Francisco evicted under the Ellis Act receive $4,500 with a cap of $13,500 per household. Under this ruling, each tenant regardless of age or income is eligible to receive the increased payout. Previously, only low income, elderly or disabled tenants were eligible for any payment in an Ellis eviction.
The Peskin legislation primarily affects small property owners. That’s why SPOSF once again took on a case against the City. We have fought and will continue to fight for small property owners overburdened by local regulations. SPOSF has taken the lead in challenging a number of cases against excessive rental regulations that restrict owners' rights. We have won some battles and lost some, but the SPOSF Board believes it is important to fight in the courts when we deem it appropriate. In a great victory in 2003, SPOSF celebrated its challenge to a City amendment put forth by Supervisor Jake McGoldrick to restrict the right of owners to sell their units as Tenancies in Common (TICs). The City appealed the case. Once again, SPOSF prevailed at the Court of Appeals in June 2004 and the State Supreme Court denied the City’s request for review. The right to sell our properties in the form of TICs is now protected because of our efforts. Since that ruling, the City has seen a significant increase in homeownership despite ever-escalating housing prices due to renters’ ability to form and purchase TICs. One of the important issues that SPOSF has fought for and will continue to fight for is increased homeownership opportunity. It’s good for the City and it’s good for renters.
Relocation expenses or punitive measure?
The current case involving forced payments of up to $13,500 per household regardless of tenant age or income demonstrates that current eviction regulations and rent control restrictions put forth by the Board of Supervisors are no longer targeted simply towards helping low-income tenants; it’s clear that the Supervisors are focused on a redistribution of property value from owners to all tenants. It’s not about protecting poor tenants, but rather about punishing property owners who want to exit the rental business. While tenant activists tout the ruling as a “victory” for tenants, in reality, it hurts tenants who aspire to become homeowners. Current renters are the ones who purchase most TICs formed after an Ellis eviction. The increased costs attached to invoking the Ellis Act will fall on these renters (prospective buyers) in the form of higher prices or on small property owners who’ve had enough of being landlords but have no intention of selling their property.
Politicians pandering to tenant voters claim that primarily speculators seeking to profit by evicting renters exploit the Ellis Act. However, the facts say otherwise. Little noticed are the large number of small property owners who invoke the Ellis Act simply to go out of business with no intention of selling or re-renting their units. They’re simply fed up with the increasingly cumbersome and litigation-prone over-regulation of their homes and feel that control over their property is at risk under the current eviction controls. The payments now required under the Peskin law could make exiting the rental business prohibitively expensive for owners, therefore forcing them to stay in business against their will. This is contrary to the intent of the Ellis Act. One may ask: “Why would a small property owner ever want to invoke the Ellis Act in the first place? ” We’ll explore that question in our next issue.
SPOSF will continue to fight for the rights of small property owners in San Francisco, and we thank our members who help us sponsor important lawsuits. This is one of the primary missions of the Small Property Owners of San Francisco Institute (SPOSFI), a separate entity that we formed for education, outreach and litigation. Contributions to SPOSFI are tax deductible. Please consider making a donation to SPOSFI so that we can continue funding this and other important lawsuits. We look forward to your continued support.
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