BILL ANALYSIS �
AB 2405
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Date of Hearing: April 23, 2014
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
K.H. "Katcho" Achadjian, Chair
AB 2405 (Ammiano) - As Amended: April 10, 2014
SUBJECT : Landlord tenant: Ellis Act.
SUMMARY : Allows a county board of supervisors, under specified
conditions, to compel the owner of any residential real property
to offer, or continue to offer, accommodations for rent or
lease, in spite of provisions in the Ellis Act. Specifically,
this bill :
1)Allows a county board of supervisors, by the adoption of a
resolution or by a majority vote of the electors within the
county, to compel the owner of any residential real property
to offer, or continue to offer, accommodations in the property
for rent or lease, in spite of existing law (Ellis Act), if a
public entity finds that prohibition contained in existing law
decreases the total number of affordable rental units within a
jurisdiction.
2)Requires, if an owner seeks to displace a tenant or lessee
from accommodations withdrawn from rent or lease pursuant to
existing law by an unlawful detainer proceedings, the owner to
state the following in the caption of the complaint: "Civil
Action Described in Section 7060.6 of the Government Code."
3)Provides that the clerk shall not allow access to any court
records in the action, in the case of a complaint involving
residential property in which an owner seeks to displace a
tenant or lessee from accommodations withdrawn from rent or
lease by an unlawful detainer proceeding, except as specified.
4)Makes a number of findings and declarations about allowing
local jurisdictions the flexibility to voluntarily suspend
Ellis Act evictions to allow participating jurisdictions to
reign in Ellis Act abuses that are preventing these
jurisdictions from meeting their supply of affordable housing.
EXISTING LAW :
1)Defines, for purposes of claims and actions against public
entities and public employees, the term "public entity" to
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include the state, the Regents of the University of
California, the Trustees of the California State University
and the California State University, a county, city, district,
public authority, public agency, and any other political
subdivision or public corporation in the State.
2)Generally prohibits public entities from adopting any statute,
ordinance, or regulation, or taking any administrative action,
to compel the owner of residential real property to offer or
to continue to offer residential real property for rent or
lease.
3)Allows public entities to require a property owner to notify
the entity of an intention to withdraw those accommodations
from rent or lease, as specified. Provided that the
requirements are met, the accommodations may not be withdrawn
until 120 days after delivery of the notice to the public
entity, unless the tenant or lessee is at least 62 years of
age or disabled, lived in the their accommodations for at
least one year prior to the notice, in which case the date of
withdrawal shall be one year after the delivery of that notice
to the public entity, as specified.
4)Provides that if accommodations are demolished, and new
accommodations are constructed on the same property and
offered for rent or lease within five years of the date the
accommodations were withdrawn from rent or lease, the newly
constructed accommodations shall be subject to any system of
controls on the price at which they would be offered and on
the basis of a fair and reasonable return on the newly
constructed accommodations, notwithstanding any exemption from
the system of controls for newly constructed accommodations.
5)Defines "accommodations" to mean either of the following:
a) The residential rental units in any detached physical
structure containing four or more residential rental units;
or,
b) With respect to a detached physical structure containing
three of fewer residential rental units, the residential
rental units in that structure and in any other structure
located on the same parcel of land, including any detached
physical structure, as specified.
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6)Allows, if an owner seeks to displace a tenant or lessee from
accommodations withdrawn from rent or lease pursuant to this
chapter by an unlawful detainer proceeding, the tenant or
lessee may appear and answer or demur pursuant to existing law
and may assert by way of defense that the owner has not
complied with the applicable provisions of this chapter, or
statutes, ordinances, or regulations of public entities
adopted to implement this chapter, as authorized by this
chapter.
7)States the intent of the Legislature, in enacting the Ellis
Act, to supersede any holding or portion of any holding in
Nash v. City of Santa Monica, 37 Cal.3d 97 to the extent that
the holding, or portion of the holding, conflicts with this
chapter, so as to permit landlords to go out of business.
However, this act is not otherwise intended to do any of the
following:
a) Interfere with local governmental authority over land
use, including regulation of the conversion of existing
housing to condominiums or other subdivided interests or to
other nonresidential use following its withdrawal from rent
or lease under this chapter;
b) Preempt local or municipal environmental or land use
regulations, procedures, or controls that govern the
demolition and redevelopment of residential property;
c) Override procedural protections designed to prevent
abuse of the right to evict tenants;
d) Permit an owner to withdraw from rent or lease less than
all of the accommodations, as defined;
e) Grant to any public entity any power which it does not
possess independent of this chapter to control or establish
a system of control on the price at which accommodations
may be offered for rent or lease, or to diminish any such
power which that public entity may possess, except as
specifically provided in this chapter; or,
f) Alter in any way either the section of law relating to
the withdrawal of accommodations which comprise a
mobilehome park from rent or lease or the section of law
relating to a change of use of a mobilehome park.
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8)Allows the clerk to allow access to limited civil case
records, only as follows:
a) To a party to the action, including a party's attorney;
b) To any person who provides the clerk with the names of
at least one plaintiff and one defendant and the address of
the premises, including the apartment or unit number, if
any;
c) To a resident of the premises who provides the clerk
with the name of one of the parties or the case number and
shows proof of residency; and,
d) To any person by order of the court, which may be
granted ex parte, on a showing of good cause.
9)Requires each governing body of a local government to adopt a
comprehensive, long-term general plan for the physical
development of the city, city and county, or county.
10)Requires the general plan to address seven mandated elements,
including a housing element, in order to plan to meet the
existing and projected housing needs of all economic segments
of the community.
FISCAL EFFECT : This bill is keyed fiscal.
COMMENTS :
1)Purpose of this bill . This bill allows a county board of
supervisors, by the adoption of a resolution or by a majority
vote of the electors within the county, to compel the owner of
any residential real property to offer, or continue to offer,
accommodations in the property for rent or lease, in spite of
provisions contained in the Ellis Act, if the public entity
finds that prohibition contained in existing law decreases the
total number of affordable rental units within a jurisdiction.
The bill makes changes to provisions in the Ellis Act to
require, if an owner seeks to displace a tenant or lessee from
accommodations withdrawn from rent or lease by an unlawful
detainer proceeding, the owner to state the following in the
caption of the complaint: "Civil Action Described in Section
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7060.6 of the Government Code." The bill also limits access
to court records in specified actions, in the case of
complaint involving residential property.
This bill is author-sponsored.
2)Ellis Act . The Ellis Act prohibits a local government from
compelling the owner of a residential rental property, except
for a residential hotel, to continue offering the property as
rental housing. At the same time, the law expressly allows
local government to impose a variety of requirements on rental
property owners who desire to exit the rental market.
Dependent upon the proposed use of the property after its
removal from the market (i.e. condominium conversions, owner
occupancy) local governments have enacted numerous
requirements, including relocation assistance to displaced
tenants, specific notice periods, and deed restrictions on
future use of the property.
The Ellis Act applies only when an owner seeks to remove all
units within a building, or all units on a property with a
building containing three or fewer units, from the market, and
has real effect only in cities or counties with rent control
and just cause eviction ordinances. In rent control
jurisdictions, the Ellis act provides that the local
government may require the owner to give notice before
withdrawing the building from the market. If so, the owner
may withdraw the units 120 days after the notice is delivered,
except that the act extends the notice period to one year for
tenants who are disabled or over 62 and who have lived in the
unit for at least one year. In addition, owners who seek to
re-rent the units within two years after withdrawal are liable
to displaced tenants for actual and exemplary damages and
required to offer the units to displaced tenants under the old
rent-controlled lease terms. The city or county may
additionally require an owner for up to 10 years to offer
re-rented units to tenants displace by the withdrawal. If the
owner demolishes the old units and constructs new rental units
on the same property within five years of withdrawal, a city
or county may subject the new units to its rent control
ordinance.
3)Author's statement . According to the author, "In adopting the
Ellis Act, the Legislature basically responded to the
California Supreme Court ruling by changing the law and
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adopting the Ellis Act to specifically allow landlords to
evict tenants for the purpose of going out of business. The
Legislature included provisions which restrict the landlord's
ability to evict and then re-enter the rental business. At
that time, proponents of the Ellis Act claimed that enactment
would protect long-time landlords in rent-controlled
jurisdiction to go out of the land-lording business doe to
personal or fiscal demands. For many years, Ellis Act
evictions were rare, until the late 1990s when speculators
found a loophole in the Ellis Act deterring from the intent of
the law.
"California was hit hard by the foreclosure crisis. Many
homeowners were forced into the rental market. As the demand
for rental units went up, so did the cost of rent. Local
jurisdictions with rental control ordinances began noticing a
sudden increase in the number of Ellis Act evictions. The
market encouraged owners to sell their property for top dollar
to investors who could in turn charge higher rent resulting in
rent-controlled tenants being displaced with no options for
housing and no ability to pay the higher demand rent. The
disabled, elderly and families were hit the hardest.
"With the housing crisis growing, more attention was paid to
Ellis Act evictions, which more often than not led to
homelessness. A closer look at the Ellis Act evictions showed
a glaring loophole that allows speculators to use Ellis Act to
turn a building over for a higher profit, which was not the
intent of Ellis Act, initially enacted to remove local
jurisdictions' ability to prevent landlords from evicting
tenants to get out of rent-controlled units.
"There is a growing trend toward local control with
realignment of corrections and social services, the Local
Control Funding Formula in education and local housing element
requirements. Also lost are local redevelopment funds to
build more affordable housing. The inflexibility of the Ellis
Act prevents some local jurisdictions from meeting their
supply of affordable housing as well as controlling the
abuses. Returning the power to local jurisdictions to
determine the best way to both meet housing supply and demand
with regards to landlords using evictions as a means to go out
of business is good public policy. If a tenant is evicted
through the Ellis Act, by no fault of their own, the court may
mask the unlawful detainer action to protect the tenant's
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rental history."
The author points to an April 2014 report entitled "The
Speculator Loophole: Ellis Act Evictions in San Francisco" as
evidence of the abuses of the Ellis Act. The report notes
that San Francisco has experienced a sharp rise in Ellis Act
evictions in 2013. The number of units rose from 66 in 2011,
to 109 in 2012, and to 252 in 2013. According to the report,
"the rise in Ellis Act evictions appears to be driven by two
forces. First, booming property values have increased the
profit opportunity for investors that convert rent controlled
units to tenancies-in-common which can be sold much like
condominiums. Second, after a period of tight lending, banks
are providing more favorable terms for so-called
'franctionalized loans,' a shift that has made TIC interests
more marketable."
4)Policy considerations . The Committee may wish to consider the
following:
a) Withdrawal of rental units . Opponents argue that there
is no "crisis" in withdrawal of rental units under the
Ellis Act and note that according to a 2013 report produced
by the City and County of San Francisco, only 2376 units
were withdrawn from the market between March 2009 and
February 2013 - an amount that represents .75% of San
Francisco's 316,432 rent controlled units. Further, they
point to data released by the San Francisco Rent Control
Board on last rent board year (March 2012 to February 2013)
that shows that only 192 units were withdrawn, increasing
the total number of Ellis Act evictions over the last five
years to 2568, which still only represents .81% of the rent
controlled housing units.
b) Profitability . Opponents argue that this bill permits
local governments to force landlords to stay in the rental
property business without any regard to whether the
property is profitable or not, and that this a dangerous
precedent as local government does not have the authority
to force any other industry to stay in business against
their means or will.
c) Local ordinances . Opponents argue that the bill is
unnecessary given the numerous anti-landlord and anti-Ellis
Act laws that have recently been proposed or approved by
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local governments. They raise, for example, the San
Francisco Board of Supervisors and the recent introduction
of an ordinance that would double relocation payments to
over $10,000 per tenant and up to $36,000 per household.
d) Terminology in bill . This bill references both a
"county board of supervisors" and a "public entity" which
includes a county, city, district, public authority, public
agency, and any other political subdivision or public
corporation in the state. For consistency in terminology,
the author may wish to consider adding the term
"legislative body" of the "public entity" to ensure that
the bill applies broadly to both cities and counties.
Also, it is unclear how the terminology in the bill relates
to San Francisco, which is referred to in statute as "city
and county".
e) Resolution or public vote . The bill allows a county
board of supervisors to compel the owner of any residential
real property to continue offering accommodations if it
finds that provisions of the Ellis Act decrease the total
number of affordable rental units within a jurisdiction.
In order to make this happen, the bill requires the adopted
of a resolution by the board of supervisors, or by a
majority vote of the electors within the county. The
Committee may wish to ask the author to clarify how the
public vote would work - would voters be required to vote
each time a public entity makes a finding about the
decrease in number of affordable rental units, or each time
an owner gives notice of intent to withdraw to the public
entity? How long would this resolution or public vote
last?
5)Related legislation . SB 1439 (Leno, 2014) allows the City and
County of San Francisco to adopt an ordinance, resolution, or
regulation to:
a) Require an owner submitting an Ellis Act notice to
identify each person or entity with an ownership interest
in the building, including persons with an ownership
interest in a corporate entity. This information shall be
available for public inspection.
b) Prohibit an owner from submitting a notice to withdraw a
building pursuant to the Ellis Act unless all the owners of
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the property have been owners for at least five continuous
years. If the owner is a corporate entity, all persons or
entities with an ownership interest must have held that
interest for five continuous years.
c) Prohibit any owner of a building for which an Ellis Act
notice has been submitted from withdrawing any other
property that he or she acquired after submitting the
notice for the initial property.
d) Prohibit an owner from acting in concert directly or
indirectly with a co-owner, successive owner, prospective
owner, or other person to circumvent the above two
prohibitions.
e) Provide that a violator of any of these provisions is
liable to the tenant for actual damages, special damages of
at least $2,000 for each violation, and reasonable attorney
fees and court costs determined by the court.
SB 1439 passed the Senate Transportation and Housing Committee
on April 8, 2014 on a 6 -4 vote and will next be heard in the
Senate Judiciary Committee.
6)Arguments in support . Supporters argue that the Ellis Act has
become increasingly abused by speculators who seek to flip
properties for a profit and the expense of some of the most
vulnerable tenants, and that this bill is critical to giving
local jurisdictions the power to determine if the Ellis Act is
sensible policy for their region.
7)Arguments in opposition . Opponents argue that state law
already gives local governments clear authority to impose a
variety of requirements on owners who desire to exit the
rental market and that the bill is harmful to rental property
owners. Opponents argue that the number of units lost through
Ellis Act is extremely small.
8)Double-referral . This bill is double-referred to the
Judiciary Committee.
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REGISTERED SUPPORT / OPPOSITION :
Support
AIDS Legal Referral Panel
Anti-Eviction Mapping Project
California Alliance for Retired Americans
Causa Justa::Just Cause
City of West Hollywood
Coalition of Homelessness
Gray Panthers of San Francisco
Housing California
Senior and Disability Action
Tenants Together
Western Regional Advocacy Project
Opposition
Apartment Association of California Southern Cities
Apartment Association of Orange County
California Apartment Association
California Association of REALTORS
California Chamber of Commerce
Civil Justice Association of California
East Bay Rental Housing Association
Nor Cal Rental Property Association
San Diego County Apartment Association
San Francisco Association of REALTORS
Zacks & Freedman
Analysis Prepared by : Debbie Michel / L. GOV. / (916)
319-3958