A state appeals court has struck down a San Francisco ordinance that requires landlords who evict their tenants and go out of the rental business under the state's Ellis Act to wait 10 years before rebuilding or renovating any of the formerly rented units.
The local law, enacted in December 2013, penalizes property owners for exercising their rights under the Ellis Act and thus conflicts with California law, the First District Court of Appeal in San Francisco said Wednesday.
The 1986 state law, backed by real estate interests, allows owners to evict renters without any of the reasons usually required for evictions -- like nonpayment of rent, or property damage -- if the owner is taking the property off the rental market. The Ellis Act is typically used to convert a building to a condominium, although less often in San Francisco, which has severely limited new condo conversions.
The owner must also pay the former tenants' "reasonable" relocation costs. But the courts have struck down another San Francisco ordinance that would have required landlords to pay the difference between the previous rent and a two-year apartment rental at market rates in the city, up to a maximum of $50,000.
Wednesday's ruling was one of several decisions from the court rejecting San Francisco ordinances that have sought to discourage Ellis Act evictions and preserve affordable rent-controlled housing.
"We're hopeful that San Francisco will take heed of (Wednesday's) decision and the earlier ones and be more respectful of the rights of small property owners," said attorney Andrew Zacks, who represented owners in both the relocation-payments case and the latest case.
John Coté, spokesman for City Attorney Dennis Herrera, said the ruling was "not the outcome we were hoping for," and would be reviewed for possible further action.
The 2013 ordinance, sponsored by then-Supervisor John Avalos, was challenged by a group called the Small Property Owners of San Francisco Institute. An initial ruling by Superior Court Judge Teri Jackson upheld the measure.
In overruling Jackson, the appeals court cited a 2016 ruling by another panel of the same court that overturned a San Francisco ordinance requiring landlords to wait 10 years after an Ellis Act eviction before merging the former rental unit with other units on the property.
City officials said they chose the 10-year waiting period because the Ellis Act itself allows property owners to resume rentals after 10 years if they offer the evicted tenants a chance to return to their former unit. If the owner returns the unit to the rental market within five years, the law says, it must be priced at the previous rate.
The court said San Francisco's ordinance goes further by prohibiting property owners from expanding, renovating or making other changes to the site within the 10-year period.
"The ordinance penalizes property owners who leave the rental market," as they have a right to do under state law, Justice Marla Miller said in the 3-0 ruling.
The city's lawyers argued that allowing owners to remodel the vacated units would price them out of the reach of former tenants who sought to return if the units were again offered for rent. Miller said the argument "is speculative and ignores the substantial protections provided by the Ellis Act."
Besides the relocation payments, she noted, renters are entitled to advance notice of evictions -- 120 days for all tenants, one year for the elderly or disabled who have lived there for a year or more. And if the owner returns the unit to the rental market in less than two years, both the tenant and the city can sue for punitive damages.
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