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Rent Control officials have lost an initial battle over the fate of a formerly rent controlled property that has been brewing for more than 15 years.

A judge ruled against the Rent Control Board’s efforts to bring a Mid-City apartment building in Santa Monica under rent control after allowing the owner to rent the 13 apartments at market rates since 1993.

Judge Lawrence H. Cho issued a ruling Jan. 15 that called the board’s decision to revoke the removal permit that exempted the building at 1040 20th Street from Santa Monica’s rent control law “capricious.” It awarded $7,500 in attorney fees and costs to the owner, James Corrigan. The board has filed an appeal in California’s 2nd appellate district contesting the decision, said general counsel Stephen Lewis.

Cho’s decision follows an April 2018 decision by judge Gerald Rosenberg that found the board did not have the power to revoke the permit.

Santa Monica’s rent control law covers most residential buildings built before 1979 and the building dates to 1957. Corrigan applied for a permit to take the rent-controlled building off the rental market in 1993.

The city charter allows property owners to take rent-controlled units off the market if the board finds that the unit is “uninhabitable and is incapable of being made habitable in an economically feasible manner.”

The board granted Corrigan the removal permit and he began renovating the property in order to make it habitable and rent it out to tenants. Rosenberg’s April decision said Corrigan renovated the building because the board told him he would be able to rent the units at market rates. He would be able to recoup the cost of the renovations with the rent he collected and could not have covered his expenses if the units were rent-controlled.

Lewis said a board staff member misinterpreted the city charter during the 1993 permit hearing. The law does not allow a property owner who has been granted a permit to remove units from the rental market because they are uninhabitable to keep renting the units, he said. However, the staff member told Corrigan he could keep renting the building after the permit rendered it exempt from the rent control law.

The board became aware that Corrigan had been renting the building when one of his tenants told the board she received a sudden rent increase. It awarded her excess rent and initiated a case to bring the building under the rent control law.

Lewis said Rosenberg’s and Cho’s decisions have not taken the law as written into account.

“A removal permit does not make you exempt from rent control. The court said, ‘for 20 years you said the building was exempt, so you can’t change that now.’ But that’s not the law,” Lewis said. “Staff made a mistake. If that resulted in the law being rewritten, imagine the chaos that would create.”

Corrigan’s attorney, Donald F. Woods, Jr., said the law actually says that a property is exempt from rent control laws if the property owner can’t make a fair profit on it. The board has not been able to provide evidence that it made a mistake in the 1993 hearing, he added.

“The owner could have never afforded the renovations necessary to rent the units under rent control,” Woods said.

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