The California Court of Appeals has overturned a trial court verdict against Santa Monica’s Rent Control Board (RCB) in a what has become a two-decade debacle over regulating an apartment building on 20th Street.
Under this month’s ruling, the property will be returned to the rent control inventory and the RCB will not have to pay any fees associated with the original judgment.
The building in question was built more than 20 years before the establishment of rent control and while the building was initially subject to the rules, the owners applied for a permit to take the rent-controlled building off the rental market in 1993 on the grounds the property was uninhabitable and would be too expensive to maintain.
That permit was granted but at the time RCB staff incorrectly described the permit as removing the property from rent control rules, rather than removing it from the rental market entirely.
Unbeknown to the Board, the property remained at market rates until 2016 when tenants contacted the RCB to complain about large rent increases. At that time, the Board wrote to the owners to reassert rent control limits on the units and the landlords filed suit against the Board.
The Rent Control Board lost at trial and a judge said their efforts to reassert rent control on the property were “capricious.” In addition to rebuffing efforts to limit rents, the judge ordered the RCB to cover $7,500 in costs for the property owner James Corrigan.
However, the Court of Appeals said the trial courts were incorrect in their judgment. According to the Appeals’ ruling, the government agency is required to reassert the correct interpretation of the law when a mistake is made, the original removal permits are still valid should the landlord wish to demolish the property and that the landlord can still receive a fair rate of return on the property.
“We conclude the Board was not authorized to exempt the owners’ residential rental units from rent control,” said the ruling “Accordingly, the trial court erred in concluding that the Board was equitably estopped from denying that the residential rental units that were the subject of removal permits were permanently exempt from rent control.”
Officials said the Appeal Court victory will have a positive impact for the eleven disputed units.
“This ruling affects what are potentially some of the City’s most vulnerable tenants. It would have made no sense to say that the tenants of responsible landlords who properly maintain their buildings are subject to rent control, but those who let their buildings become uninhabitable are free to charge whatever they like,” said Tracy Condon, the Rent Control Board’s executive director.
The ruling brings the units under rent control and also voids the order to pay the landlord’s legal costs.
“Although this is an important victory for the Board, it’s also a victory for common sense. The Court here did nothing more remarkable than to read the law to mean exactly what it says: that a removal permit is a permit to remove units from the market, not to keep them on the market free from rent control,” said Stephen Lewis, the Board’s general counsel.