Overview:
The Rent Control Board wants landlords who evict tenants to actually leave the rental market when they use a state law to remove renters from rent controlled properties
The Rent Control Board (RCB) wants landlords who evict tenants using a state law to adhere to the terms of that law and actually leave the rental market when they use the Ellis Act to remove renters from rent controlled properties.
The Board will consider changes to local rules at its Sept. 14 meeting that would insert “good faith” language into existing regulations that allow landlords to evict tenants under rules that are supposed to apply to individuals or companies that want to exit the rental market.
Known as the Ellis Act, the law was put in place to provide property owners the ability to exit the rental business and use their property for other purposes. However, it doesn’t contain a mechanism to prevent landlords from returning to the rental business after evicting tenants. Rather, it imposes a penalty on properties that reenter the rental market based on how long the property was vacant.
According to the Rent Control Board, those penalties are simply too weak to prevent abuse of the Ellis Act when partnered with another law, Costa Hawkins. The Costa Hawkins act resets rents to market rate when a Rent Controlled unit is vacated and under current economic conditions, landlords can now evict renters who are paying vastly below market rates, leave the units vacant for five years and return to profitability when units come back at market rate.
“Unfortunately, in practice, the re-control provisions that were meant to deter abuse of Ellis are often used as a blueprint for evading local rent regulations,” said a report that will be presented to the RCB this week. “Instead of a good faith intent to leave the rental business, some landlords, especially large corporate entities, are invoking Ellis in order to empty their rental properties and leave them vacant until such time as the re-control provisions allow the units to be re-offered at market rental rates, whether by the current owner or a successor owner.”
The report said there is now a viable business model to evict tenants that accounts for the five-years waiting period.
“As a result, some landlords, at the time they are evicting tenants under Ellis, have calculated that 5-year period and factored in those rental losses in advance as the cost of doing business,” said the report. “At the end of that 5-year period, the now-vacant rental units, which often have undergone extensive renovations during this time, are either re-offered for rent at market rates or sold to a new owner at a premium and then re-rented at market rates. The agency has even seen ads for properties that are being marketed as empty rental properties with the 5-year date touted as when Ellis ‘ends.’ This is a clear misuse of the law since none of these owners have the requisite intent to ‘go out of business’ at the time the requisite notices are filed.”
The proposal before RCB this week adds additional definitions to the rules clarifying the Ellis Act has a “good faith” intent qualification.
“These amendments clarify the definition of good faith and require owners to attest to their intent to leave the rental business in the Notice of Intent that is filed with the agency. They also include some factors for determining good faith, which will assist both landlords and tenants as well as provide a resource for hearing officers and judges in adjudicating cases where the landlord’s intent is in question,” said the report.
In addition to the clarifying language, the proposal also reiterates the existing repercussions for violations of the rules including rejecting Ellis applications, pursuing lawsuits against non-complying landlords and mandating reoccupancy by evicted tenants.
The Rent Control Board will discuss the issue at their Sept. 14 meeting to be held in City Hall (1685 Main Street) at 7 p.m.