Rent Control, the Ellis Act, Tenant Eviction Law, Protected Tenants, Tenant Relocation Fees and Tenant Buyout Agreements in San Francisco
Residential Rent Stabilization and Arbitration Ordinance - Rent control and eviction control are huge political issues in San Francisco and this ordinance is constantly being changed by the Board of Supervisors, ballot measures, lawsuits or even the state legislature. Buyers and sellers are responsible for determining any rights and obligations they may have under San Francisco’s Rent Ordinance. It is strongly recommended that these issues be fully investigated with a qualified San Francisco landlord-tenant law attorney and the San Francisco Rent Board. Links to these resources can be found at the bottom of this article.
All residential rental units in San Francisco, with the exception of those in structures for which a certificate of occupancy was first issued after June 13, 1979, and certain single-family dwellings and condominium units, are subject to San Francisco’s Residential Rent Stabilization and Arbitration Ordinance. The ordinance limits the landlord’s ability to increase rents and evict tenants, among other things.
Under the ordinance, landlords may only impose rent increases on tenants in occupancy in accordance with the provisions of the ordinance, and the rules and regulations of the Rent Board (the body charged with administering the ordinance) as they relate to certain matters. Those matters include the annual allowable rent increase, banking, the cost of utilities, charges for excess water use, certain property tax increases, the certified costs of certain capital improvements, rehabilitation and energy conservation measures and, in the case of units affected by Proposition I (a 1994 ballot measure which extended rent control to owner-occupied properties with two to four residential rental units), extraordinary circumstances or past rent histories. Landlords who seek to impose certain other rent increases must request an arbitration hearing. Whenever a landlord gives a tenant legal notice of a rent increase, the landlord must inform the tenant in writing of the components of the rent increase. A successor in interest to the landlord may be required to refund rent increases improperly collected by a previous landlord.
Additionally, the ordinance requires any eviction of a tenant to be based upon at least one of 15 “just cause” grounds. This greatly limits the ability of a landlord to evict a tenant in a rent controlled property in San Francisco. Indeed, so long as a tenant pays his or her rent, the tenancy may continue indefinitely, as a practical matter.
Failure to comply with the ordinance can subject a landlord to civil and criminal liability. The civil remedies created by the ordinance include a tenant’s right to “treble” (triple damages) and attorney’s fees.
The Rent Ordinance is amended regularly by the Board of Supervisors, as are the rules and regulations by the Rent Board. Buyers and sellers are responsible for determining whether any amendments in the ordinance or the rules and regulations may be applicable to them.
Information concerning San Francisco’s Rent Ordinance can be obtained by contacting the Rent Board at 415-252-4600 (automated), 415-252-4602 (personal assistance) or visiting its web site at www.sfrb.org.
Brokers are not qualified to advise buyers and sellers concerning the rights and obligations of residential property owners under the Rent Ordinance. Buyers and sellers must make their own determinations concerning their rights and obligations under the ordinance and, in that regard, are urged to contact a qualified real estate attorney knowledgeable regarding San Francisco real property issues.
Owner Move-In Evictions - San Francisco has enacted strict controls regulating the right of an owner to move into any multi-unit residential rental property he or she owns.
On August 20, 1998, citing a “worsening residential rental crisis,” former supervisor Sue Bierman introduced owner move-in reform legislation. The legislation subsequently was passed by the Board of Supervisors and signed into law by the mayor. Among other things, the Bierman legislation:
Prohibits residential rental property owners from recovering possession of a unit after July 1, 1997, unless the owner has at least a 50 percent interest in the property; prohibits rental property owners from recovering possession of a unit unless possession is recovered for at least 36 continuous months; prohibits rental property owners from recovering possession of a unit if any comparable unit owned by the landlord is available; and prohibits rental property owners from recovering possession of a unit for a relative unless the unit is a single-family property or a multi-unit property in which the owner currently resides or plans to reside.
The Bierman legislation also provides that certain tenants cannot be evicted from their units by an owner for his or her occupancy, or the occupancy of relatives. The tenants who are protected are: (1) tenants who are 60 years of age or older and have resided in the unit for 10 years or more; (2) disabled tenants who have resided in the unit for 10 years or more; and (3) catastrophically ill tenants who have resided in the unit for five years or more.
On November 3, 1998, subsequent to the enactment of the Bierman legislation, the voters in San Francisco passed Proposition G (commonly known as “Prop. G”). The proposition includes many of the provisions contained in the Bierman legislation, as well as some which are different. For instance, Prop. G contains a provision which provides that once an owner recovers possession of a unit, any other current or future owner is prevented from recovering possession of any other unit in the same building. It also contains a provision that sets the ownership interest a property owner must have to recover possession of a unit at 25 percent, instead of 50 percent, as in the Bierman legislation.
Under both the Bierman legislation and Prop. G, the provision prohibiting an owner from recovering possession of a unit if the owner receives notice that the tenant in the unit is protected from eviction does not apply to either single-family dwellings or condominium units, provided that the owner owns only one condominium unit in the building. Another circumstance where the provision does not apply to condominium units is where an owner owns more than one unit in a building, resides in one of the units and intends to move a qualified relative who is 60 years of age or older into a unit occupied by a tenant otherwise protected from eviction.
Soon after the passage of Prop. G, the proposition was challenged on constitutional grounds in a lawsuit filed by the San Francisco Association of REALTORS® and other plaintiffs in the Superior Court of the State of California, County of San Francisco. In a ruling issued in 2003 in favor of the plaintiffs, the Superior Court held elements of Prop. G unconstitutional “as applied” to the plaintiffs. The court said that by creating “coerced lifetime tenancies” in the plaintiffs’ properties, the proposition “effectuates a permanent invasion of the rights of plaintiffs.” The court also said that since the proposition provides no compensation for affected landlords, it also “effectuates an unconstitutional per se taking of property as applied to each plaintiff.”
According to some legal authorities, the practical effect of ruling Prop. G unconstitutional “as applied” is to permit persons in similar situations, but who were not plaintiffs in the lawsuit, to apply the court’s reasoning to prevent the challenged provisions of Prop. G from being applied to them. But the city attorney’s office appears to disagree with this view. It has taken the position that the ruling only applies to other properties owned by the plaintiffs in the lawsuit, not to persons who were not plaintiffs or their properties. Because of this divergence of opinion, there is no present certainty that in future cases the Superior Court will rule the same way or even rely upon the Prop. G ruling in addressing the issues.
However, there now appears to be certainty on the question of the ownership interest a property owner must have to recover possession of a unit. Initially, the appellate department of the Superior Court for the City and County of San Francisco for cases involving amounts in controversy under $25,000 held, in an unpublished decision, that the 50 percent Bierman legislation requirement was applicable. That decision, according to legal authorities, could not be cited as binding precedent in other cases. But the decision was well known to the tenants’ bar and resulted in subsequent trial rulings that 50 percent was required in all instances. But the conflict between the Bierman legislation and Prop. G seems to have been settled definitively by a recent reported decision of the Appellate Division of the Superior Court for the City and County of San Francisco. That decision held that the 25 percent ownership interest required by Prop. G controls and applies.
Owners of multi-unit residential rental property should understand that there are considerable risks involved in recovering possession of a unit for their own occupancy or the occupancy of a relative. It is extremely important that buyers who plan to move into a multi-unit residential rental property they are purchasing, and particularly multiple buyers of such property, understand that great uncertainty—both legal and political—surrounds the subject of owner and relative move-in evictions in San Francisco. Buyers who are contemplating the eviction of a tenant or tenants from residential rental property they are purchasing are urged to consult a qualified real estate attorney knowledgeable regarding San Francisco real property issues for advice concerning their right to do so or any questions they may have regarding owner and relative move-in evictions.
Determining Whether Tenants Are Protected from OMI Eviction - A request may be served on tenants in a building to determine whether any of them claim to be protected from owner or relative move-in eviction.
A request may be served on all tenants in a building to give them an opportunity to indicate whether any of them are protected from owner and relative move-in eviction under San Francisco’s Residential Rent Stabilization and Arbitration Ordinance. The tenants then are given a period of 30 days to respond as to whether they are protected. The request must contain a warning that a tenant’s failure to submit a statement within the 30-day period will be deemed an admission that the tenant is not protected. If tenants do not respond to the request within the 30-day period, they are precluded from claiming that they are protected in the future. If, on the other hand, they claim they are protected, the ordinance provides a mechanism by which the rental property owner can contest the claim. A copy of any request served on a tenant must be filed with the Rent Board by the property owner within 10 days of service.
Sellers and/or buyers with additional questions concerning the use of the request described above, or any other related matter, are urged to consult a qualified real estate attorney knowledgeable regarding San Francisco real property issues.
Ordinances to Discourage Tenant Evictions - Sellers of real property consisting of two or more residential units are required, among other things, to give written notice to buyers disclosing the reason for the most recent termination of tenancy for every unit delivered vacant at close of escrow.
To “discourage tenant evictions,” the Board of Supervisors in 2002 passed and the mayor signed into law amendments to the city’s Rent Ordinance, proposed by former supervisor Chris Daly. Of particular interest to buyers and sellers of real property covered by the ordinance is a provision which makes it unlawful for a landlord to knowingly fail to disclose in writing to the buyer, prior to entering into a contract for the sale and purchase of any real property consisting of two or more residential units, the specific ground(s) for the termination of the tenancy of each residential rental unit to be delivered vacant at close of escrow. Originally, this law contained other provisions relating to the recovery of rental units by landlords. Two of these provisions—the so-called “Ellis bluff” (a landlord threatening to commence an Ellis Act proceeding to withdraw the property from the rental market for the purpose of persuading the tenants to move out voluntarily) and the requirement that tenants be represented by an attorney in order to be allowed to enter into a binding waiver of rights under the ordinance with a landlord—have been held unconstitutional by the courts.
In 2006, voters in San Francisco narrowly approved a ballot measure requiring the owners of multi-unit residential properties to disclose in writing to “prospective purchasers” certain details relating to the eviction history of the property. More specifically, the measure requires a “landlord/owner” when offering a property for sale in San Francisco with two or more residential units to disclose to any prospective purchaser the specific ground(s) for the termination of the tenancy of each residential rental unit to be delivered vacant at close of escrow and whether any evicted tenant was elderly or disabled.
In early 2008, the Board of Supervisors passed and the mayor signed into law amendments to the City’s Rent Ordinance, proposed by former supervisor Daly, to require sellers and buyers of multi-unit residential properties subject to rent control to disclose in writing to tenants certain legal rights. More specifically, the measure requires a seller “before selling” to provide a specific set of disclosures in a particular type-size to all tenants and the buyer to do likewise within thirty (30) days after close of escrow.
And, in November 2008, San Francisco voters approved Proposition M, which added provisions designed to stop purported tenant harassment. Further, Proposition M expanded the definition of a “decrease in [housing] services” to include a list of “bad faith” acts by landlords and their Brokers—ranging from violating any State or local antidiscrimination law, to failing to cash a rent check within 30 days, to interfering with a tenant’s right to privacy. Upon finding any such harassment and thereby a “decrease in [housing] services,” Proposition M allowed the San Francisco Rent Board (Board) to order a reduction in rent. By how much and for how long was not specified in the proposition, nor were any criteria provided for making such determinations. Proposition M also added an attorney fees provision to the Rent Ordinance, mandating an award of fees to a prevailing tenant in an unlawful detainer case brought under State law. In February 2011, an appellate court ruled that: (1) no rent reductions could be granted by the San Francisco Rent Board for abusing the landlord’s right of access, influencing or attempting to influence a tenant to vacate through fraud, intimidation or coercion, attempting to coerce the tenant to vacate with offer(s) of payments and other similar conduct as any resulting losses can only be awarded by a court as a matter of law; (2) prohibiting a landlord from offering a tenant payments to vacate a rental unit after the tenant has requested in writing that the landlord stop making such requests is an unconstitutional infringement upon a landlord’s free speech rights; and, (3) a local government has no right to mandate that attorney fees be awarded in unlawful detainer cases brought under State law. The appellate court thus invalidated these three provisions leaving the rest of this law intact.
Buyers and sellers are urged to discuss all aspects of the above-mentioned laws that may be pertinent to a specific real property sale and purchase transaction with a qualified real estate attorney knowledgeable regarding San Francisco real property issues.
Relocation Payments for No-Fault Evictions - Each eligible tenant who receives a covered no-fault eviction notice is entitled to receive relocation expenses from the landlord.
In 2006, voters in San Francisco approved Proposition H, a measure that requires rental property owners to pay “relocation expenses” to “eligible tenants” for no-fault evictions. (Note: Relocation expenses payable to tenants for evictions resulting from use of the State Ellis Act are specified in §37.9A(e)(3) of the City’s Rent Ordinance and are similar but not identical to those specified in Proposition H. The Ellis Act allows owners of residential rental buildings to remove a building from rental use.) Proposition H applies to all notices to quit served on or after August 10, 2006.
Covered under Proposition H are notices to quit based on Sections 37.9(a) (8), (10), (11) or (12) of the city’s Rent Ordinance. Those sections apply to landlords who seek to recover possession of a rental unit for the following purposes:
(8) For the landlords’ use or occupancy as his or her principal place of residence or for the use or occupancy of the landlord’s relatives as their principal place of residence;
(10) To demolish or to otherwise permanently remove the rental unit from housing use;
(11) To remove temporarily the unit from housing use in order to be able to carry out capital improvements or rehabilitation work; or
(12) To carry out substantial rehabilitation work.
Under Proposition H, each eligible tenant, defined as any authorized occupant of a rental unit regardless of age who has resided in the unit for 12 or more months, who receives a covered no-fault eviction notice is entitled to receive relocation expenses from the landlord in the amounts specified in §37.9C(2) of the Rent Ordinance. The amounts originally set forth in this law were:
• A payment of $4,500 to each eligible tenant receiving a covered no-fault eviction notice—$2,250 of which shall be paid at the time of the service of the notice to quit, and $2,250 of which shall be paid when the unit is vacated—with a maximum of $13,500 in relocation expenses for all eligible tenants in the same unit.
• In addition, a payment of $3,000 to each eligible tenant who is 60 years of age or older or who is disabled within the meaning of §12955.3 of the California Government Code, and each household with at least one eligible tenant and at least one child under the age of 18 years—$1,500 of which is to be paid within 15 calendar days of the landlord’s receipt of notice from the eligible tenant of entitlement to the relocation payment, along with supporting evidence, and $1,500 of which is to be paid when the eligible tenant vacates the unit. Within 30 days after notification to the landlord of a claim of entitlement to additional relocation expenses because of disability, age, or having children in the household, the landlord is to give written notice to the Rent Board of the claim for additional relocation assistance and whether or not the landlord disputes the claim.
Each year on or about March 1, the relocation expenses, including the maximum relocation expenses per unit, are to increase, rounded to the nearest dollar, at the rate of increase in the “rent of primary residence” expenditure category of the Consumer Price Index for All Urban Consumers in the San Francisco-Oakland-San Jose Region for the preceding calendar year, as that data is made available by the United States Department of Labor and published by the City’s Rent Board. For March 1, 2012 through February 28, 2013 the amounts are $5,153 for each eligible tenant (an authorized occupant, regardless of age, who has resided in the unit for 12 or more months) with a cap of $15,460 per unit, with an additional $3,436 for each eligible tenant who is 60 years of age or older or who is disabled within the meaning of §12955.3 of the California Government Code, and each household with at least one eligible tenant and at least one child under the age of 18 years.
In November 2014, San Francisco adopted a new ordinance regulating “Buyout Agreements” (agreements by which a landlord pays a tenant money or other consideration to vacate a rental unit) and “Buyout Negotiations” (any discussion or bargaining, oral or written, between a landlord and tenant regarding the possibility of entering into a Buyout Agreement) for residential rental properties which are subject to local rent control laws. Compliance is quite complicated and the new ordinance changes the rules of condo conversion for units subject to a buyout agreement.
For further information on relocation payments for no-fault evictions or tenant buyout agreements, contact the City’s Rent Board at 415-252-4600.
Ellis Act - Owners of residential rental property, under certain circumstances, may avail themselves of a State law, which, subject to certain restrictions, allows the owners to withdraw their property from rental use.
Because of the excessive restrictions imposed on the owners of residential rental property by San Francisco law, some owners have utilized a State law which allows them to withdraw their property from residential rental use. Individuals who are buying residential rental property as “tenants-in-common” for their own occupancy commonly use this law to be able to evict existing tenants. The law, known as the Ellis Act, generally preempts or overrides San Francisco law, if properly invoked, but it does not preempt or override local law which establishes various procedural protections consistent with the Act. Invoking the Ellis Act carries with it long-term implications for the property that should be carefully considered before proceeding.
The Ellis Act contains detailed procedural requirements that relate to the eviction of existing tenants. They include, but are not limited to, notice, filing and recordation requirements. Also, after the Act is invoked, the right to rent the property in the future is restricted. Since the Act binds the invoking owner and the owner’s successors and assigns, this may affect the value and desirability of the property if it is later marketed for sale. These and other important considerations should be carefully evaluated before an owner elects to proceed under the Ellis Act or a buyer purchases a property that has been subject to an Ellis Act proceeding.
Former supervisor Aaron Peskin obtained passage of a local ordinance that expands tenant relocation eligibility where units are withdrawn from the rental market pursuant to the Ellis Act. The ordinance became law without the mayor’s signature on February 20, 2005. Under the ordinance, when residential units are withdrawn from the rental market pursuant to the Ellis Act, each tenant who is relocated will be entitled to a payment of $4,500, up to a maximum total of $13,500, if the tenant resided in the unit on or after August 10, 2004. The payment amounts are to be increased on March 1 of each year, according to the “rent of primary residence” expenditure category of the Consumer Price Index for the preceding 12 months. In addition, owners may not withdraw defined residential hotel units from the rental market pursuant to the Ellis Act if the hotel’s occupancy permit was issued prior to January 1, 1990, and if the hotel did not file a notice of intent prior to January 1, 2004, to withdraw the units from the rental market.
The ordinance also provides that the existing additional relocation payment of $3,000 to each senior (62 or older) or disabled tenant displaced will increase annually on March 1 of each year, according to the “rent of primary residence” expenditure category of the Consumer Price Index for the preceding calendar year. The amounts due from March 1, 2012 through February 28, 2013 are $5,157.27 for each tenant with a cap of $15,471.78 per unit, with an additional $3,438.17 for each elderly (62 years of age or older) or disabled (within the meaning of §12955.3 of the California Government Code) tenant.
Note: the regulations specifying Ellis Act tenant relocation payments were changed again effective June 1, 2014, creating an alternative, complex formula for determining these payments to evicted tenants, not untypically with the effect of greatly increasing the payments. More information can be found here: SF Rent Board - Ellis Act Packet - 6-1-14 . Note that this law is now (autumn 2014) the subject of lawsuits back and forth, so consult with an attorney for the latest information regarding implementation and ramifications.
Individuals who have questions or are seeking advice regarding the Ellis Act, tenant evictions and rent control in San Francisco are urged to contact a qualified real estate attorney knowledgeable regarding the Ellis Act, landlord-tenant law and San Francisco property-use issues. THE LAWS GOVERNING THESE AREAS OF REAL ESTATE IN SAN FRANCISCO ARE EXTREMELY COMPLICATED & CONSTANTLY CHANGING. Damages assessed for violations of SF rent and eviction control statutes can easily run into the hundreds of thousands of dollars. Real estate agents and brokers are not remotely qualified to provide advice in this regard.
Several local attorneys who specialize in landlord-tenant, tenant eviction and Ellis Act issues have published articles and outlines regarding these enormously complex and legally fraught issues. Below are links to the San Francisco Rent Board, a landlord-tenant law firm, and a real estate blog that covers breaking news on these topics:
San Francisco Rent Board Website
Goldman, Gellman, Melbostad: Legal Articles
Political & Legal Updates Blog
This information is mostly quoted from “GENERAL INFORMATION FOR BUYERS AND SELLERS OF RESIDENTIAL REAL PROPERTY IN THE CITY AND COUNTY OF SAN FRANCISCO” as published by the San Francisco Association of Realtors on 11/15/12. As possible, we try to update this webpage with new information, but we will never be as up to date as an attorney specializing in these topics.