Background
The Ellis Act, found in California Government Code Section 7060, et seq., gives rental property owners the right to exit the rental housing business, but also allows local governments to place conditions and restrictions on landlords who evict tenants in order to exit the market. San Francisco has enacted procedures in Rent Ordinance Section 37.9A that owners must follow if they are going to evict tenants to exit the rental housing business. On January 1, 2020, the California Legislature adopted AB 1399 to clarify and amend certain portions of the Ellis Act.
What does this legislation change?
1. Clarifies that the “date of withdrawal” for the entire property as a whole is the latest termination date of any unit.
Rent Ordinance Section 37.9A(f)(4) requires a 120-day notice period before a unit is "withdrawn" from the market under the Ellis Act. However, certain senior and disabled tenants are entitled to an extension to one-year, which defers the withdrawal date for that unit. The amendments to Ordinance Section 37.9A clarify that the “date of withdrawal” for the entire property as a whole is the latest termination date of any unit.
2. Requires that if any unit is returned to the rental market during the 10-year period of constraints, the entire property must be returned to the market, with exceptions for certain owner-occupied units.
In 2020, AB 1399 amended State law to specify that the Ellis Act is not intended to allow an owner to return less than all the units to the rental market. In other words, it clarified that local governments may require that if any unit is returned to the rental market during the period of constraints, the entire property must be returned to the market, with exceptions for certain owner-occupied units. The new amendments to Ordinance Section 37.9A now make this a local requirement.
3. Relocation payments for Ellis Act evictions have been increased.
Relocation payments have been increased for Ellis Act eviction notices served on or after September 1, 2022. Currently, San Francisco's Rent Ordinance requires landlords who are evicting under the Ellis Act to provide relocation payments of approximately $7,426 per eligible tenant, capped at $22,280 per household, plus an additional $4,951 for each tenant who is senior or disabled. Effective September 1, 2022, these amounts have been increased to $10,000 per eligible tenant, capped at $30,000 per household, plus an additional $6,700 for each tenant who is senior or disabled. These new amounts will increase each March 1.
4. Clarification re punitive damages and Ordinance clean-up.
Finally, the new amendments (a) clarify (pursuant to AB 1399) that an owner’s payment of punitive damages following the owner’s unlawful re-rental of a unit does not extinguish the owner’s obligation to re-offer the unit upon re-rental to the displaced tenants, and (b) deletes certain inoperative Code provisions related to relocation payments, including former Administrative Code Section 37.9A(e)(3)(E).