From the Daily Journal - January 25, 2006
Tenant Buyout Provision Appears Safe, For Now
By Donna Domino

A state appellate court seemed ready Tuesday afternoon to uphold a San Francisco tenant protection law that requires property owners who want to take their buildings out of the rental market to pay $4,500 to each evicted tenant.

Landlords had persuaded a trial judge to throw out the law on the grounds that it unfairly penalizes them for withdrawing from the rental market.

But in a hearing Tuesday, a three-judge panel appeared likely to conclude that under the Ellis Act, the state law governing how landlords can evict tenants, cities have leeway to impose a reasonable buyout fee to compensate tenants for being thrown out. Pieri v. City of San Francisco, A110571.

"How does one decide how much is too much?" 1st District Court of Appeal Justice Maria P. Rivera inquired of plaintiffs' attorney Andrew Zacks, of San Francisco's Zacks Utrecht & Leadbetter.

Zacks had complained that buyouts were too expensive. In some situations, Zacks noted, property owners could be forced to pay as much as $80,000 to buy out residents in buildings with many tenants because a relatively new law allows up to $13,500 for a household with multiple tenants.

Rivera pointed out that property owners might still protest even if the fee was only one dollar.

Deputy City Attorney Vince Chhabria said the Ellis Act's "savings" clause preserves the right of communities to "adopt programs that mitigate the effects of evictions," noting language that declares such authority "shall not be disturbed."

The Ellis Act allows property owners to take their rental properties off the market and authorizes cities to decide how to compensate tenants who are evicted.

The buyout provision in the law was originally intended for low-income people and provided a maximum of $4,500 per household.

But in 2004, lawmakers expanded the compensation to $4,500 per tenant and took away the low-income requirement.

After the new requirement took effect last summer, real estate groups sued.

San Francisco Superior Court Judge James Warren ruled in favor of the property owners, but he ordered that the new buyout conditions remain in place until the issue is resolved.

If the court of appeal upholds the law, Chhabria said other cities would be free to impose buyout fees for evictions. Programs similar to San Francisco's are also in effect in Berkeley, Los Angeles and Santa Monica.

Zacks noted that a different panel on the 1st District rejected the city of San Francisco's argument in another case, Reidy v. City and County of San Francisco, 123 Cal. App. 4th 580.

He said the 2004 precedent follows a long line of decisions holding that "these types of local impediments to the exercise of the right to go out of the rental business are invalid."

San Francisco Superior Court Judge John Munter, who was sitting on Tuesday's panel on assignment, asked if landlords would make the same argument against paying a smaller relocation benefit to evicted tenants.

"What's the difference between $1,000 and $4,500?" Munter said.

Zacks' partner, Paul F. Utrecht, argued that it's unclear how landlords are supposed to comply with the Ellis Act.

"The city cannot impose requirements not authorized by state law," he said.

Justice Patricia K. Sepulveda also sat on the appellate panel, but remained quiet.

After the hearing, Zacks expressed surprise that the justices appeared unpersuaded by his arguments.

"They're going to overrule, it looks like, but we're going to the Supremes," he promised.