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Owner Occupancy and Ellis Evictions

By Andy Sirkin

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How does San Francisco's rent control law affect evictions?

The law strictly limits rent increases for most residential tenants. But it does not restrict the rent for new tenants occupying vacant dwellings. To prevent owners from evicting tenants to create vacancies and increase rents, the law prohibits evictions without "Just Cause", and recognizes only 15 specific circumstances of Just Cause. This means that once a tenant occupies a rent-controlled dwelling, he/she can stay for life unless there is Just Cause for eviction. The tenants right to stay in the home or apartment forever cannot be changed through an agreement (written or oral) between the owner and the tenants. So, for example, even if the tenant has a one-year lease, the tenant does not have to leave at the end of the lease and the owner has no right to force the tenant out based on the fact that the lease is over. It is illegal for the owner to even ask the tenant to leave voluntarily at the end of the lease. Similarly, even if the tenant signs an agreement absolutely agreeing to move out on some future date, or at the owner’s request, the tenant does not have to keep the promise and the owner cannot force the tenant out.

What buildings are rent-controlled?

In general, all dwellings built before 1979 are subject to rent and eviction controls. Single-family homes (without "in-law" units) and condominiums where all tenants moved in on or after January 1, 1996 are exempt from rent increase limits. This exemption does not apply to condominium conversions unless the condominium has already been sold by the owner who converted it, or the condominium is the only one in the building that has not been sold and the owner has occupied it for at least one year after conversion. Also, under a recent addition to the San Francisco rent control law, property that has been foreclosed upon becomes subject to eviction control even if it was previously exempt.

What are the requirements for owner occupancy (owner move-in) evictions in San Francisco?

The law recognizes owner-occupancy as one of the Just Causes for eviction only when specific conditions are met by the owner and the tenant. The law in this area frequently changes, so you should contact a landlord-tenant attorney for recent developments on this issue. The following is a partial list of the requirements that seem to apply on the publication date:

Protected Tenants: Certain tenants are "protected" and cannot be evicted for owner-occupancy except in very limited circumstances. Protected tenants are those 60 or over, or disabled, who have occupied for 10 years, and those catastrophically ill who have occupied for 5 years. Also remember that no tenant with an unexpired lease can be evicted, and that tenants who occupy a unit during conversion to a condominium are entitled to remain for one year after conversion, or for life if they are over 62 or disabled.

Ownership Percentage: The occupying owner must own at least 25% of the building to qualify for an owner-occupancy eviction.

School-Age Children: If someone under 18 resides in the unit, and the tenant has occupied the unit for more than 12 months, the eviction may only occur during summer school vacation.

One Eviction Limit: Only one owner-occupancy (owner move-in) eviction per building is allowed. Owners cannot use owner-occupancy as the Just Cause for two or more evictions in the same building unless (i) the owners are related to each other as parent/child, grandparent/grandchild, or sibling, or (ii) a building permit has been issued to legally combine the units to be occupied as a single unit. Such permits are rarely issued and are subject to review by the Planning Commission.

Single Unit Limit: There cannot have been an owner occupancy (owner move-in) eviction in a different unit within the same building since November 1998. Following a post-11/98 owner-occupancy, the affected unit is the only unit that can be targeted for an owner-occupancy eviction. This restriction applies forever, regardless of resale, unless the owner successfully petitions the Rent Board based upon hardship.

Alternative Dwelling: None of the evicting owners can own a "comparable" vacant dwelling anywhere. If a "comparable" dwelling becomes available prior to the evicted tenant vacating, the tenant does not have to move. The law does not define "comparable". If any of the evicting owners own a "non-comparable" vacant dwelling, that dwelling must be offered to the evicted tenant, but it can be offerred at market rent. (The ability to offer it at market rent (as opposed to a rent commensurate with what the tenant was previously paying) is the result of a court case and is contrary to what is written in the SF Rent Control Ordinance itself). The alternative dwelling restriction can be problematic when a TIC group buys a duplex which has one occupied and one vacant unit. Under these circumstances, we recommend that an owner occupy the vacant unit and establish a paper trail of residency there before the other owner attempts an owner-occupancy eviction.

Minimum Occupancy: The occupying owners must intend to occupy the dwelling as their principal residence within three months and then for a period of at least 36 continuous months. If the owners do not meet the occupancy requirements, they are likely to be sued for wrongful eviction absent a compelling, unforseeable reason for the change of plan. Damages in these lawsuits can run well into six figures. Also, regardless of the reason for the early vacancy, if the owners intend to re-rent the dwelling, they must offer it to the evicted tenant at the previous rent. If the evicted tenant declines, the owner must offer the unit to the general public at the evicted tenant's previous rent.

Recording: A document must be recorded in the County Records designating the unit that has been the subject of the eviction and the resulting restrictions. This document will show up on all future title reports and may affect the value of the property and the owner's ability to obtain financing.

Good Faith: The occupying owners must act in good faith, with honest intent, and without ulterior motive. Tenants frequently resist owner-occupancy evictions in court by claiming that an ulterior motive,such as profit, underlies the eviction. Tenants are entitled to a jury trial.

Relocation Expenses: In November 2006, San Francisco voters approved a new law that requires higher payments to tenants in connection with certain types of evictions. The new fees apply when a tenant is evicted for owner occupancy (as well as in other situations). The amounts of the payments are as follows: (i) $4,500 for each person (regardless of age) who has lived in the unit for at least one year, up to a maximum of three people (or $13,500) per unit; plus (ii) $3,000 for each person who is either (i) over 60,or (ii) disabled under California law (which has a very broad definition of disability); plus (iii) $3,000 if at least one child (under 18) resides in the unit. Half of each payment must be made with the eviction notice, and the other half must be made when the unit is vacated. Payment amounts will increase annually based on the Consumer Price Index. The new payment requirements apply to all eviction notices served on or after August 10, 2006.

What are the requirements for Ellis Act evictions?

The Ellis Act is a state law in California that allows owners to, "go out of business"‚ and remove dwellings from rental use subject to certain restrictions listed below. Tenants can be evicted under the Ellis Act anywhere in California, but local law can impact the procedures and requirements. The list below describes the requirements in San Francisco.

Evict All Tenants: In general, all tenants in every dwelling on the property must be evicted. However, if the property has four or more dwellings, and two or more buildings, it is possible to evict all the tenants in a particular building, but not the tenants in the other building(s).

Future Rentals: During the first two years after an Ellis eviction, no dwellings can be re-rented. If a dwelling is re-rented during the first five years, the maximum rent is the amount paid by the evicted tenant plus any rent increases which would have been allowed if the dwelling had never been vacated. In addition, during the ten years after the eviction, re-rental must be first offered to the evicted tenant if that tenant has registered for re-rental.

Reporting and Recording: Government filings are required at the time of the eviction and then annually for five years. In addition, a document must be recorded in the County Records describing the ongoing rental restrictions. This document will show up on all future title reports and may affect the value of the property and the owner's ability to obtain financing.

Protected Tenants: Elderly (62 or over), disabled, and catastrophically ill tenants are entitled to en extended notice period of one-year (as opposed to the normal 120-day notice required for other Ellis Act evictions). These tenants also receive relocation expenses of about $3,000 (the actual amount adjusts each year) in addition to the standard relocation payment described below. Tenants with unexpired leases cannot be evicted.

Relocation Payments: The owner must pay each tenant approximately $5,000 up to a maximum payment per unit of approximately $15,000 (the actual amounts and ceiling adjusts each year). These payments are in addition to the ones required for elderly (62 or over), disabled, and catastrophically ill tenants.

Do evictions affect condominium conversion?

San Francisco law now makes it more difficult to convert a building to condominiums if there has been an eviction in the building that was not based on the tenant’s action or inaction. Both owner move-in and Ellis Act evictions fall within the category of evictions that can restrict or prevent a building from converting to condos. For more information on how past evictions affect the building's ability to convert to condominiums, see The Effect of Eviction History on San Francisco Condominium Conversion Eligibility.

Do Ellis evictions affect resale value or financing options?

Some Realtors believe that Ellis evictions lower resale value, but this is difficult to substantiate with market data. There are certain lenders who refuse to finance Ellis buildings, but this has proven problematic only for larger buildings where relatively few lenders are willing to provide financing. We recommend that resale and financing issues be investigated and evaluated before Ellis act evictions are undertaken.

What are the procedures for owner-occupancy (owner move-in) and Ellis evictions?

In an eviction, even minor mistakes are fatal, and require the owner to begin the entire process anew. The following is a partial list of procedures:

Notice: An eviction notice must be in writing and contain the magic words in the proper places. The form of the notice depends on the Just Cause for the eviction. Avoid any conversation that could be interpreted as an improper oral notice or any letter that could be interpreted as an improper written notice.

Filing: A copy of the notice must be filed with the Rent Board within days of delivery to the tenant. Additional filing requirements apply to Ellis evictions.

Service: A separate copy of the notice to each occupant may be delivered either personally or by certified mail. Slipping the notice into the mailbox or under the door is not sufficient. Under certain circumstances, other types of delivery are sufficient, and fewer than all occupants may be provided notices, but the rules are complex.

Waiting Period: Tenants are entitled to a specific number of days of advance notice before they are required to move out. The notice period varies by type of eviction, the length of time the tenant has lived in the property, and the age and health of the tenant.

Rent Collection: An owner cannot accept rent for any period following notice expiration. If you give a 60-day notice on the 15th of July, then accept full rent on the first of September, you invalidate your notice.

Unlawful Detainer: If the tenant does not vacate on time, the owner must file a lawsuit seeking possession. These lawsuits generally take 45 days to go from filing to trial, but occasionally take much longer. Few eviction cases go to trial but the number is increasing.

Can you pay a tenant to move (a tenant buyout)?

Paying a tenant to move is generally risky in a rent-controlled community and should be approached with extreme caution. Even discussing a buyout with a tenant can create legal liability for wrongful eviction, and tenants can generally refuse to comply with buyout agreements even if they are written and even if the tenant has accepted payment.

About the author

Sirkin & Associates was a pioneer in the area of tenants in common (TIC) arrangements involving occupancy rights assignments, which are often used as a substitute for subdividing a property when true subdivision is impossible or unduly expensive. In 1985, Andy Sirkin created the legal and transactional structure which has become the industry standard for this type of TIC. Over the succeeding years, Andy’s innovations have included being the first state-approved real estate instructor for occupancy-based TICs, being the first to obtain state approval for a large-building TIC sale, being the first to convince institutional lenders to offer individual TIC financing, and being the first to develop the loan documents and lender underwriting guidelines for fractional TIC financing. In recent years, the type of co-ownership arrangement Andy conceived nearly 25 years ago has grown to comprise approximately 1/3 of all attached-home sales in San Francisco.

Sirkin & Associates has prepared close to 3,000 occupancy-based TIC agreements for properties of every size and type, and continues to assist in the vast majority of these transactions in California. This unmatched level of experience allows us to offer time-tested approaches for the vast majority of co-ownership situations, to quickly and effectively solve problems, and to produce documents that are clear, easy to navigate and read, and efficient and cost-effective to enforce. We continue to improve our documents each month as we encounter new situations and learn more about what TIC arrangements perform best in the real world. We also share our accumulated knowledge, and support real estate professionals and the TIC community, by continuously publishing new articles on our website and offering free educational workshops.

Our tenancy in common practice involves general advice and counseling, TIC agreement preparation, loan documents, and ongoing consultation to developers, seller, Realtors and TIC owners, on either a flat fee or hourly basis. We have a well-deserved reputation for returning calls promptly and providing fast turnaround times. But more important, we are known for finding creative solutions, calming fears, and finding common ground, so that transactions and relationships work. Although our role usually begins at the time the tenancy in common is first formed or sold, we are committed to remaining available to solve problems throughout the life of each TIC. Contact us via email at DASirkin@earthlink.net, or by telephone at 415-738-8545.

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