How the Ellis Act effects San Francisco Landlords

The Ellis Act was passed in 1985 by the California State Assembly, and has recently become the center of a raging controversy in San Francisco. The law provides landlords with a legal way to go out of business by converting the rental units to condos for sale or closing down the building. With the current San Francisco real estate market as tight as it is, the Ellis Act is being blamed for providing a loophole for landlords to evict tenants protected by the city's rent control ordinance, which keeps rents from rising more than a small percent every year. Recently, there have been several local measures passed that could alter the Ellis Act, and these profoundly affect landlords and their properties.


What Is the Ellis Act?

The Ellis Act was originally intended as a way for landlords to avoid bankruptcy by taking a property off the rental market to convert it to a private residence or units for sale. The Ellis Act allows for evictions of existing tenants in these circumstances, but does have stipulations meant to protect renters. The landlord must give at least 120 days' notice to tenants before initiating an eviction under the Ellis Act. Landlords must also pay for relocation costs, which range from $5,000 to more than $8,000 per person depending on factors such as age and disability. If the tenant is over 62 years of age and has lived in the building for more than a year, then the landlord must give a full year's notice.


How Common are Ellis Act Evictions?

According to KQED news, the peak of Ellis Act evictions took place in 2000 during the dot-com boom, when the city saw 384 evictions in one year. Since then, the number has significantly dropped, with the 2009-2012 period seeing less than 100 Ellis Act evictions each year. To put the numbers in perspective, San Francisco had over 1,000 for-cause evictions every year for the last couple of years, and nearly as many no-fault evictions, where things like owner move-in, demolition, or remodeling were the cause of the eviction. In 2013, the number of Ellis Act evictions climbed to over 100 once again as the San Francisco real estate market became tighter when the city supervisors put a ban on the conversion of apartments to common condos. 2014 saw an even greater uptick in Ellis Act evictions, leading to increasing protests from the community, some of which successfully stopped the eviction process.


The Future of the Ellis Act

The controversy over the Ellis Act and the ever-increasing number of evictions carried out in its name has lead to a burst of legislation and litigation in San Francisco. A city ordinance passed in April of 2014 requires landlords to pay a relocation fee to tenants that is equal to the difference between their current rent and what they will have to pay for a similar apartment for two years. This can amount to more than $100,000 in some cases where the tenant was enjoying rent-controlled rates and now has to pay San Francisco's high market prices. The San Francisco Apartment Association, a group of city property owners, has filed suit against the city, claiming that the ordinance requires them to pay "oppressive" and "unconstitutional" amounts of money. The future of the Ellis Act and how it will affect San Francisco landlords is now a hotly contested issue.

Posted on Dec 03, 2014


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