In basic terms, a rental agreement between a tenant and a landlord is a business arrangement.
This means there may be times when the landlord may find themselves going out of business because they can't maintain their profit structure.
The Ellis Act is a law only in California that allows a property owner to terminate their business and remove properties from rental use, which results in all tenants in that building being evicted.
What Happens During an Ellis Act Eviction?
Once an eviction notice under the Ellis Act is sent out, no dwellings can be rented again by the landlord.
If the same building is rented again within 10 years, the evicted tenant must be given the first chance to rent the property if they registered for a re-rental.
It is a 120 day eviction notice.
If the tenant is over the age of 62, disabled, or medically defined as being catastrophically ill, then the eviction notice is extended to 1 year.
Tenants that are evicted under the Ellis Act are also entitled to relocation payments if they have been in the property for over a year.
In the past, this amount was about $16,000 per person per unit, with a maximum of 3 people receiving the payment. [A family of six would receive three payments, not six.]
Those who are elderly, ill, or disabled would receive a 20% premium.
Now landlords must pay the difference between the new rent of a tenant they've evicted and the rent their tenant paid them multiplied by 24.
Cities Can Make Changes To the Ellis Act
In several California cities, landlords have been using the Ellis Act to improve their buildings or to convert them into condominiums.
Some cities, such as San Francisco, have put in restrictions that limit the type of modifications that a building may receive after evictions take place.
Ellis Act evictions must also have annual filings for the property over the next 5 years regarding rental restrictions.
This out of business notice will be added to the title reports for the property in question and may affect the value of the property or the ability for a landlord to secure financing.
An Ellis Act eviction basically gives landlords an “out,” but they'll be paying for up to 2 years of rental subsidies.
The process is complex, but generally cannot be fought by a tenant unless fewer than 120 days notice is given.
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