Court of Appeals Limits Post Eviction Restrictions on Properties That Have Been Ellis Acted. 

The Ellis Act remains a viable ground for evicting tenants in San Francisco, despite efforts to curb its use. Because the Ellis Act is state law the San Francisco Board of Supervisors is constrained in the limits it can place on the use of the Ellis Act. Recently, in Small Property Owners Institute of San Francisco v. City and County of San Francisco(2018) 22 Cal. App. 5th77, the Court of Appeals limited post eviction limitations on remodeling units that were made vacant by the Ellis Act. 

In December 2013 the San Francisco Board of Supervisors passed Ordinance No. 286-13 imposing a ten year wait period for any property owner who sought to alter a non-conforming residential rental unit, if tenants were evicted from the unit pursuant to the Ellis Act (and other no-fault evictions). The Small Property Owner of San Francisco Institute (SPOSFI) challenged the ordinance, arguing that the ordinance was a prohibitive price on owners exercising their rights under the Ellis Act. They argued the ordinance was pre-empted because it conflicted with the Ellis Act. The City prevailed at trial. However, a panel of judges in the Court of Appeal, First District, Division 2, California, found that the ordinance was pre-empted by the Ellis Act – Government Code sections 7060 et seq.   

The court reasoned as follows. A local ordinance is pre-empted by a state law if the local ordinance duplicates, contradicts, or enter an area fully occupied by a state law. The Ellis Act, is a state law, representing an owner’s absolute right to exit the residential rental business. The Ellis Act completely occupies the field of substantive requirements for an owner to exit the rental market, and therefore local governments cannot pass ordinances that add substantive requirements to the Ellis Act. 

The San Francisco ordinance was a substantive requirement because it was automatic and effective as soon as the owner invoked the Ellis Act. The waiting period was like a penalty on any owner using the Ellis Act. Because the ordinance was like a penalty and added substantive requirements to the Ellis Act process, it was pre-empted by the state law.  

There are two exceptions for local government in the Ellis Act: the Ellis Act does not limit a local government’s ability to regulate property the eviction and it does not limit a local government’s ability to mitigate the adverse effects of the Ellis Act. The Court ruled the ten-year ban did not regulate the particulars of the remodeling of a non-conforming unit after the eviction, but instead was an automatic ban on any re-modeling. The Court also ruled that the Amendment did not mitigate adverse effects of the withdrawal of units, because there are already strict limitations on re-renting units after units have been withdrawn. Indeed, the ordinance would have kept unimproved rental units off the market, which would be not helpful for any displaced tenants. 

 The case, which relates more to limits on local power, effectively curbed the Board’s ability to limit post Ellis Act remodeling of units. This is positive for anyone who successfully uses the Ellis Act.