The Ellis Act is a California state law that allows landlords to evict residential tenants in order to permanently withdraw their property from the rental market. Passed in 1985, the Ellis Act was initially designed to provide property owners with the ability to exit the rental business, particularly in response to local rent control laws that some landlords argued made it financially unviable to continue renting their properties. However, the use of the Ellis Act has become a point of contention in cities with strong tenant protections, such as San Francisco, Los Angeles, and Berkeley. This article will provide a comprehensive overview of the Ellis Act, the eviction process under this law, and the legal and financial implications for landlords.

Understanding the Ellis Act

The Ellis Act is codified in California Government Code §§ 7060-7060.7. The Act provides landlords with the right to withdraw their property from the residential rental market, effectively allowing them to evict all tenants in the building. Importantly, the Ellis Act does not provide landlords with a blanket right to evict tenants for other reasons; it specifically applies to cases where the landlord intends to remove the rental units from the market altogether, either by converting them to another use, leaving them vacant, or selling the property.

Key Provisions of the Ellis Act

1. Right to Withdraw: Landlords have the right to withdraw their property from the rental market, but they must comply with specific procedural requirements.
2. Notice Requirements: Landlords must provide tenants with a minimum of 120 days’ notice before the eviction takes effect. However, certain tenants, such as those who are disabled or elderly, may be entitled to a one-year notice.
3. Relocation Assistance: In cities with rent control, landlords are often required to pay relocation assistance to displaced tenants. The amount and eligibility criteria for relocation assistance vary depending on local ordinances.
4. Restrictions on Re-Renting: If a landlord decides to re-rent the property within a certain period (typically five to ten years), they may be required to offer the unit back to the original tenant at the same rent-controlled rate.

The Ellis Act Eviction Process

The process of evicting tenants under the Ellis Act involves several legal steps that must be carefully followed to ensure compliance with state law and local ordinances. Failure to adhere to these requirements can result in significant legal consequences, including the invalidation of the eviction and potential liability for damages.

Step 1: Notice of Intent to Withdraw

The first step in the Ellis Act eviction process is for the landlord to file a “Notice of Intent to Withdraw” the property from the rental market with the local rent board or other designated agency. This notice must include specific details about the property, such as the number of units, the names of the tenants, and the proposed withdrawal date. The landlord must also serve a copy of this notice to each tenant.

Notice to Tenants

• Standard Notice: The standard notice period for tenants under the Ellis Act is 120 days. This means that tenants have four months from the date they receive the notice to vacate the property.
• Extended Notice for Vulnerable Tenants: Tenants who are elderly (62 years or older) or disabled are entitled to a one-year notice period. To qualify, tenants must provide the landlord with written notice of their status within 60 days of receiving the original notice.

Step 2: Tenant Relocation Assistance

In many jurisdictions, particularly those with rent control ordinances, landlords are required to provide displaced tenants with relocation assistance. The specifics of these payments vary depending on local laws but typically include:

• Fixed Payment: A flat fee based on the size of the unit or the tenant’s income level.
• Additional Assistance for Vulnerable Tenants: Higher payments for tenants who are elderly, disabled, or have low incomes.

For example, in San Francisco, landlords must pay a base relocation amount per tenant, with additional payments for households with children, seniors, or disabled tenants.

Step 3: Filing the Final Notice of Withdrawal

After the notice period has expired, and the tenants have vacated the property, the landlord must file a “Final Notice of Withdrawal” with the local rent board. This notice confirms that the property has been withdrawn from the rental market. The landlord must also serve a copy of this notice to each tenant who was evicted under the Ellis Act.

Step 4: Restrictions on Re-Renting the Property

The Ellis Act includes significant restrictions on re-renting the property after it has been withdrawn from the rental market. These restrictions are intended to prevent landlords from using the Ellis Act to circumvent rent control laws and then re-renting the property at market rates.

• Offer of Re-Rental: If the landlord decides to re-rent any of the units within five years of the withdrawal, they must offer the unit back to the original tenant at the same rent-controlled rate. This offer must be made in writing, and the tenant has 30 days to accept.
• Rent Control Reinstatement: If the property is re-rented within 10 years, the units remain subject to rent control, and the landlord cannot charge more than the rent that was in place before the Ellis Act eviction.
• Penalty for Non-Compliance: Failure to comply with these restrictions can result in significant penalties, including fines and the requirement to pay damages to the displaced tenants.

Legal Considerations and Challenges

While the Ellis Act provides landlords with the legal right to withdraw their property from the rental market, the process is far from straightforward. Landlords must navigate a complex web of state laws and local regulations, which can vary significantly from one city to another. In cities with strong tenant protections, such as San Francisco, Los Angeles, and Berkeley, the process can be particularly challenging.

Legal Risks and Litigation

Ellis Act evictions are often subject to legal challenges by tenants or tenant advocacy groups. Common grounds for litigation include:

• Bad Faith Withdrawal: Tenants may argue that the landlord is not genuinely withdrawing the property from the rental market and is instead using the Ellis Act as a pretext to evict tenants and re-rent the units at higher rates.
• Failure to Comply with Notice Requirements: Tenants can challenge the eviction if the landlord fails to provide the correct notice period or does not adhere to the requirements for vulnerable tenants.
• Disputes Over Relocation Assistance: Tenants may dispute the amount of relocation assistance offered by the landlord or argue that they qualify for additional payments based on their age, disability status, or income level.

Defending Against Challenges

To defend against these challenges, landlords must ensure that they strictly comply with all procedural requirements under the Ellis Act and any applicable local ordinances. This includes maintaining thorough documentation of all notices, communications with tenants, and payments of relocation assistance.

Financial Implications for Landlords

The financial implications of an Ellis Act eviction can be substantial. In addition to the costs associated with providing relocation assistance to tenants, landlords may face significant legal expenses if the eviction is challenged in court. Furthermore, the restrictions on re-renting the property can limit the landlord’s ability to generate income from the property for several years.

Relocation Assistance Costs

Relocation assistance payments can be a significant financial burden for landlords, particularly in cities with high relocation payment requirements. For example, in Los Angeles, the required relocation payment can range from several thousand dollars to tens of thousands of dollars, depending on the size of the unit and the tenant’s income level.

Loss of Rental Income

By withdrawing the property from the rental market, landlords lose the ability to generate rental income from the units. If the property is not immediately sold or converted to another use, this can result in a substantial loss of revenue.

Potential for Increased Property Value

Despite the financial challenges, some landlords use the Ellis Act as part of a broader strategy to increase the value of their property. By withdrawing the property from the rental market and potentially converting it to another use, such as condominiums, landlords may be able to sell the property at a higher price.

Conclusion

The Ellis Act provides California landlords with a powerful tool to withdraw their property from the rental market, but it comes with significant legal and financial responsibilities. Landlords considering an Ellis Act eviction must carefully navigate the complex procedural requirements, provide adequate notice and relocation assistance to tenants, and be prepared for potential legal challenges. While the process can be costly and time-consuming, it may be a viable option for landlords seeking to exit the rental business in cities with strict rent control laws.

Citations

1. California Government Code §§ 7060-7060.7 (Ellis Act).
2. San Francisco Administrative Code Chapter 37 (Rent Ordinance, including Ellis Act provisions).
3. Los Angeles Municipal Code § 151.09 (Rent Stabilization Ordinance).
4. Berkeley Municipal Code Chapter 13.77 (Ellis Act Implementation Ordinance).
5. Santa Monica Rent Control Board Regulation 5002 (Ellis Act Withdrawal Procedures).
6. California Civil Code § 1947.12 (Rent control and just cause eviction protections).
7. California Code of Civil Procedure § 1161 (Unlawful detainer).
8. California Code of Civil Procedure § 1179 (Relief from forfeiture).