With restrictions on evictions proliferating throughout the Bay Area, more and more landlords are turning to the Ellis Act, the state law that allows landlords to go out of business, to regain control over their properties for the purposes of sale, demolition, or converting to non-rental uses. In response, local politicians have pushed back against the Ellis Act, creating local laws to discourage landlords from using the Ellis Act to evict tenants from their property. In September of last year, the California Court of Appeal ruled that the City of San Francisco went too far, giving landlords some breathing room in the face of mounting rules and oppressive regulations.
In December 2013, the San Francisco City Council passed an ordinance that prohibited landlords from “merging” rental units (i.e. converting a duplex or triplex into a single-family home) within 10 years of the property being vacated pursuant to the Ellis Act. In response, the San Francisco Apartment Association (SFAA) sued the City of San Francisco to prevent the ordinance from going into effect, alleging it conflicted with the Ellis Act, which is given priority over local laws.
After the City lost in court, it appealed to the ruling, but all its arguments were rejected. The Appellate Court held that SFAA had standing to sue on behalf of San Francisco landlords impacted by the ordinance, that the Ellis Act pre-empted any such legislation by the City of San Francisco, and that the entire ordinance should be struck down for that reason. Key to the court’s ruling was the finding that the Ellis Act was enacted specifically to stop local governments from passing laws that either prohibited or placed punitive penalties upon landlords who chose to go out of business. In applying that rule to the San Francisco ordinance, the court extended a growing line of cases and precedent that reinforce the Ellis Act as a bulwark against continual and ever-more creative attacks by local governments.