State toughens restrictions on property owners
A law designed to give landlords a way out of the business has been used by some property owners to jack up the price on rent-controlled units.
The owners of a Santa Monica building were fined $22,000 this week for doing just that. They put their apartments back on the market three years after evicting their tenants under the Ellis Act.
The 1987 Ellis Act was written to protect the rights of property owners who don’t want to be landlords anymore. But since the introduction of vacancy decontrol in 1995, it has been used by many landlords to evict tenants and later raise rents.
More than 20 percent of the Santa Monica properties that were “Ellised” have been brought back to the market by landlords, according to a March report from the Rent Control Board. Between July 2001 and July 2002, 25 properties were Ellised and seven of the buildings came back onto the market.
Andrew Zanger, a renters’ rights attorney, explained the mathematics from a landlord’s perspective. If a property owner evicts a renter who is paying $500 a month for a rent-controlled apartment, he must leave the spot vacant for two years and pay “punitive damages” to the tenant in the amount of six months’ rent, for a total of $15,000 in missed revenue, Zanger said.
But if the landlord rents the same apartment for $3,000 a month, it wouldn’t take long to recover the lost income.
“It’s financially feasible to do,” he said. “And we’ve seen people do it.”
Some renters agree.
“The law itself is simply a slap on the wrist for landlords,” said Solomon Harris, a resident who was displaced in 1999 when his building was Ellised. “It really puts out a green light for landlords wanting to circumvent rent control.”
“The law itself is simply a slap on the wrist for landlords. It really puts out a green light for landlords wanting to circumvent rent control.” — — SOLOMON HARRIS Santa Monica resident
Laws governing Ellis Act procedures were tightened this year in response to the concerns of tenants and activists. Landlords must now wait five years before renting the units at market rates. Previously, landlords were required to wait two years and, when the law was first introduced, only one year. Property owners must pay former tenants six months’ rent. If the owner violates the two-year waiting period, tenants are entitled to “actual damages,” which are determined by a judge.
Perry said the law was specifically worded to give landlords a way to get rid of tenants.
“It’s clearly a legitimate goal,” he said, adding some landlords no longer want to deal with their tenants. “If they’re that fed up. If they reach that level of disgust.”
Still, Perry said none of his clients — including Ross Vaisburd and Daniel Smith, who were fined $22,000 this week for violating the Ellis Act — have ever Ellised a building with the intention of later bringing it back to market.
“If they did, I’d say, ‘You’re making a big mistake,’” said Perry, “because (state Sen.) Sheila Kuehl is making this more and more difficult each year” by introducing stricter legislation.
The Ellis Act was originally written to protect landlords who wanted an exit from the business, Zanger said. The act was written in response to a Supreme Court decision overturning an order by the Rent Control Board that demanded a landlord stay in business, even though he wished to retire.
When vacancy decontrol later passed, landlords began to use Ellis as a relatively inexpensive way to get tenants out of their units and bring the units up to market value, Zanger said. Later, restrictions were passed to curb that trend.
The majority of properties Ellised in Santa Monica have not been brought back to the market. Officials say some have been demolished and made into condominiums, others are used as personal residences and still others stand vacant.
Landlords who Ellis their properties often wait to make improvements after the first two years when penalties are the most severe. Though the law requires they re-rent to former tenants at the same rent-controlled rates, nearly all of the property owners opt instead to pay the six months’ rent in fines, said Keith Kresge, an attorney for the rent control board.
“I don’t know of any case where a displaced tenant has actually been given their unit back,” he said.
But Kresge said the new legislation will curb abuses by providing a further disincentive to landlords trying to circumvent the system.
“In reality, the owner could go back into business,” Kresge said. “But he would suffer.”
- Solomon Harris, resident
Originally published in the Santa Monica Daily Press print edition on April 11, 2003. Read the original PDF.