Landlord rights group loses bid to overturn city law
By DAVE DANFORTH Daily Press Staff Writer
Santa Monica tenants who received past interest on their security deposits won’t have to cough up any of it, according to a proposed settlement of a legal challenge to a city law.
The settlement will end a challenge in which a landlord rights group successfully shot down the law requiring those interest payments, which totaled about $3 million. Negotiations have been underway since the ruling in the case last year.
The suit was brought by the Action Apartment Association, which alleged the 1999 Santa Monica law requiring landlords pay tenants 3 percent on their deposits was unfair. The landlords claimed that since banks were offering nowhere near that kind of interest on their bank accounts, they lost money. The loss, they complained, amounted to an illegal “taking” of property without due process.
The state’s appeals court agreed last year in overturning the ordinance. What was left was to decide what to do about funds already paid out, and what to do with future tenant deposits.
The ruling didn’t invalidate the ordinance on principle. Instead, it held that 3 percent was simply too stiff for landlords at a time when it was difficult to find a bank that would pay so much interest on a security deposit account.
Under the settlement, no tenant will be expected to return anything paid under the ordinance — a practical impossibility anyway since many have moved. In addition, the city will agree to enact no replacement law for at least three years as a sort of compensation for the time its law was in effect.
After that, the city could require landlords to begin paying tenants again, but no more than the actual amount a landlord earned in interest on a tenant deposit.
The interest payment requirement was a raw blister which chapped landlords already sore at a City Hall firmly in the grip of tenant advocates. Rent control was instituted in Santa Monica when Santa Monicans for Renters Rights came to power in 1979.
“There’s no reason for (a landlord) to have to travel across town just to get a half a percent more interest, and the city shouldn’t force you to do that,” said Action’s president, Santa Monica lawyer and landlord Gordon Gitlen.
The Action Apartment Association, chaired by Gitlen, has been active in attempting to curb what its members felt were abuses in the city’s administration of rent control. But it is not always successful.
On Thursday, it lost a bid to overturn Santa Monica’s 1995 Tenant Harassment Ordinance when a Los Angeles judge ruled the group lacked standing to sue and that its arguments had no merit.
Superior Court Judge Roy L. Hart threw out the May 2002 challenge, the fifth mounted by landlords against the law. Landlords sought to invalidate a part of the ordinance prohibiting an eviction based on facts or theories they know to be groundless. They threw some 15 different theories at the ordinance, including freedom of speech, discrimination and due process.
Judge Hart threw them all out with his ruling. He also held that the landlord’s group lacks “standing,” or the precise legal position from which to sue. It is often difficult in law to overturn an ordinance in theory, rather than the midst of a case in which it is being used.
On the other hand, Gitlen himself won a minor victory when he persuaded a small claims commissioner that it wasn’t proper for the Rent Control Board to charge him registration fees on a unit which, while under rent control, wasn’t actually being rented but was used for a caretaker.
Originally published in the Santa Monica Daily Press print edition on January 10, 2003. Read the original PDF.