Tests of Ellis Act Put Landlords, Tenants on Hold

Two years ago, people like Albinas Markevicius were making plans. A new state law called the Ellis Act was going to make it easier to remove money-losing apartments from the rental market; maybe condominiums or stores could be put in their place.

But now, Markevicius, a resident of Santa Monica since 1957 and owner of nine apartment buildings there, has put his plans on hold.

A year ago Suzanne Abrescia learned that she would probably be evicted from her home of 10 years under the Ellis Act. She began writing letters, making calls and mustering support among other tenants.

Now she waits to see what the new owner of her building, a Beverly Hills attorney who purchased it last year, will do.

Markevicius and Abrescia represent opposite sides of a legal and political battle being waged over the state’s Ellis Act. It is the latest skirmish in a decade-old war over Santa Monica’s rent control, considered one of the toughest of its kind in the country.

Intent of Ellis Act

The Ellis Act, written in 1986 by Sen. Jim Ellis (R-San Diego) and sponsored by the California Assn. of Realtors, allows apartment owners to evict their tenants in order to “go out of business” and remove the buildings from the rental market.

Debate rages, however, over what the owner can then do with the property and to what extent some local ordinances, regulations or permits are preempted.

Santa Monica officials have brought four lawsuits to challenge the law. The city lost one of the cases in Superior Court and again on appeal, and another Superior Court decision against Santa Monica goes before an appellate panel on Wednesday.

Should Santa Monica lose all the cases, the authority and power of the city’s five-member Rent Control Board--the body that must approve any rent increase and all demolitions or conversions of rental property--could be seriously undercut, legal specialists say.

Developers, landlords, residents and city officials are eagerly awaiting the outcome of these test cases. Nowhere else in the state has such a legal barrage been hurled at the Ellis law.

Many landlords, apartment owners and real estate brokers breathed a collective sigh of relief when Ellis passed the state Legislature; finally, they saw a way to be partially liberated from what local bumper stickers call the “tyranny (of) radical rent control.”

Improper Evictions Alleged

But tenants, their advocates and city rent control officials viewed the law with concern. Increasingly, they are alarmed at what they say is misuse of the law to improperly evict tenants and deplete the affordable housing stock.

The Rent Control Board says notices for withdrawal under the Ellis Act have been filed for 53 properties, or 334 apartments. Landlords who evict their tenants under the Ellis Act are required to pay relocation fees.

Markevicius, a Lithuanian immigrant who heads the Roque & Mark property management/investment firm, said his interest in using the Ellis Act was strictly economic. On most of his apartments, he only receives about one-third what comparable apartments in Los Angeles are rented for, he said.

He said he had hoped to use Ellis on two of his nine buildings where he does not break even.

“Ellis was an attempt by the state to balance things out so the owner would have some rights too,” Markevicius, 58, said. “But the city made it very expensive and difficult to (invoke Ellis). Now, it’s all coming to a head in the courts. In the meanwhile, we’re not doing any good for owners or tenants; we’re not creating housing, just expending lots of energy and time.”

Markevicius said he would see what the courts decide before going ahead with plans to replace the two buildings with condominiums or stores.

“I believe in working hard and saving money and buying property, like in the old country,” he said. “But lately it has gotten kind of contentious. Sometimes you feel like some kind of evil person that you own real estate.”

Abrescia is in a similar limbo. A former owner of the six-unit building where she lives filed a notice of intention to use the Ellis Act in June, 1987. The building was purchased two months later by Ronald W. Sampson, a lawyer in Beverly Hills. No further Ellis papers were filed, but Abrescia said she felt that the threat of imminent eviction hangs over her.

“You wait and you wait and you wait, and it’s hell,” she said.

Waging Her Own War

Abrescia, 38, a child development specialist, has become a self-styled rent control vigilante. She relentlessly attends Rent Control Board meetings, follows cases and keeps files “three feet wide” with reams of rent control and tenant information. And she vows to fight the Ellis Act to the end.

“There are landlords out there who don’t see tenants as people but look at them with dollar signs in their eyes,” Abrescia said. “And if there aren’t protections, they’ll be destroyed.”

The Santa Monica Rent Control Board last week filed lawsuits against two groups of apartment owners accused of improperly using the Ellis Act to evict tenants and then move into the vacated apartments themselves.

The board alleged that groups of people are getting together and buying apartment buildings with the purpose of using the Ellis Act to convert the buildings into “de facto condos.”

The board’s general counsel, Joel Martin Levy, said landlords, in collusion with real estate brokers, appear to be “working a ruse to avoid rent control laws and create a new type of rental not contemplated by the Ellis Act.”

Harassment Charges

The officials also charged that some landlords are using the threat of the Ellis Act to “harass and intimidate” tenants.

Gordon P. Gitlen, an attorney for one of the groups sued, denied there was anything improper in the way his clients used the Ellis Act.

“The issue boils down to whether the people who own the building have a right to live in it,” Gitlen said.

Landlord advocates, who are rallying around the Ellis Act, accused Santa Monica officials of using the two lawsuits to intimidate landlords and to discourage them from invoking the state law.

“The city of Santa Monica, being radical and holier than thou, is trying to block the landlord’s right to use his property as he sees fit,” said Carl Lambert, president of the Santa Monica landlord group, Action.

“They have thrown up every conceivable roadblock, legal or not, to prevent people from going out of business under Ellis. They are saying the city doesn’t have to bend to state law, that they are a country unto themselves.”

‘Abuse of Rights’

But city officials counter that they are seeking to protect tenants and preserve affordable housing.

“It is my position that any eviction under Ellis is an abuse of tenants’ rights,” said City Atty. Robert M. Myers, author of Santa Monica’s rent control law. “The Ellis Act is a state statute bought and paid for by the real estate industry.”

While it is too early to see how these cases will go, the two previous Superior Court rulings have so far gone against Santa Monica.

Late last month, a California Court of Appeal upheld a Superior Court ruling that rejected Santa Monica’s contention that the Ellis Act is unconstitutional. Judge David Rothman ruled in favor of landlord Henry Yarmark’s contention that the Ellis Act preempted local removal and eviction regulations, when those regulations prevent the landlord from removing his units from the rental market and going out of business.

Even more far-reaching may be a case on appeal this week.

Removal Permit Issue

The court will examine a Superior Court ruling that said an owner does not have to obtain a removal permit from the Santa Monica Rent Control Board when the owner has used the Ellis Act to withdraw his apartments from the rental market.

Attorney Christopher Harding, who will argue the case, said a removal permit becomes redundant after Ellis and should not be required. The city has contended its local laws must still prevail, including the requirement of a removal permit.

If the original ruling is upheld, Harding said, it will set a precedent for allowing a landlord to unilaterally remove himself from the jurisdiction of Santa Monica’s Rent Control Board.

“That will work a very fundamental change in rent control,” Harding said. “For the first time, the Rent Control Board will have to act with a better sense of fairness on rent issues. If landlords receive a fair return, they’ll have little reason to use the Ellis Act. I think the Rent Control Board will come to its senses and protect rental housing stock with fair rents.”

The Ellis Act was inspired in part by a 1985 U.S. Supreme Court dismissal of a landlord’s appeal challenging the Santa Monica rent law. Apartment owner Jerome J. Nash took his case to Superior Court when the city refused to allow him to demolish a six-unit building. Nash won in Superior Court but the decision was reversed in the state Supreme Court, and the U.S. Supreme Court refused to hear the case.

Rent control was voted into law in Santa Monica in 1979. About 80% of Santa Monica’s 90,000 residents are renters.