Landlords Who Want to Quit Win Court Fight

In a major blow to Santa Monica’s strict rent control law, a state appeals court has ruled that the law cannot be used to deny a demolition permit to a landlord who wants to go out of the rental business.

The strongly worded ruling makes it easier for landlords to tear down their buildings, takes away important authority wielded until now by the Rent Control Board, and appears to shift the battleground over rent control to the City Council.

“This is probably the most substantial legal victory in a challenge to the rent control law since the law was passed nine years ago,” said Christopher M. Harding, an attorney representing building owner Henry Yarmark in the case that led to the decision.

Santa Monica City Atty. Robert M. Myers said the opinion handed down Tuesday by the 3-member 2nd District Court of Appeal was “plain wrong.” He said it was likely the city would appeal to the state Supreme Court, though he thought chances for victory there were dim.

Test of Ellis Act

The case represented a key test of the 1986 Ellis Act, a state law that allows landlords to evict their tenants and go out of business. The law has been repeatedly challenged by Santa Monica officials.

In September, 1986, Yarmark used the Ellis Act to evict tenants at 1719 Wilshire Blvd. and applied for a demolition permit. The city contended that under city law, Yarmark still had to obtain a removal permit from the Rent Control Board before a demolition permit could be issued.

Members of the Javidzad family, who leased the property from Yarmark for commercial purposes, then sued the city, demanding a demolition permit be issued without the removal permit. The Javidzads contended that because the property had been removed from the rental market under the Ellis Act, it was no longer under the Rent Control Board’s jurisdiction.

Local Ordinances Superseded

Superior Court Judge David M. Rothman sided with the Javidzads, saying the city had to process a demolition permit without requiring a removal permit because the Ellis Act superseded local ordinances that conflict with it.

The city appealed but lost on Tuesday.

The court said the city’s “strained reading” of the Ellis Act was an “absurdity” that “flouts the will” of the state Legislature.

“Appellants (the city and Rent Control Board) . . . submit that in passing the act, the Legislature intended nothing more than to enable a landlord to go out of business by evicting all the tenants residing in a building, and a property owner who has done so has obtained the full benefit of the act,” the court said.

“Appellants do recognize the denial of a removal permit precludes the redevelopment of a property. They insist, however, a landlord who is thereby left with a vacant apartment building is merely paying the price of choosing to go out of business!”

The court also said its ruling did not change the city’s police power to regulate demolition, redevelopment or other subsequent uses of the property once it is removed from the rental housing market.

Myers, who wrote the rent control law that was passed by voters in 1979, said he now expects the City Council to look at other ways to protect tenants and the rental housing stock.

Among laws the city has on the books is a requirement that owners replace units of rental housing that they remove from the market. Now the city is studying allowing the owners the option of paying fees instead. The fees, which are yet to be established by the city, are expected to range from $20,000 to $51,000 per unit, and will probably also be challenged in court.

“In the long-term struggle for economic and social justice for tenants, one expects losses along the road,” Myers said. “This is not the first and won’t be the last. We’ve had more wins than losses so far.”

Harding suggested the ruling may force the city to find ways to offer incentives to landlords to encourage them to remain in the rental business. One incentive would be to allow landlords to raise some rents to market value while setting aside an equal number of apartments for low-income tenants.

“During the past nine years,” Harding said, “the Rent Control Board has been able to club landlords into submission. They have not relied on incentives but on different and various forms of punishment to achieve their goals.

“Now, the Ellis Act provides landlords with a viable option to leave the Rent Control Board’s jurisdiction unilaterally, without the Rent Control Board’s permission.”

Neither Myers nor Harding would predict a rush by apartment owners to use the Ellis Act or another “demolition derby,” a reference to the months leading up to enactment of the rent control law, when owners hurried to tear down their buildings and put up condominiums.

The Ellis Act was written by Sen. Jim Ellis (R-San Diego) and sponsored by the California Assn. of Realtors. Myers has called it a law “bought and paid for” by the real estate industry.

According to the Rent Control Board, owners have served notice they planned to use the Ellis Act to evict tenants from 334 apartments at 53 properties in Santa Monica.