Couple Struggles to Revive Suit Over San Francisco Lifetime Tenant Rule

SAN FRANCISCO (CN) – A lawyer for two landlords struggled to explain to a Ninth Circuit panel Friday why his clients did not apply for an exemption from a rule forcing them to offer a lifetime lease to their tenant before they sued the city of San Francisco.

“There is a requirement to seek a variance or the equivalent,” U.S. Circuit Judge Michelle Friedland said. “Did you do that in this case?”

Attorney Jeffrey McCoy of the Pacific Legal Foundation said his clients did apply for an exemption to that requirement in the city’s expedited condo conversion program, a claim the city disputes. However, McCoy also insisted that seeking an exemption is not a prerequisite for filing a federal lawsuit.

“They were not required to exhaust administrative remedies,” McCoy told the panel.

McCoy represents Peyman Pakdel and Sima Chegini, an Ohio couple who challenged a lifetime lease offer requirement in the city’s expedited condo conversion program in June 2017. U.S. District Judge Richard Seeborg rejected the lawsuit in November 2017, finding the lifetime lease mandate did not qualify as an unlawful seizure of property because the city did not force the couple to convert their unit to a condominium.

The Ninth U.S. Circuit Court of Appeals in San Francisco. (Photo credit: Sanfranman59/Wikipedia)

Pakdel and Chegini, who bought a tenancy-in-common interest in a six-unit building in San Francisco’s Russian Hill neighborhood in 2009, said they had planned to move into the unit once they retired. However, a tenant who has lived there since 2010 decided to take the required offer of a lifetime lease in May 2017, after it was converted into a condo.

Deputy City Attorney Kristen Jensen told the panel Friday that the couple never sought an exemption from the program’s lifetime lease requirement until after their condo conversion was approved.

“They first requested relief from the city in June 2017, after they had received the condo conversion,” Jensen said. “This was long after the appeal period under the subdivision code had passed.”

U.S. Circuit Judge Carlos Bea asked McCoy why an appeal wasn’t filed with a three-person city board that considers such matters.

“It seems to me there is always an appeal to an administrative body even in mandatory situations,” Bea said. “You’re telling me there wasn’t.”

McCoy replied that only a final decision is required for a Fifth Amendment claim of unlawful taking of property to be ripe for a federal lawsuit.

“All it requires is a final decision,” McCoy said. “In this case, we do have a final decision from the city.”

The panel also seemed reluctant to accept McCoy’s argument that the city’s lifetime lease offer mandate violates his clients’ property rights.

“Was there any right that you had or your clients had to convert this property to a condominium,” Friedland asked.

“The city made that right,” McCoy replied.

“Well they made that right but contingent on agreeing to this requirement about the tenant,” Friedland shot back.

Representing the city, Jensen argued the right the plaintiffs really want to protect is the right to evict a tenant, a right that does not exist under state or federal law.

“San Francisco has both rent control and eviction control protections that apply the moment you enter into a rent agreement with a tenant,” Jensen said. “There is no right to evict because they want to.”

Jensen also told the panel that the city will suffer harm if the case is sent back to district court because San Francisco has put the program on hold pending this litigation.

“There are thousands of like-situated tenancy-in-common holders who cannot convert their condos because the program has been suspended as a result of this litigation,” Jensen said.

Bea rejected that argument, noting that the city can unfreeze the program if it wants to.

“The city can revoke the suspension in five minutes,” Bea said.

After 30 minutes of debate, the panel took the arguments under submission.

U.S. Circuit Judge Ronald Gould joined Bea and Friedland on the panel.

Gould was appointed by Bill Clinton. Bea was appointed by George W. Bush, and Friedland was appointed by Barrack Obama.

In 2017, the Ninth Circuit refused to rule on another case involving a blocked San Francisco law that required landlords to pay massive sums to evicted tenants for retroactive relocation-assistance after the city repealed and replaced the law.

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