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Legal War Over San Francisco Rental Market

SAN FRANCISCO (CN) - Landlords and realtors fired two legal salvos last week in a battle over the wild San Francisco residential rental market, taking aim at new city ordinances that make it harder for property owners to renovate apartments from which tenants have been evicted under California's Ellis Act.

California enacted the Ellis Act in 1985 with a dual purpose. To "permit landlords to go out of business," it allows landlords to evict tenants if the landlord plans to take a building off the rental market. Once vacated, the property owner may use the evacuated units as single-family residences or condominiums - but they are prevented from putting any units in the building on the rental market for five years.

The act was intended to stop landlords from evicting tenants and then raising the rent for the next ones.

Last week San Francisco enacted an ordinance that prohibits property owners from combining two vacant units in a "residential merger" - a prohibition that is illegal, according to the plaintiff San Francisco Association of Realtors and three groups that represent property owners.

The San Francisco Apartment Coalition, the Coalition for Better Housing and the San Francisco Association of Realtors sued the City and County of San Francisco in one lawsuit.

The Small Property Owners of San Francisco Institute sued the City and County of San Francisco, its Board of Supervisors, its Planning Commission and Planning Department in the other complaint. Both are in Superior Court.

Citations in this article come from the coalitions' lawsuit until further notice.

The new restrictions violate the Ellis Act, which "exclusively occupies the field of a rental property owner going out of business," according to the 8-page lawsuit.

The new ordinance bars residential mergers for 10 years after an Ellis Act eviction - twice the term decreed by the state. This effectively punishes owners who perform legal, Ellis Act evictions, the coalitions claim.

One hardship they cite is for a property owner whose family grows: "Thus, for example, someone wishing to combine two units into one larger unit so that a family may live there, would be seeking a residential merger."

Their coalitions seek a writ of mandate, declaratory judgment that the new law is pre-empted by the Ellis Act, and injunctive relief.

They are represented by James R. Parrinello, with Nielsen, Merksamer, Parrinello, Gross & Leoni, of San Rafael.

The Small Property Owners of San Francisco Institute claims in its lawsuit that another new law also seeks to punish property owners.

This law gives owners the right to expand and renovate 52,000 housing units that do not conform to zoning density requirements, if they were built before the zoning took effect - but not if the Ellis Act has been used to evict tenants from the "nonconforming units."

That's where the problem lies, according to the institute, which says it "actively supports the Ellis Act and responds to state and local attempts to weaken the Act."

The institute's tool is the California Environmental Quality Act, which it claims San Francisco violated when it enacted an ordinance that imposes "punitive measures against nonconforming units that have been the subject of certain lawful evictions."

They also claim that the Ellis Act pre-empts the ordinance, which they say violates owners' due process rights and improperly evaded environmental review.

The law also imposes an irrational 10-year ban after a lawful Ellis Act eviction on "ordinary maintenance, minor repairs, and reconstruction after a fire or earthquake," the complaint states.

The institute, which is represented by Andrew M. Zacks of Zacks & Freedman, asks the court to require the city to complete an environmental impact report and to find that the new ordinance intrudes on the Ellis Act and violates property owners' due process rights.

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