Ninth Circuit Finds San Francisco Landlord Buyout Law Constitutional

SAN FRANCISCO (CN) – A city ordinance regulating landlords’ ability to force tenants to leave their apartments by buying them out does not violate the landlords’ constitutional rights, a Ninth Circuit panel ruled Thursday.

“The City requires landlords to provide tenants with a form that describes tenants’ rights with respect to buyout negotiations and agreements, and lists the contact information for tenants’ rights organizations,” U.S. Circuit Judge Carlos Bea wrote for the three-judge panel. “Both disclosures are ‘purely factual,’ and do not include any message whatsoever from the tenants’ rights organizations listed on the disclosure form.

“Moreover, the required disclosure advances the City’s purported substantial interest in increasing the fairness of buyout negotiations (by informing tenants of their rights) and reducing the likelihood that tenants will accept ‘unfair’ buyout agreements (by providing tenants with a list of organizations that can advance their rights),” Bea continued in the 20-page opinion.

San Francisco has one of the most expensive housing markets in the country, and the city limits how much landlords can raise rent for most buildings built before 1979.

But landlords in the city can buy out tenants and then rent the vacated apartments at higher prices, circumventing rent control regulations.

The San Francisco Apartment Association, a group of landlords, claims a city ordinance related to buyouts violates their constitutional rights.

The ordinance requires landlords who are considering buying out tenants’ leases to approach them with a disclosure form to certify that they understand the plan.

It also prohibits landlords from converting buildings into condominiums for 10 years after they pay off tenants to leave two or more units – or just one unit, if the tenant was ill or had a disability.

The city passed the ordinance after findings that landlords often pressured tenants into signing buyout agreements, even threatening them with evictions if they refused to do so.

The court battles over the ordinance have dragged on for nearly three years.

The association’s 2015 federal lawsuit said the disclosure process gives tenants unfair veto power because tenants can later sue landlords if they refuse to sign the disclosure forms.

According to the landlords, the ordinance burdens them in a way that affects their property rights, and penalizes them for complying with the law.

U.S. District Judge Phyllis Hamilton found in favor of San Francisco in November 2015, concluding that the ordinance did not impose “any meaningful delay in the landlord’s ability to engage in buyout negotiations.”

“Nothing in the ordinance either forbids particular speech or speech activities, thereby imposing a true restraint on future speech, or conditions speech or speech activities upon the unbridled discretion of government officials,” Hamilton wrote.

“Whatever particular relationship a tenant may have with his/her landlord, it cannot transform a conversation between a landlord and a tenant concerning a possible buyout into something other than a discussion proposing a commercial transaction,” she said.

The landlords appealed to the Ninth Circuit, and during oral arguments, San Francisco’s deputy city attorney said the limitations on which buildings can become condos protects vulnerable tenants and keeps housing affordable.

The landlords’ attorney said the buyout negotiations are protected speech, and the part of the law requiring landlords to get a tenant’s signature before negotiating violates their free speech rights.

The circuit panel upheld the lower court’s ruling on Thursday, agreeing with the District Court that the ordinance does not violate the landlords’ constitutional rights.

The landlords also argued that the publicly searchable database of buyout agreements violated their privacy rights. The panel rejected this argument because information that is already publicly available is not protected by the state constitution.

Further, the landlords “offer no explanation why the terms or consideration for a buyout agreement is more sensitive or private than other financial information routinely submitted to the government and made publicly available,” Bea wrote.

The Coalition for Better Housing, Small Property Owners of San Francisco Institute, San Francisco Association of Realtors, and property owner Norman T. Larson also joined the lawsuit.

Bea was joined on the panel by Circuit Judge Richard Tallman and visiting Sixth Circuit Judge Eugene Siler, Jr.


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