Ellis Act

The Ellis Act ^[1] is a California State law that allows landlords to evict residential tenants in order to “go out of the rental business”. The Ellis Act applies to rent controlled jurisdictions that impose substantive eviction controls on landlords, preventing the termination of residential tenancies, other than for "just cause". The Ellis Act requires that a landlord terminate all residential tenancies and withdraw all "accommodations" (which roughly equates to all "residential rental units"), such that the landlord cannot, for instance, terminate the tenancies of rental units with lower, rent-controlled rents while maintaining the market rate tenancies.

The Ellis Act itself does not impose rules on landlords directly, but merely provides that, if local governments have a rent control ordinance, they may impose procedures governing the withdrawal of the residential rental units consistent with the provisions of the Ellis Act. For instance, cities can require that landlords file a "notice of intent to withdraw", providing the city with information about the tenancy (like the names of tenants, dates of commencement and rental rates). Cities can require the payment of relocation assistance "to mitigate any adverse impact on persons displaced". It can further require that the termination date of the tenancies be extended, from the standard 120 days, to a full year from the commencement of the withdrawal process, where tenants claim to be at least 62 years old or disabled.

The city may also impose restrictions against the future rental use of the property. It can require that, if the landlord offers the withdrawn units for lease within ten years of withdrawal, she must first offer the unit to the displaced tenant(s), and, if she offers the unit within the first five years, she must offer it to the displaced tenant(s) at their former rental rate. Implementing statutes vary by city, so there are different requirements in each jurisdiction:

• San Francisco requires compensation, which increases along with CPI, and which, as of 2016, was $5,894 per tenant (plus an additional $3,929.74 per disabled/elderly tenant), capped at $17,683.86 per unit. A pair of efforts by San Francisco Supervisor David Campos in 2014 and 2015, to increase this relocation payment to provide for two years of market rate subsidy to displaced tenants, was found to be "unreasonable" and preempted by the Ellis Act. An amendment to the Ellis Act for San Francisco County was proposed in 2014 in the California State Legislature, SB1439 ^[2] If enacted, SB 1439 would require property owners who have filed an ellis eviction to wait five years before doing so with another building.^[3] The measure did not pass.^[4]
• Santa Monica requires an owner get a re-occupation permit before the building can be used for any purpose following Ellis Act evictions.^[5]
• Los Angeles applies rent control provisions to units built on the same property up to five years later.^[6]

Where withdrawn residential units can no longer be rented, Ellis Act-invoking property owners often sell apartments as individual tenancy-in-common ("TIC") units. Some cities, like San Francisco, impose strict restrictions on withdrawn property (e.g., preventing condominium conversion or the adding of "accessory dwelling units"). However, a 2016 decision by the First District Court of Appeals upheld a challenge against San Francisco's ordinance preventing post-Ellis "mergers" of units, finding that state law occupies the field of substantive eviction controls for owners attempting to withdraw units from the residential rental market, suggesting that the Ellis Act may impose a limit on post-withdrawal "penalties" that seek to disincentivize use of this state law right.

The Ellis Act is named after Republican State Senator (1981-1988) James "Jim" L. Ellis, a former representative of San Diego. It "was adopted by the California Legislature in 1985 after the California Supreme Court ruled that landlords do not have the right to evict tenants to go out of the business of being a landlord".^[7] That case was Nash v. City of Santa Monica (1984) 37 Cal.3d 97.

Criticism and Response

Tenant groups in San Francisco and Los Angeles claim that California landlords commonly misuse the Ellis Act "to bypass rent control"^[8][9] and cash-in during peak housing market periods^[10] by managing rent-stabilized properties to vacancy, after which they might demolish buildings to build pricey condominiums, retenant newly vacated units at top-market rents, or resell buildings at much higher prices than they bought once they are no longer value-encumbered by the presence of long-term, rent-stabilized tenants.

The Ellis Act has been the focus of many tenants rights groups other anti-eviction movements in San Francisco. On November 2014, Proposition G was proposed to add a tax on real estate speculation in order to slow down the number of no-fault evictions caused by the Ellis Act.^[11] Groups have argued that the rising number of evictions due to the Ellis Act is contributing to the Gentrification of San Francisco.

References