Tenants Secure Passage of Law Limiting Owner's Ability to Take Away Services and Amenities

Tenants Secure Passage of Law Limiting Owners’ Ability to Take Away Services and Amenities

Effective July 27, 2006, the San Francisco rent law is amended to provide that a landlord may not take away a tenant’s use of garage facilities, parking facilities, driveways, storage areas, laundry rooms, decks, patios, or garden access without “just cause.” This list is extended to kitchen facilities and lobbies in single room occupancy (SRO) hotels. Where such a severance does occur, the tenant is entitled to a reduction in base rent.

Why This Law Was Passed

Since the adoption of San Francisco’s rent and eviction control ordinance more than 27 years ago, owners were severely restricted as to how much rents could be raised and whether a tenant’s tenancy could be terminated. The current law states that a tenancy can be terminated by the owner for only 14 “just cause” reasons. Some of these grounds call for a temporary suspension of the tenancy, with the landlord having to re-offer the unit back to the displaced occupants. Others, like the Ellis Act and the Owner/Relative Move-In provisions, place onerous restrictions on the landlord’s subsequent use of the property. Yet under all of the just cause reasons, the landlord must serve a detailed eviction notice and, if the tenant does not vacate after the notice period expires, file a court action; if the litigation is successful, the tenant must surrender the entire unit.

Over the years, owners, many of whom were new purchasers, faced the dilemma of having to change the terms of a tenancy by removing an occupant from a garage space or storage area. In these instances, possession of the entire rental unit was not sought, and the tenant was welcome to remain in occupancy of the actual apartment with a reduced rent. For example, a purchaser of a four-unit building might have to reclaim a parking stall for his personal use from a tenant who was not displaced by an owner move-in but, nonetheless, had control over a garage area that the new ownership wanted to use exclusively. Under state law, the landlord would simply serve the tenant with a thirty day notice changing the terms of the tenancy. Local regulation further required that the landlord reduce the tenant’s rent in proportion to the value of the service being withdrawn. The Rent Board provided a forum to adjudicate these rent decreases in the event the parties could not reach an agreement.

Sometimes, a tenant would not consent to relinquish the parking/storage space, thereby prompting the landlord to file an eviction action for the just cause of breach of lease agreement that, if successful, would terminate the tenant’s tenancy and award the landlord possession of the entire rental unit, even though the landlord simply wanted to change the extent of housing services being enjoyed by the tenant. As such, for most landlords, employing a “just cause” for eviction was a method of last resort when the tenant refused to cooperate.

Then, about ten years ago, certain superior court judges began a pattern of denying landlords the ability to evict a tenant simply because the tenant refused to relinquish a service. Oftentimes, the court’s rationale was that a parking space or garage in San Francisco is tantamount to a kitchen or bathroom, and therefore it could not be forcibly withdrawn unless the landlord had just cause to terminate the entire tenancy under the rent law. These decisions added to the uncertainty that consistently pervades property ownership in San Francisco: While state and local law, and even the Rent Board, seemingly permitted a landlord to withdraw these incidental services of tenancy provided a fair reduction of rent was offered, an owner forced to take the matter to superior court faced a judiciary that was less sympathetic.

Thus, in an attempt to stop owners from interfering with housing amenities, tenant groups lobbied Supervisor Mirkarimi to pass legislation that would, once and for all, eliminate the owner’s ability to withdraw services. The public policy argument used to justify this proposal was the assertion that many speculators and tenancy-in-common (TIC) developers were buying buildings and then forcing tenants to vacate by taking away their parking, storage, and use of gardens and patios. In these situations, it was argued, tenants would not want to stay in an environment where they were once afforded the ability to park and store their belongings, and instead opt to move elsewhere. In addition, tenant advocates pointed to instances where elderly, disabled, or otherwise vulnerable tenants were displaced when a new owner withdrew these services and thereby made continued occupancy virtually impossible, as parking for an elderly tenant or garden use for someone who is ill may be a crucial component of the tenancy rather than just an incidental luxury. While there are no known statistics or findings to verify these beliefs, the majority of the Board of Supervisors felt compelled to take action.

The Legislative Process

The initial legislation that was proposed, and passed on first reading by the Board of Supervisors, was extremely restrictive and potentially devastating to the landlord community. The submitted draft suggested that an owner could not under any circumstance interfere with parking, storage, or any access to common areas, including lobbies and patios. This meant that owners doing remodeling or extensive work on their buildings would be subject to a wrongful eviction lawsuit, as taking away such amenities without a required just cause would be unlawful without question. Indeed, any perceived interference in the tenant’s service, whether it is an inconvenience caused by scaffolding or a temporary withdrawal of a deck for improvement work, would have been illegal. Moreover, since many of these owners would not be Ellis Acting the building or withdrawing the offended tenant’s unit by way of an owner or relative move-in action, there could be no just cause to justify the withdrawal, thereby placing the landlord community in a quagmire.

Fortunately, your industry leaders at the San Francisco Apartment Association, Coalition for Better Housing, and other related organizations sprung into immediate action. The first stop was the Mayor’s Office, where Mr. Newsom and his staff paved the way for a series of consultations with Supervisor Mirkarimi. The second leg was meeting with Supervisor Mirkarimi and his assistants. The Supervisor was receptive, and he understood the dilemma created by his new law: Owners would effectively be prevented from improving their property. Thus, during the second reading before the Board of Supervisors, the language in the law was modified. More importantly, with the assistance of Supervisor Sean Elsbernd, a legislative intent statement was read into the record, thereby establishing that the law was not meant to deter improvement projects and capital rehabilitations. Although the ordinance amendment is still vague and potentially over-reaching, there is now a real possibility that it can be implemented with legislative guidance that addresses the ambiguities.

Unanswered Questions

However, there are certain aspects that require clarification. For starters, the legislation still states that “just cause,” as defined by the rent law, is required before garage facilities, parking facilities, driveways, storage spaces, laundry rooms, decks, patios, or gardens can be severed from the tenancy. The housing industry has maintained that the narrow definitions, and onerous requirements, of the Rent Ordinance’s just causes are much too restrictive to constitute the sole justification for withdrawing or altering tenant housing services. Moreover, many owners do not want to terminate a tenancy simply to gain partial or full control over a common area or tenant amenity.

In response, the landlord commissioners on the Rent Board have expressed their intent to adopt Rules and Regulations that expand the definition of “just cause,” when applied to removing or altering tenant services, beyond the current eviction parameters. The motivation to pursue this amendment will hopefully be shared by the tenant side, for without amendment, owners who need parking and storage, or simply want to remodel common areas, may be forced to terminate the entire tenancy, as you cannot relegate an owner move-in to a storage area or Ellis Act the parking garage only.

In addition, there will undoubtedly be legal challenges to this legislation, as state law permits an owner to change the terms of a tenancy after expiration of the initial lease term. If an owner is prevented from altering the size of a laundry room, or cannot re-allocate storage space so as to improve the fire safety of the basement, the integrity of this rent law amendment may come before the California Court of Appeal, or perhaps even the California Supreme Court. Incidentally, throughout the legislative debate, the Supervisors were presented with a myriad of situations where a well-intentioned owner would be lawfully prohibited from actually improving the apartment house because of an inability to re-define and re-assign tenant services. And to compound the inequity, is it fair to subject such owners to wrongful eviction lawsuits simply because incidental and minor changes to a building are implemented? Clearly, such a result would be patently unfair and unproductive.

Conclusion

The housing industry cannot dwell on why this legislation was passed. To the contrary, our advocates should be complimented for successfully engineering crucial changes to the legislative text that, if not implemented, would have resulted in a far more onerous creature than what is now in effect. Instead, the focus must be on working with the Rent Board Commissioners to adopt rules and regulations that respect the new policy prohibiting the unilateral withdrawal of certain amenities, but at the same time allowing the situations where an owner must change a service of an existing tenant for the benefit of the building. The tenant community should also acknowledge that forcing a landlord to invoke a just cause ground for termination of the entire tenancy in order to modify a service will inevitably result in more tenant displacements from housing. Therefore, there are compelling motivations on both sides to ensure that implementation of this law is fair, just, and sensible.