The first legal challenge to West Hollywood's temporary rent control law drew sharp responses last week from City Council members still trying to work out a permanent rent ordinance.
The lawsuit, filed in Los Angeles Superior Court by landlord Letizia Gelles to exempt her 15-unit apartment building from the city's freeze on rents, came as the Council prepared to vote this Thursday on the general direction of the permanent rent control law. A final draft is expected to be voted on by May.
Several council members said they expected the lawsuit to be the first of many filed by landlords and suggested that it might be a signal to the council to moderate what many expect to be a strong rent control law.
"It's obviously confrontational," said Councilman Steve Schulte. "I'm sure she feels she's been wronged, but it's poorly timed. And I think there's an implied threat of what's to come."
Councilman John Heilman said Gelles' action might be damaging to landlords' efforts to lobby for a moderate rent control law. But he added that landlord organizers have tried to downplay the lawsuit's impact.
"They've tried to assure me it was an isolated decision by one apartment owner and didn't reflect any tactic on their part," Heilman said. "I may have some reasons to doubt that, but they may also be having trouble controlling some of their people."
Grafton Tanqueray, president of West Hollywood Concerned Citizens, a group lobbying for landlords' interests, insisted that Gelles filed her lawsuit on her own initiative. "This was not a communal decision," he said. "It's simply an action taken by one individual who has been hurt by the rent rollback. She's a very feisty lady and she doesn't like what's happening to her investment."
Another member of the group, real estate dealer John Parks, said the lawsuit could be taken as an indirect "warning of things to come. I've talked to other apartment owners who are also considering litigation. There's a lot of little old ladies who have been hurt really bad by this temporary ordinance."
Gelles could not be reached for comment. But her attorney, Stephen Jones, also claimed that the lawsuit was not part of any overall strategy by landlords. "We're not trying to invalidate the ordinance," he said. "We're just saying that in her case, she is being denied a fair return on her investments."
Jones has been prominent in efforts by West Hollywood apartment owners to moderate the rent control law. He has lobbied for them, appeared at public hearings on the issue and even applied unsuccessfully to be the city's rent control administrator. He was also involved last year in an effort to head off the city's incorporation.
According to Jones, Gelles paid $855,000 last June 6 for a 15-unit building in the 8500 block of Holloway Drive. She then made $37,000 in improvements to six vacant units and the building's common areas. Between August and the end of November, Jones said, Gelles raised rents in 12 of the 15 units.
But on Nov. 29, nearly a month after West Hollywood voted to incorporate, the new City Council voted to roll back all rents in the city to their August 6 levels (the date that county supervisors voted to place the incorporation issue on the ballot) and freeze them in place.
Since then, Jones said, Gelles has suffered a net loss of $1,600 a month because of the rent rollbacks and could eventually lose $1,900 a month if--as she expects--her property taxes increase.
Jones said Gelles decided to file the lawsuit last week because it might take up to six months before a city rent board is set up and empowered to look into her complaints. "That's a lot of money for her to lose while she is waiting," Jones said. "If there had been any other way for her to seek relief, she would have sought it."
West Hollywood City Atty. Michael Jenkins said he doubted the lawsuit "has any merit," but declined to give any legal reasons. "We're still evaluating our response," he said.
Like the council members, he criticized the timing of the suit. "It's unfortunate she found it necessary to do this several short weeks before we adopt a permanent ordinance."
No date has been set for a hearing, but council members expect the permanent rent control law to be in place by the time a judge rules in the case.
"In all the private meetings we've had with the landlords, we asked them to hold off any legal action at least until the permanent law was voted on," Heilman said. "We've tried to be open-minded. The only influence I think it has on us is to make the council more determined to have strong rent control."