When Lawrence Kates successfully used the Ellis Act a few weeks ago to discourage the City of Thousand Oaks from expanding rent controls, the new state law looked like a clever tool for landlords to fight local government.
Now the tool is starting to look tarnished.
Kates issued 30-day eviction notices to tenants, many of them senior citizens, in the 496-unit Oakview apartments owned by his company, Standard Investments of Los Angeles. He agreed to withdraw the notices only after city officials agreed to delay expanding its rent controls for at least six months.
Mayor Alex T. Fiore was quoted then as calling Kates' action a form of "blackmail," but Kates said in a telephone interview that "only about 25% of the units in Thousand Oaks are under rent control now, and the city wanted to control 100%. We simply don't want to operate under rent control."
The Ellis Act was intended to give landlords an option. Effective last July 1, it prohibits "any public entity from enacting or implementing ordinances to compel a residential property owner to offer or continue to offer the property for lease or rent."
On Sept. 24, however, the City of Santa Monica and the Santa Monica Rent Control Board filed a lawsuit, in what is now called the Yarmack case, contending that "the Ellis Act does not authorize a landlord to evict tenants . . .(or) remove rental units . . . in violation of local law." The suit charges that such actions "will violate the city charter." A Superior Court hearing is scheduled Oct. 14.
Dugald Gillies, legislative advocate for the California Assn. of Realtors, which sponsored the Ellis Act, scoffs at the city's suit. "I can't see how they can win," he said. "This city-versus-state issue comes up repeatedly, and the rule is fairly well established that when the state adopts a comprehensive body of legislation, as the Ellis Act is, and states its intention to preempt, as the Ellis Act does, the court will uphold the preemption."
In addition, he said, the new law deliberately includes charter cities. "I'm sure that the city attorney is aware of that, but what the heck? They litigate everything in Santa Monica."
City Attorney Robert Myers claims that Santa Monica's success rate on rent-control issues has been high. "We've won almost every case," he said. And he expects to win this one. "We would never file a lawsuit we didn't think we had a chance of winning, and we think we made a compelling argument against evicting tenants."
The city argues that "nowhere in the act are landlords given the specific right to evict tenants, nor are local eviction statutes prohibited."
So how could a landlord go out of business otherwise? Howell Tumlin, administrator of the city's Rent Control Board, says "by attrition." As tenants move, landlords can leave the units empty.
Rand Corp.'s Empty Units
That's what the Rand Corp. has been doing for some time in the three apartment buildings it owns in Santa Monica, but Rand attorney Sherman Stacey said, "The city objects to evicting, but without evicting, it could be 30 years before a building could be used for anything else."
The Rand Corp., which has filed under the Ellis Act, wants to demolish the three apartment buildings, which have 19 occupied units, and build a facility to complement its adjacent holdings, which are used for research and education.
"The Rand Corp. isn't in the business of buying property for rentals. It bought for corporate expansion," Stacey explained. He is studying the city's lawsuit but says it won't necessarily affect plans of the Rand Corp. or any other building owner to go out of the rental business under the Ellis Act.
The city sued Henry and Regina Yarmack and Bernard and Rebecca Appelbaum for notifying the Santa Monica Rent Board in July of their intent to withdraw their Tour Inn Motel from the rental market. Craig Mordoh, director of legal affairs for the Apartment Assn. of Greater Los Angeles, noted, "It's interesting that the city picked a small owner rather than the Rand Corp."
The motel's residents would have been among the first tenants in Santa Monica who would have had to move under the Ellis Act. The lawsuit is the first to challenge the new law.
Owners of 17 Santa Monica buildings containing 131 apartments--78 of them occupied--filed notices of intent to go out of the rental business under the Ellis Act. This number of owners is higher than Berkeley, West Hollywood or East Palo Alto, the three other California cities with the tightest rent controls. As of last week, there were no filings in East Palo Alto, one in Berkeley and one in West Hollywood, though more are expected there by owners whose units were built or converted as condominiums but were then rented rather than sold.