New Amendment to Ellis Act
The Ellis Act, found in California Government Code Section 7060, et seq., gives rental property owners the right to exit the rental housing business, but also allows local governments to place conditions and restrictions on landlords who evict tenants in order to exit the market. San Francisco has enacted procedures in Rent Ordinance Section 37.9A that owners must follow if they are going to evict tenants to exit the rental housing business. Pursuant to Assembly Bill 1399, the Ellis Act was amended effective January 1, 2020, to clarify the following:
(a) Government Code Section 7060.2(c) and Rent Ordinance Section 37.9A(c)(2) require a landlord to give a displaced tenant the first right of refusal to re-rent a unit returned to the market within ten years of the date of withdrawal, or face punitive damages equal to six months of the contract rent. AB 1399 amends Government Code Section 7060.2(c) to clarify that paying damages does not extinguish the owner’s obligation to comply with the law upon re-rental.
(b) Rent Ordinance Section 37.9A(f)(4) requires a 120-day notice period before a unit is "withdrawn" from the market under the Ellis Act. However, certain senior and disabled tenants are entitled to an extension to one-year, which defers the withdrawal date for that unit. Pursuant to AB 1399, Government Code Section 7060.4(b)(6) was amended to clarify that the “date of withdrawal” for the entire property as a whole is the latest termination date of any unit.
(c) AB 1399 amends Government Code Section 7060.7(d) to specify that the Ellis Act is not intended to allow an owner to return less than all the units to the rental market. In other words, it clarifies that local governments may require that if any unit is returned to the rental market during the period of constraints, the entire property must be returned to the market, with exceptions for certain owner-occupied units.
A redlined version of the Ellis Act, with changes effective January 1, 2020, can be found here: https://leginfo.legislature.ca.gov/faces/billCompareClient.xhtml?bill_id=201920200AB1399&showamends=true