“Multifamily housing is often treated as if it were a quasi-public resource, for example by rent control laws. The degree to which apartments should or shouldn't be so treated was recently addressed by a California court in Coyne v. City and County of San Francisco, which considered the limits on mitigation measures a city may impose on landlords for removing residential property from the rental market.” That is according to Manatt, Phelps & Phillips' Keli Osaki and Tom Muller. When San Francisco increased the relocation assistance payments property owners must pay their tenants under the Ellis Act, the increase was challenged, the duo says.

The commentary below takes a closer look and the views are the authors' own.

Fortunately for the landlord, California state law prohibits a city from “compel[ling] the owner of any residential real property to offer, or to continue to offer, accommodations in the property for rent or lease ….” While landlords may exit the residential rental business, the state law did nothing to “[d]iminish[ ] or enhance[ ] any power in any public entity to mitigate any adverse impact on persons displaced by reason of the withdrawal from rent or lease of any accommodations.”

San Francisco's requirements initially included providing relocation payments ranging from $1,500 to $2,500 (depending on the size of the unit) to displaced low-income tenants, and $3,000 to displaced elderly and disabled tenants. These amounts were later increased. For evictions noticed between March 2015 and February 2016, the inflation-adjusted base relocation payout due per tenant ranged from $5,555 to $16,666 per unit, with an additional payment of $3,703 to each elderly or disabled evicted tenant.

The Court of Appeal sided with the landlords, finding that the ordinances cannot impose a prohibitive price on a landlord's withdrawal from the residential rental business. The Court also expressed its concern that the City's procedural requirements, which allowed landlords to monitor the relocation expenses of their former tenants, may also impose a prohibitive price on landlords withdrawing from the residential rental business. The Court noted that these requirements appeared to impair landlords' ability to avail themselves of the procedures to leave the rental business and to cloud their exits with uncertainty.

In a decision that preceded the Coyne opinion, Levin v. City and County of San Francisco, the federal district court held that one of the City's ordinances requiring property owners to make relocation payments to their tenants was, on its face, an unconstitutional taking in violation of the Fifth Amendment of the U.S. Constitution. The Levin court aptly noted that “San Francisco's housing shortage and the high market rates that result are significant problems of public concern, and the City legislature's attempts to ameliorate them are laudable. '[B]ut there are outer limits to how this may be done.'” Coyne reinforces this ruling, and so for now multifamily housing in California is still mostly private property.

The commentary below takes a closer look and the views are the authors' own.

Instant Insights /

Do Landlords Have the Right to Remove Residential Property from the Rental Market?

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