San Francisco Apartment Association

Court Talk

Right to Opt Out of Section 8 Upheld

by Clifford E. Fried

Kun Sam Kim v. City of Oakland
Almost three years after Oakland voters passed Measure EE, the Just Cause for Eviction Ordinance, a judge of the Alameda Superior Court has ruled portions of Measure EE void on preemption grounds.

Within weeks after Measure EE passed, the Rental Housing Association of Northern Alameda County (RHA) and some individual property owners filed a petition for writ of mandate seeking to invalidate several provisions of the new eviction-control ordinance. Because of the large number of provisions being attacked and the complexity of the legal issues raised in the lawsuit, it took until January 4, 2006, for the court to issue its ruling in the case.

Virtually all of the challenges to Measure EE were based upon the theory of preemption. The California Constitution gives cities the power to make laws that don’t conflict with state law. A conflict exists if a city ordinance duplicates, contradicts or enters an area fully occupied by state law. If the local ordinance conflicts with state law, the local law is preempted and thus void. Likewise, if parts of the local law are in conflict, those parts are void.

In the Kim case, Judge Steven Brick of the Alameda County Superior Court was asked to review approximately ten parts of Measure EE to see if they were preempted by state law. Here are some of his rulings:

  • The prenotice warning requirements of Measure EE are not preempted by the state’s Code of Civil Procedure. The court reasoned that the warnings were substantive in nature, whereas the Code of Civil Procedure deals with eviction procedures. Since limiting the ability of landlords to evict is within a municipality’s power, the warning requirements didn’t conflict with state law.
  • Notwithstanding the absence of nuisance and waste as grounds for eviction under Measure EE, Oakland landlords can still evict on these grounds. After the passage of Measure EE, the Oakland City Council passed a regulation that imposes an implied covenant in every residential rental agreement that the tenant will not commit a nuisance or waste. Therefore, if a tenant breaches the implied covenant, the landlord may serve a notice to perform the covenant or quit. Measure EE expressly permits evictions for breach of covenant.
  • With regard to owner move-in evictions, where Measure EE requires that a vacant unit be offered to tenants at a regulated rent, that requirement is preempted by the state’s Costa-Hawkins Rental Housing Act, which states that only landlords may set the initial rent on vacant units. But with regard to temporary evictions for renovation work, the preemption doctrine doesn’t apply; upon reoccupancy, the returning tenant’s rent may be regulated by Measure EE.
  • In the instances where Measure EE creates a presumption that the landlord has violated the law, those provisions are preempted and invalid. Only the state’s evidence code can allocate the burdens of proof between litigants. Judge Brick’s ruling confirms the cardinal rule of law that the party asserting a claim has the burden of proving the facts necessary to establish their claim. A landlord cannot be found guilty of violating Measure EE unless the tenant proves his or her case and no necessary facts will be presumed.
  • The part of Measure EE that makes landlords liable for punitive damages whenever Measure EE is violated is preempted and void. Measure EE ostensibly makes landlords strictly liable for punitive damages without the tenant having to show the landlord acted maliciously or with fraud, which state law requires before punitive damages may be imposed against a defendant.

The rulings of Judge Brick will no doubt be appealed to a higher court. RHA will appeal some or all of the challenged provisions that were upheld, and the City of Oakland will appeal those provisions ruled invalid. In about a year, this column will review the decision from the Court of Appeal.

Apartment Assoc. of Los Angeles County, Inc. v. City of Los Angeles
A Los Angeles rent ordinance that effectively prevented landlords from opting out of the Section 8 program was declared to be in conflict with and, therefore, preempted by state law. This case is significant because there had been uncertainty in California as to whether a landlord may terminate or to refuse to renew a Section 8 contract.

In response to the withdrawal by landlords of numerous units from the Section 8 program, the City of Los Angeles passed a law that made it unlawful for landlords to terminate or fail to renew a rental assistance contract with the housing authority and then demand that the tenant pay rent in excess of the tenant’s portion of the rent under the rental assistance contract. The rent ordinance created an affirmative defense for Section 8 tenants in nonpayment of rent action.

The trial court ruled in favor of the property owners, saying that the Los Angeles ordinance was preempted by the Costa-Hawkins Rental Housing Act, which provides that where an owner terminates or fails to renew a Section 8 contract with the housing authority, the tenant shall be given 90-days written notice of the effective date of the termination and shall not be obligated to pay more rent than the tenant’s portion of the rent under the contract for 90 days. The Los Angeles ordinance imposes the same restrictions as state law, but without a time limit. A conflict between state and local law exists when a local law serves the same purpose as the state law but provides additional tenant protection.

The appellate court affirmed the ruling of the trial court and held that because the State Legislature had fully occupied the field in this area, the local ordinance, which purported to confer greater tenant protection by freezing the tenant’s rent beyond 90 days, is preempted.

The San Francisco Housing Authority and Rent Board take the position that the Section 8 program is involuntary and that a landlord must sign a housing assistance contract with the Housing Authority upon demand. Likewise, the City of San Francisco believes that a landlord may not opt out of the program by terminating or refusing to renew a Section 8 contract. In light of this appellate court decision, which analyzed “a landlord’s recognized right to terminate or refuse to renew a Section 8 contract,” San Francisco will be forced to rethink its positions.

Carson Gardens, LLC v. The City of Carson Mobilehome Park Rental Board
The City of Carson has a rent control ordinance applicable to mobilehome parks. Under the ordinance, the Mobilehome Park Rental Review Board hears and determines rent adjustment petitions. In making its determinations, the ordinance requires the board to consider certain guidelines, including a gross-profits maintenance (GPM) analysis, which compares the gross profits expected from the last rent increase granted to the landlord prior to the current application to the gross profit shown by the current application.

Carson Gardens, LLC filed an application for a rent increase in the amount of $105.50 per space per month. The proposed rent increase was based upon a GPM analysis, the method utilized by the board for many years in analyzing rent increase petitions. The board granted a rent increase of only $19.78 to $23.05 per space and did not use the GPM analysis because it felt it would be meaningless.

Carson Gardens petitioned the Superior Court for a writ of administrative mandate. The court issued a writ in favor of the landlord and ordered the board to apply the GPM analysis or another reasonable methodology that takes operating expenses into consideration. The court then remanded the case back to the board for another hearing.

The board conducted a new hearing, but contrary to the court’s order, it neither applied the GPM analysis nor another methodology. This time the board concluded that a rent increase of $36.44 would be reasonable. Carson Gardens went back to court to enforce the original court order and a new order directing the board to grant a rent increase of $113.36 per space. The trial court granted the requested orders.

On appeal, the court ruled that the board waived its right to object to the original court order requiring the board to use the GPM analysis. However, the board argued that the trial court exceeded its authority when it ordered a specific rent increase. The appellate court agreed. The law provides that while a court may set aside an administrative decision, it may not divest the rent board of its discretionary powers. The court order setting the rent at $113.36 improperly eliminated any further exercise of discretion that was legally vested in the board.

Rent board practitioners in the Bay Area can learn from this case. If a rent board refuses to comply with a court order on remand, landlords should seek monetary sanctions from the court. Given the budget issues of many rent boards, a hefty sanctions order should prevent future abuses.

The opinions expressed in this article are those of the author and do not necessarily reflect the viewpoint of SFAA or the San Francisco Apartment Magazine. The information within this article is general in nature. Consult an attorney for any specific problem. Clifford E. Fried is a partner with Wiegel & Fried, LLP, 415-552-8230. Copyright © 2006, Wiegel & Fried, LLP. All rights reserved.