Court Talk
by Clifford Fried
Gill Petrolium v. Hayer
Some landlords have learned that even though they can obtain a favorable judgment in an eviction case based upon nonpayment of rent, the court may allow the tenant to remain in possession of the premises. California’s Code of Civil Procedure Section 1179 permits the tenant to remain in possession by asking the court for relief from forfeiture of the lease.
Sec. 1179 permits a court to relieve a tenant of the burdens of a judgment in an unlawful detainer action if the eviction would be a hardship on the tenant. As a condition of being granted relief, the tenant must first pay the full rent that is due. While most tenants can’t meet this condition, some landlords are surprised when tenants manage to come up with the money and stay in the unit.
In Gill Petrolium v. Hayer, after a commercial landlord prevailed in an eviction action for nonpayment of rent, the tenant successfully moved for relief from forfeiture pursuant to Sec. 1179 on the condition that the tenant pay the landlord the contract rent plus penalties and interest. However, the eviction judgment awarded market rent as damages. The landlord appealed.
On appeal, the trial court’s decision was affirmed on the basis that Sec. 1179 vests the court with broad equitable discretion to determine the conditions upon which relief will be granted to the end that exact justice may be done.
Landlords should be prepared to address a tenant’s motion for relief from forfeiture under Sec. 1179 whenever a judgment is entered in a nonpayment of rent case. Landlords should ask the court to condition relief upon the tenant paying all eviction costs to date, as well as back rent. It is only fair for the tenant to reimburse the landlord for all late fees, court costs and attorneys’ fees incurred in the eviction lawsuit.
DeLaura v. Beckett
Landlord Mary DeLaura wished to sell her 2-unit property in San Francisco. Before doing so, she wanted to make sure her tenant wasn’t a “protected tenant.” (The San Francisco Rent Ordinance protects certain elderly and disabled tenants from owner move-in evictions.) The status of DeLaura’s tenant could impact the sales price of the property. The landlord wanted to tell potential buyers that her tenant wasn’t protected.
DeLaura filed a lawsuit for declaratory relief, asking the court to rule that her tenant wasn’t a protected tenant under the rent ordinance. The landlord couldn’t evict because she had no just cause. She just wanted to know if her tenant was in fact protected.
The trial court dismissed the landlord’s lawsuit on the grounds that there wasn’t a justiciable controversy. In other words, there was no actual, present controversy to decide. A court may dismiss a case where a judicial declaration isn’t necessary or proper at the time.
The dismissal was affirmed on appeal. The California Court of Appeal held that there is a more appropriate statutory procedure for determining a tenant’s status as a protected tenant. The Rent Ordinance requires a tenant, within 30 days of a written request from the landlord, to submit a statement, with supporting evidence, if the tenant claims to be a member of a protected class. The failure to submit a timely statement is deemed an admission that the tenant is not protected.
Where a tenant responds in a timely manner, the landlord can challenge a claim of protected status either by requesting a hearing with the Rent Board or, at the landlord’s option, through commencement of eviction proceedings. DeLaura failed to explain why these procedures would not sufficiently resolve her concerns.
There are forms available for landlords so they can properly inquire as to a tenant’s protected status. If landlords seek to owner-occupy their property, are contemplating a sale of their property or are simply curious, a request for information can be served on tenants at any time. A landlord may challenge a tenant’s claim at the Rent Board without liability. Likewise, there is no liability for challenging a tenant’s claim of protected status in an unlawful detainer action based upon owner move in.
Johnson v. CCSF
In response to strict rent laws, many landlords in San Francisco and elsewhere in California are invoking their rights to go out of business. Under the state’s Ellis Act, landlords cannot be compelled to rent their residential properties.
Since the Ellis Act trumps any local eviction laws, there is little local lawmakers can do to stop the reduction in the rental housing stock; but they still try. Rather than getting rid of strict rent laws, local politicians look for loopholes in the Ellis Act or attempt to complicate Ellis Act evictions. In San Francisco, these attempts typically fail.
The San Francisco Rent Ordinance requires that landlords who seek eviction under the Ellis Act pay their tenants’ relocation costs. Tenants with disabilities or who are 62 years of age or older receive additional payments. A landlord is also required to notify their tenants about their right to receive payment and the amount of payment that the landlord believes to be due.
In Johnson v. CCSF, a group of landlords challenged the “belief requirement” of the rent ordinance on the basis that the requirement was preempted by the Ellis Act. The trial court ruled that there was no preemption because it’s easy to comply with the belief requirement and any disputes could be resolved in an unlawful detainer action.
The trial court’s ruling was reversed on appeal. The Court of Appeal explained that the belief requirement impermissibly shifts the burden of demonstrating eligibility for relocation payment from the tenant, who is in the best position to make such a showing, to the landlord, who may face delays in the eviction process if he or she has a mistaken belief about a tenant’s eligibility for payment.
The Court of Appeal further stated that the Ellis Act preempts the belief requirement because the requirement creates an impermissible substantive defense in summary eviction proceedings that is not permissible under the Ellis Act. In this instance, an attempt by the San Francisco Board of Supervisors to complicate the Ellis Act eviction process was rejected by the court.
Pieri v. CCSF
In a “Court Talk” column from last year, I reported that the Superior Court rejected an attempt by the San Francisco Board of Supervisors to impose universal relocation assistance to tenants being evicted under the Ellis Act. Judge James Warren granted a petition for writ of mandate that compelled the city to not enforce the relocation assistance portion of the rent ordinance.
Earlier this year, the Court of Appeal reversed Judge Warren’s decision and upheld the rent ordinance requirement that landlords pay $4,500 to all tenants evicted under the Ellis Act. Landlords had argued that San Francisco’s relocation ordinance puts a prohibitive price on the decision to go out of the residential rental business. While the court ruled that $4,500 isn’t beyond the contemplation of the Ellis Act, the court left open the door as to whether the law might be invalid in a particular situation. In other words, attacking the law as applied to a particular landlord or situation might lead to a different judicial result.
A landlord is now asking the Supreme Court of California to review the Court of Appeal decision. The Supreme Court’s review of the matter is discretionary. If the court reviews the matter, one argument will be the great burden placed on landlords to litigate whether the relocation assistance ordinance is invalid as applied to them. If landlords can’t afford to pay their tenants to leave, how will they pay to litigate the validity of the ordinance? And if they can’t afford to litigate or pay tenants off, how can they ever go out of the landlording business?
This case is extremely important to the apartment industry. The Ellis Act is a last resort for many property owners who are fed up with rent control. If a city gets to set the price for going out of the rental business, there will be no limits. San Francisco’s Board of Supervisors won’t stop at $4,500; it will increase the price of going out of business to the point where landlords will no longer invoke the Ellis Act.
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.