Ellis Act Relocation Fees: what a landlord needs to pay a tenant

Effective June 1, 2014, Rent Ordinance Section 37.9A was amended to require a landlord to pay to specific Ellis Act Relocation fees to tenants evicted under the Ellis Act the greater of the relocation payment amount specified above or the “Rental Payment Differential” defined as “an amount equal to the difference between the unit’s rental rate at the time the landlord files the notice of intent to withdraw rental units with the Board, and the market rental rate for a comparable unit in San Francisco as determined by the Controller’s Office, multiplied to cover a two – year period, and divided equally by the number of tenants in the unit.” (See Subsections 37.9A(e)(3)(E).

Here is a look at how a landlord would have to calculate the rent payment differential using the Controller’s Schedule for proper Ellis Act Relocation Fees for a tenant:

A. Year in which the Unit’s Base Rent was Established
B. Total monthly rent at time of filing of Notice of Intent to Withdraw Units
C. Rental payment differential multiplier
D. Monthly rental payment differential amount (B x C)
E. Total relocation payment amount using controller’s schedule (D x 24 months)
F. Relocation payment amount per tenant (E / number of tenants per unit)
G. Plus additional amount due to elderly or disabled tenant (if applicable)
H. Total relocation payment due to tenant (F + G)

We quickly ran some numbers for an investor client on a property in Noe Valley so they could understand what the Ellis Act Relocation Fees would be. The units were run down and clearly the seller did not have any money over the years from the low rents to update or maintain the property to today’s standards. Based on this new law, if our client wanted to Ellis Act this building, a relocated tenant in the building would be entitled to the following:

A. 1980
B. $857.52
C. 2.5740
D. $2207.25
E. $52,974
F. $52,974

In July 2014, landlords eventually sued the city to challenge this new ordinance. In this example, our client would have to pay this tenant $52,974 in Ellis Act Relocation Fees just for evoking a state law that allows a property owner to take a building off the rental market.

The Ellis Act is a state law and the tenants are supposed to financial money to help with relocation—not be a calculation of what the tenant should be entitled to based on draconian San Francisco city laws that are not effective.