Ellis Act San Francisco Court Case Results
Congratulations, San Francisco Investment Property Owners.
You scored a huge win at the end of last year when a federal judge declared the city’s most-recent Ellis Act relocation fees unconstitutional. The decision by U.S. District Judge Charles Breyer shot down a new city law that required property owners who use the Ellis Act to pay displaced tenants these exorbitant fees:
The difference between the current rent and the amount needed to rent a comparable unit in the city at market rates for two years. Some amounts have exceeded $100,000. Even though the city has filed an appeal, in the meantime the judge’s ruling stands. This appeal could take years to be heard by the courts again.
What issues did the federal judge have with this new Ellis Act law?
Ellis Act and Property Rights
1. Judge Charles Breyers expressed that this violates property rights because it requires owners to pay for conditions they didn’t cause: the skyrocketing prices of rental housing and the gap between market rates and maximum charges under the city’s rent control law.
In a one day trial, Judge Breyers explains that the ordinance “seeks to force the property owner to pay for a broad public problem not of the owner’s making. A property owner did not cause the high market rent to which a tenant who chooses to stay in San Francisco might be exposed, nor cause the lower rent controlled rate the tenant previously enjoyed.”
Ellis Act and Use of Fees
2. Judge Breyers also concluded that the ordinance did not require tenants to spend the fees on replacement housing in San Francisco, or anywhere else.
Ellis Act and a Constitutional Principle
3. The ordinance violated a constitutional principle: when the government confiscates private property, by condemning land or exacting a fee for owners’ use of their property, the price must be at least “roughly proportional” to the impact of the owners’ actions. Let’s relate this to the city ordinance that enacted and upheld in 2005 which required landlords to pay displaced tenants $4,500 plus inflation adjustments, an amount that Breyer said was roughly equal to the expenses they face in moving out.
To review this entire document, please click here. This document also has this information translated in Spanish and Chinese.
If you were waiting to hear what the verdict was before selling your San Francisco apartment building, now may be a good time for you.
If you are looking to sell your multi-unit property in San Francisco, reach out to our team today for a FREE property valuation and marketing strategy appointment.