Reprinted with permission from AOA.
On April 19, 2017 the L.A. City Council voted 12-0 to make changes to portions of the Los Angeles Municipal Code governing the Ellis Act. Of course, as anyone who knows how the city operates would guess, these changes further hinder landlords’ property rights.
The Old Law
Under the old law, when a landlord withdrew a building from the residential rental market pursuant to the Ellis Act and demolished the building, any new replacement rental units constructed within five years would be subject to the Rent Stabilization Ordinance (RSO). In other words, the new units would be rent controlled. However, if a landlord wanted to avoid having an entire new building be subject to rent control, they could either dedicate the same number of units that had been under the RSO that were withdrawn from the rental market to being affordable units, or they could dedicate 20% of the units in the new construction to being affordable units, whichever was less.
The NEW Law
Under the newly voted on changes, the replacement units in this type of scenario must be a one for one replacement of affordable units or 20% of the new building, whichever is greater. While in some instances this change may not make much of a difference if any at all, in others the difference is drastic.
For example, a landlord who demolishes a smaller building that is under the RSO and replaces it with a much larger building that provides many more units for the community of Los Angeles could end up having a substantially higher number of units that must be affordable housing units subject to the RSO.
In addition, the new law clearly states that even if a building is completely vacant, a landlord must remove it from the housing market pursuant to the Ellis Act, with all of its requirements and limitations before demolishing it. This goes against the purpose of the Ellis Act, since the purpose was to allow landlords who had tenants to go out of business. If there are no tenants, there is no need to go out of business, because no residential rental business is being done.
Once again, the City of Los Angeles is attempting to thwart your rights as property owners and so far … getting away with it. As was stated, the new law was passed already, but will not take effect until it is published and all other requirements for enactment are complete. So, if you are thinking about going out of the residential rental business pursuant to the Ellis Act, be aware that these changes will be in effect very soon.
For more information, please call Sheri Swist at the Housing Reform Coalition of Los Angeles at 310-869-5153.