San Francisco Apartment Ass'n v. City & County of San Francisco

On February 27, 2014, the City/County answered the petition, denying that former section 317(e)(4) “adversely affect[ed] the ability of [plaintiffs] to purchase, sell, manage or otherwise control real property or to exercise their constitutional and statutory rights with respect to real property they own or manage in San Francisco.” The City/County also set forth several affirmative defenses, including lack of standing, police power and separation of powers.

On December 18, 2014, the trial court granted the writ of mandate and declared former section 317(e)(4) facially invalid and unenforceable insofar as it applies to landlords who notice evictions pursuant to the Ellis Act. The trial court reasoned the Ordinance improperly sought to restrain plaintiffs from permanently exiting the residential rental business by requiring a 10-year waiting period before approval could be obtained for merging two or more units of the property. The trial court thus permanently enjoined the City/County and its agents and representatives from enforcing former section 317(e)(4) as to landlords who notice evictions pursuant to the Ellis Act. The trial court entered judgment in plaintiffs’ favor on December 18, 2014. This appeal of the trial court’s ruling followed.

DISCUSSION

The City/County raises three primary contentions on appeal. First, the City/County contends that, as a threshold matter, plaintiffs have not established their associational standing to bring this action, requiring reversal on jurisdictional grounds without regard to the merits of their petition. Second, the City/County contends that, in any event, the Ordinance is a valid exercise of the police power preserved for local governments by the California Constitution. (Cal. Const., art. XI, § 7 [“A county or city may make and enforce within its limits all local, police, sanitary, and other ordinances and regulations not in conflict with general laws”].) As such, the City/County reasons, the Ordinance is not preempted by the Ellis Act, a state statute that expressly reserves for local governments the authority to enact such land use

Below, the trial court found plaintiffs had satisfactorily proved the beneficial interest of their members, reasoning that former section 317(e)(4) “infringes on the[] [members’] right to own, manage and serve as agents for rental properties in San Francisco which are regulated by section 317(e)(4).” According to the trial court: “Section 317(e)(4) directly infringes on the constitutional right of SFAA and CBH members to exit the rental market under the Ellis Act. [Citation.] Similarly, section 317(e)(4) adversely affects the ability of real estate agents and brokers, represented by SFAR, to market, sell, and manage rental properties located in the City and County of San Francisco. [Citation.] Thus, the individual members of the three petitioner organizations will be injured by 317(e)(4) if it is enforced, and as such could have challenged the Ordinance in their own right.”

We conclude the trial court’s findings on the threshold issue of standing are adequately supported by evidence in the record in the form of sworn declarations submitted by three individuals on behalf of plaintiffs. For example, Janan New, executive director of SFAA, filed a declaration attesting that, among other things, the plaintiff organization had 2,800 active members that collectively own more than 65,000 residential units. As soon as the Ordinance passed, New received numerous calls from members protected under the Ellis Act asking how the new law would apply to residential properties in San Francisco and for the organization to file a lawsuit in order to protect their rights.

Brook Turner, executive director of CBH, filed a declaration, in turn, attesting that, collectively, CBH’s members own more than 20,000 residential units in San Francisco, and that each member is protected by the Ellis Act and would be subject to the merger ban under former section 317(e)(4) to their detriment.

And, finally, Walter Baczkowski, chief executive officer of SFAR, filed a declaration attesting that its 4,200 agent/broker members are engaged for their livelihood in the sale or rental of residential real property in San Francisco and would be adversely affected by continued enforcement of former section 317(e)(4). As one example of such adverse effects, Baczkowski pointed out that SFAR members are harmed when the Ordinance discourages prospective buyers from purchasing buildings in San Francisco

This evidentiary showing is adequate to prove plaintiffs’ associational standing. The fact that plaintiffs did not offer proof that each individual member had suffered, or was at imminent risk of suffering, actual injury is of no moment. The City/County directs us to no legal authority suggesting otherwise. Rather, the relevant authority makes clear it is enough if the plaintiff organization proves by a preponderance of the evidence that its members have “ ‘some special interest to be served or some particular right to be preserved or protected over and above the interest held in common with the public at large.’ [Citation.] ... [To the contrary,] [w]rit relief is not available if the petitioner gains no direct benefit from the writ’s issuance, or suffers no direct detriment from its denial. [Citation.]” (League of California Cities v. Superior Court (2015) 241 Cal.App.4th 976 , 985 [ 194 Cal.Rptr.3d 444 ]; accord, Apartment Association, supra, 136 Cal.App.4th at pp. 127-129 [individual members of a trade organization representing owners and managers of residential rental property in the city had standing to challenge a municipal rent stabilization ordinance where said members were subject to the ordinance and, thus, were or could become subject to its restrictions on collecting excessive rent from qualified low-income, disabled or senior tenants]; Associated Builders & Contractors, Inc. v. San Francisco Airports Com. (1999) 21 Cal.4th 352 , 363 [ 87 Cal.Rptr.2d 654 , 981 P.2d 499 ] [”[i]f . . . [plaintiff organization] could demonstrate that the [project stabilization agreement] specification has the effect of infringing its members’ rights of association or expression, or that it has an anticompetitive impact on them, then [it] might legitimately claim a beneficial interest within the meaning of Code of Civil Procedure section 1086”].) And, here, this standard has been met given the evidence in plaintiffs’ sworn declarations that thousands of their individual members are involved in the sale and rental of residential rental properties in San Francisco, are protected by the Ellis Act, and would or could be negatively impacted by the continued enforcement of the Ordinance’s 10-year merger ban in buildings where Ellis Act evictions have occurred.

Accordingly, we affirm the trial court’s threshold finding that plaintiffs have associational standing to bring this action and proceed to the merits.

II. Is Former Section 317(e)(4) a Valid Exercise of Local Government Authority or Fatally Inconsistent with State Law?

The City/County’s central challenge is to the trial court’s finding that the Ordinance is facially invalid and unenforceable insofar as it applies to

A. The Principles of Preemption.

“ ‘[A] county or city may make and enforce within its limits all local, police, sanitary, and other ordinances and regulations not in conflict with general laws.’ (Cal. Const., art. XI, § 7.) ‘Land use regulation in California historically has been a function of local government under the grant of police power contained in article XI, section 1 ... . “We have recognized that a city’s or county’s power to control its own land use decisions derives from this inherent police power, not from the delegation of authority by the state.” ’ (Big Creek Lumber Co. v. County of Santa Cruz (2006) 38 Cal.4th 1139 , 1151 [ 45 Cal.Rptr.3d 21 , 136 P.3d 821 ], fn. omitted (Big Creek Lumber Co.).) Consistent with this principle, ‘when local government regulates in an area over which it traditionally has exercised control, such as the location of particular land uses, California courts will presume, absent a clear indication of preemptive intent from the Legislature, that such regulation is not preempted by state statute.’ (Id., at p. 1149; see [citation].)” (City of Riverside v. Inland Empire Patients Health & Wellness Center, Inc. (2013) 56 Cal.4th 729 , 742-743 [ 156 Cal.Rptr.3d 409 , 300 P.3d 494 ] (City of Riverside).)

However, a local ordinance may not conflict with state law; if it does, it is void. (City of Riverside, supra, 56 Cal.4th at p. 743; see also Sherwin-Williams Co. v. City of Los Angeles (1993) 4 Cal.4th 893 , 897 [ 16 Cal.Rptr.2d 215 , 844 P.2d 534 ] (Sherwin-Williams).) For purposes of the preemption analysis, local legislation conflicts with state law if it “ ‘ “ ‘duplicates, contradicts, or enters an area fully occupied by general law, either expressly or by legislative implication.’ ” ’ [Citations.]” (Sherwin-Williams, supra, at p. 897.) To “duplicate” state law, the local legislation must be “coextensive therewith.” (Ibid.) To “contradict” state law, the local legislation must be “inimical thereto.” (Id. at p. 898.) Moreover, the “ ‘contradictory and inimical’ form of preemption does not apply unless the ordinance directly requires what the state statute forbids or prohibits what the state enactment demands.” (City of Riverside, supra, 56 Cal.4th at p. 743.) In other words, if “it is reasonably possible to comply with both the state and local laws,” there is no inimical conflict. (Ibid.)

Finally, in performing the preemption analysis, we must keep in mind the general rule that the validity of a legislative enactment hinges on the enactment’s actual operation and effect rather than the subjective motivation of the legislators: “ ‘[T]he rule is general with reference to the enactments of all legislative bodies that the courts cannot inquire into the motives of the legislators in passing them, except as they may be disclosed on the face of the acts, or inferrible from their operation, considered with reference to the condition of the country and existing legislation. The motives of the legislators, considered as the purposes they had in view, will always be presumed to be to accomplish that which follows as the natural and reasonable effect of their enactments.’ ” (County of Los Angeles v. Superior Court (1975) 13 Cal.3d 721 , 726 [ 119 Cal.Rptr. 631 , 532 P.2d 495 ], italics added, citing Soon Hing v. Crowley (1885) 113 U.S. 703 , 710-711 [ 28 L.Ed. 1145 , 5 S.Ct. 730 ].) Thus, “[p]urpose alone is not a basis for concluding a local measure is preempted. While [reviewing courts] have occasionally treated an ordinance’s purpose as relevant to state preemption analysis [citations], we have done so in the context of a nuanced inquiry into the ultimate question in determining field preemption: whether the effect of the local ordinance is in fact to regulate in the very field the state has reserved to itself.” (California Grocers Assn. v. City of Los Angeles, supra, 52 Cal.4th at p. 190, fn. omitted.)

At the same time, however, courts both recognize and respect the reservations of power set forth in the Ellis Act with respect to local government authorities: “Notwithstanding Section 7060, nothing in this chapter does any of the following: [¶] . . . [¶] (b) Diminishes or enhances . . . any power which currently exists or which may hereafter exist in any public entity to grant or deny any entitlement to the use of real property, including, but not limited to, planning, zoning, and subdivision map approvals.” (§ 7060.1, subd. (b).) Meanwhile, elsewhere in the Ellis Act, the legislature expressly denies any intent to, among other things, “[i]nterfere with local governmental authority over land use,” “[p]reempt local . . . land use regulations, procedures, or controls that govern the demolition and redevelopment of residential property,” or “[o]verride procedural protections designed to prevent abuse of the right to evict tenants.” (Gov. Code, § 7060.7, subds. (a)-(c).) Considered in its entirety, “the Ellis Act does not prohibit local governments from providing procedural protections designed to prevent abuse of the right to evict tenants (§ 7060.7, subd. (c)), [but] it ‘completely occupies the field of substantive eviction controls over landlords who wish to withdraw’ all units from the residential rental market. [Citation.]” (Johnson, supra, 137 Cal.App.4th at p. 14.)

Not surprisingly, in our case, the parties disagree on whether former section 317(e)(4) has the effect of regulating in the very field the state has expressly reserved to itself vis-a-vis the Ellis Act, or of regulating in one of the fields reserved under the Act for local government entities. For its part, the City/County denies the Ordinance violates any conduct or activity prohibited under the Ellis Act, and insists the preemption doctrine is simply not applicable. In support of its contention, the City/County argues, first, that the Ordinance does not “target” properties subject to Ellis Act evictions because it imposes the same 10-year waiting period on applications to merge housing units that have been the subject of several types of “no-fault” evictions, not just Ellis Act evictions. Additionally, the City/County denies the Ordinance in any way penalizes property owners for exercising their rights under the Ellis Act because it “does not condition the right to leave the rental market on fulfillment of any prerequisites, payment of any fee, or satisfaction of any pre-condition that could result in a defense to an unlawful detainer action.”

Turning to the City/County’s first point, we disagree with its premise that the preemption analysis turns on whether a local ordinance “targets properties” subject to the Ellis Act. Rather, as the case law from above makes clear,

We agree with this analysis. Further, we conclude, contrary to the City/County’s contention, that a 10-year prohibition on removing a rental unit from the market for the purpose of merger is more akin to a substantive requirement triggered upon a landlord’s notice of intent to remove a rental unit from the rental housing market than to local regulation of “the particulars of the demolition and the redevelopment of the property after it is withdrawn . . . .” (Reidy, supra, 123 Cal.App.4th at p. 588.) Specifically, rather than regulating the particulars of a landlord’s proposed merger (or demolition or conversion) of a residential unit, former section 317(e)(4) prohibits a landlord withdrawing a residential unit from the rental market from merging the unit with another unit for 10 years. In doing so, former section 317(e)(4) imposes a penalty on the very class entitled to protection under the Ellis Act—to wit, landowners seeking to exit the residential rental business. As such, under the legal authority cited above, former section 317(e)(4) is indeed invalid. (Accord, Lincoln Place I, supra, 54 Cal.App.4th at pp. 63, 65 [rejecting argument that “its ordinance is not preempted because it does not provide a substantive barrier to a landlord’s right to go out of the rental business but only imposes a procedural requirement that must be met before the application to demolish is granted”]; Javidzad, supra, 204 Cal.App.3d 524 .) Moreover, contrary to the City/County’s related argument, the fact that this 10-year ban on applying for merger approval begins to run when the landlord exits the residential rental business rather than before the landlord exits the business does not make this ban any less of a penalty triggered by the landlord’s exercise of Ellis Act rights.

The City/County attempts to distinguish this case from those striking down local ordinances as fatally inconsistent with the Ellis Act, including Lincoln

In Javidzad, for example, the invalidated local ordinance prohibited a landowner from demolishing a rental unit unless the landowner first qualified for and obtained a removal permit. To qualify and obtain this permit, the landowner had to do one of three things: (1) demonstrate the landowner could not make a fair return on the rental unit(s); (2) demonstrate the property was uninhabitable; or (3) promise to develop new units subject to rent control. Finding this ordinance invalid on preemption grounds, our appellate colleagues reasoned that it impermissibly conditioned the landowner’s right to exit the residential rental business on compliance with requirements not found in the Ellis Act. In so finding, the court rejected the defendant’s argument, similar to the City/County’s argument herein, that the local ordinance was merely a land use regulation that, consistent with the Ellis Act, authorized permanent demolition, conversion, or alteration of the withdrawn units: “[Appellants] submit that in passing the Act, the Legislature intended nothing more than to enable a landlord to go out of business by evicting all the tenants residing in a building, and a property owner who has done so has obtained the full benefit of the Act. Appellants do recognize the denial of a removal permit precludes the redevelopment of a property. They insist, however, a landlord who is thereby left with a vacant apartment building is merely paying the price of choosing to go out of business! [¶] Appellants’ strained reading of the Act would result in an absurdity. Denying a . . . removal permit to a landlord who has gone out of the rental housing business imposes a prohibitive price on the exercise of the right under the Act.” (Javidzad, supra, 204 Cal.App.3d at pp. 530-531.)

Similarly, in Reidy, supra, 123 Cal.App.4th 580 , a preemption challenge was made under the Ellis Act to a local ordinance making it unlawful to change the use of, eliminate, or demolish a residential hotel unit without first obtaining a permit to convert. However, before this permit would issue, the hotel owner was required to provide one-for-one replacement of the units to be converted by constructing or bringing onto the market new residential units meeting certain requirements or, alternatively, by paying an in-lieu fee. Again, the appellate court declined to accept the defendant/local government’s argument that this permit to convert was merely a land use regulation that did not implicate or infringe upon a landlord’s right to exit the residential rental business: “Because section 41.20, subdivision (a)(1) of the HCO makes it unlawful for a residential hotel owner to change the use of, or eliminate a residential hotel unit without first obtaining a permit to convert, and sections

We reject this argument. The City/County acknowledges that, when two units are merged, the two original units no longer exist, but have effectively been demolished. As such, the right to re-occupancy under Government Code section 7060.2, subdivision (c)—which applies only when a particular unit removed from the market is returned to the market within 10 years—is simply not triggered. At the same time, another Ellis Act provision, section 7060.2, subdivision (d), is in fact triggered. This provision provides in relevant part that, if “the accommodations are demolished, and new accommodations are constructed on the same property, and offered for rent or lease within five years of the date [of their withdrawal], the newly constructed accommodations shall be subject to any system of controls on the price at which they would be offered on the basis of a fair and reasonable return on the newly constructed accommodations . . . .” (Gov. Code, § 7060.2, subd. (d), italics added.) As such, we reject the City/County’s suggestion that the Ordinance serves a legitimate local purpose wholly consistent with the Ellis Act. While the City/County may be entitled to enact an ordinance imposing restrictions on the rent that may be charged for merged or reconstructed units within five years of removal of the former units from the rental market, the Ordinance before us exceeds any such restriction. To wit, the Ordinance also prohibits an owner from removing a property from the rental market and for 10 years merging the unit with another unit for the purpose of residing in or selling the merged units—inconsistent, as we have explained, with the Ellis Act. For this reason, we stand by our conclusion that the Ordinance is fatally inconsistent with the Ellis Act.

Next, the City/County challenges the trial court’s finding that former section 317(e)(4) is facially void under the Ellis Act with respect to the 10-year prohibition of mergers following notice of intent to undertake an Ellis Act eviction. According to the City/County, plaintiffs failed their burden as the party making a facial challenge (as opposed to an “as applied” challenge) to establish “the challenged [law] ‘inevitably pose[s] a present total and fatal conflict’ with applicable prohibitions.” (See Association of California Ins. Cos. v. Poizner, supra, 180 Cal.App.4th at p. 1054; see also Sanchez v. City of

DISPOSITION

The judgment is affirmed. Plaintiffs are awarded costs on appeal.

Poliak, Acting P. J., and Siggins, J., concurred.