The Ellis Act:
The "Ellis Act" is a California state law passed in 1986 which states that landlords have the right to evict tenants to "go out of the rental business." For an Ellis eviction to be valid, the landlord must remove all of the units in the building from the rental market. They cannot just pick and choose by evicting some tenants and not others, for example singling out one or two tenants with low rent and/or removing just one or two units from the rental market. When a landlord invokes the Ellis Act, the apartments cannot be re-rented without vacancy rent control restrictions over the next 5-10 years. While there are restrictions on re-renting the units during that period, the Act has no such restrictions on converting them to ownership units such as tenancies in common (TICs) or condos.
An Ellis Act eviction is for the purpose of removing all of the rental units in the building from the rental market. These evictions generally are used to "change the use" of the building. Most Ellis evictions are used to convert rental units to condominium-like TICs, using loopholes in the condo law. However, Ellis is also used to convert multi-unit buildings into single family homes. As a result, there is now significant concern from many corners that the Ellis Act is being abused by real estate developers who simply purchase a multi-unit rental property, invoke the Ellis Act to evict the tenants, and then convert the units to TIC’s (tenancies in common) or merge the units into a single family dwelling after which they can then be sold for a substantial profit on the open market.
State legislators in a move to make it easier for senior and disabled tenants who are evicted under the Ellis Act passed legislation, effective January 1, 2000, where senior (age 62) and disabled tenants (persons "having a condition that limits a major life activity") must receive a one year notice of eviction. All other tenants must receive at least 120 days notice. And in 2005 in an attempt to curb the ever growing Ellis Act abuse by real estate developers, the San Francisco Board of Supervisors passed a law, effective May 1, 2005, that made it impossible for condo conversion for any building that evicts a senior or disabled tenant prior to conversion. Under these circumstances no condo conversion will be allowed for that building ever, not even if the building is eventually demolished and rebuilt. The rate of Ellis evictions did slow during the recent real estate crash, but now the trend is increasing once again as TIC's (tenancies in common) and mergers have increased in popularity, once again putting senior and disabled tenants at risk of increased Ellis evictions.
Because there are limited defenses against the Ellis Act, senior and disabled tenants who have lived in their rent-controlled apartments for 10 years or more and who normally would be protected from most evictions by law have been especially hard hit. Mostly subsisting on fixed incomes, they are being removed from their homes unable to afford new rents 2-3 times higher or more than they had been paying and many times having to leave the City altogether because of it or, worse, end up on the street homeless. Sometimes just the threat of an Ellis eviction will do the trick and these tenants will be intimidated into accepting low, unfair buyout amounts as a result, thus saving the landlord from having to Ellis his property at all.
Many San Franciscans mistakenly believe that once a building is removed from the rental market or "Ellised", that the units cannot be re-rented for ten years. There are vacancy rent control restrictions on re-rental of these units but the landlord is not forbidden from re-renting. However, for a period of five years, if the units are re-rented to anyone, the maximum rent which can be charged is the same rent the evicted tenant in that unit was paying (plus any allowable increases which would be otherwise allowed under rent control). After five years, there is no restriction on rents for newly vacated units. The previously evicted tenant has the first right of return for ten years, but only at their same rent (plus any increases which would have been allowed under rent control) for a period of five years. Tenants must notify the landlord and the Rent Board if they want to avail themselves of this option within 30 days after they vacate.
In some cases where a landlord re-rents a unit, the displaced tenants can recover damages against the landlord. The amount of damages depends on when the landlord re-rents the unit. The sooner a landlord tries to re-rent, the greater the damages. A landlord who tries to re-rent a unit within two years of an Ellis Act eviction is liable for actual and unlimited punitive damages. Conversely, if a landlord re-rents a unit after two years, the punitive damages are limited to six months rent.