Appeals Court Returns Santa Monica Building to Rent Control

Santa Monica Real Estate Attorney -Milla L. Lvovich

Rent control remains a hotly contested issue throughout California. The California legislature is currently considering a new statewide rent control policy. Meanwhile, individual cities and counties continue to struggle with their own rent control inventories.

On July 30, a California appeals court sided with Santa Monica in its long-running effort to bring a single building back under rent control. The building in question was constructed before Santa Monica had rent control. But it was subject to rent control after the City adopted its policy in 1979. In 1983, the building’s owner asked the Santa Monica Rent Control Board (RCB) for permission to take the property off the rental market. At the time, the owner said the property was “uninhabitable” and needed extensive repairs.

The RCB eventually granted permission to take the building out of rent control, but not the rental market. This was actually a mistake on the part of the Board’s staff. And without the RCB’s knowledge, the owner continued to rent the property at market rates. In 2016, tenants complained to the RCB. The Board then tried to reassert rent control over the property.

This prompted litigation. A Los Angeles judge held the RCB was “estopped” from placing the building back under rent control. The California Second District Court of Appeal reversed that decision in favor of the Board. According to the appeals court, estoppel did not apply here. In fact, the RCB was not “authorized to exempt the owners’ residential rental units from rent control.” The RCB could only allow the owner to remove the property from the rental market.

The Second District said the original permit remained valid. The owner could therefore demolish the building or convert it to non-rental units. But as long as the building remains on the rental market, it is subject to rent control.

San Francisco real estate attorney Milla L. Lvovich said the Second District’s decision highlights the lengths officials will go to enforce rent control. “California is in the midst of a serious housing crunch. Cities and counties will not hesitate to use every legal tool at their disposal to bring rents down. All landlords need to be aware of the specific rent control laws applicable in their area. And tenants should not hesitate to speak with an attorney if they believe their property should be subject to rent control.”