On September 19, 2016, San Francisco homeowners got confirmed in their relief, when the appellate court affirmed our county court's decision to strike a 10-year ban on residential mergers, following a non-fault eviction. The decision became final on October 24 (3 Cal.App 5th 463). And yes, we are now in the fifth series of appellate decisions, since July 1, 2016.
San Francisco Planning Code, Section 317, regulates residential mergers. Residential mergers, unless subject to Conditional Use, are generally prohibited. S.F. Planning Code, Sec. 317(f); see also, Sec. 101.1(b)(3) for the declared reason of such prohibition, securing more of affordable housing.
In early 2014, the supervisors added another measure to further toughen up mergers of residential units, particularly to further discourage non-fault evictions: to prohibit mergers for 10 years following such an eviction. This rule became codified under Section 317(e)(4). San Francisco Apartment Association sued, on the grounds that this prohibition violates the statewide Ellis Act. This is because the legislative history of this ordinance demonstrates that the Ellis Act evictions were the primary goal of this new prohibition.
In November of 2014, the trial court found Section 317(e)(4) unenforceable. The City appealed, and the appellate decision just got issued 10 days ago, on September 19, 2016. Here is the copy (it is not yet certified for publication).
The court in this case, San Francisco Apartment Association v. City and County of San Francisco (2016) [Appeal. case No. A144702, trial case No. CPF-14-513452] relied on a chain of prior decisions*, finding that the Ellis Act preempts the subject ordinance, in that the city may not impede an owner's decision to quit residential rental business by means of the Ellis Act, it has to remain "unfettered."
I would personally add an observation that, although only a fraction of Ellis-Acting properties are merging after the eviction, the inability to do so creates an additional negative mark on the property title, negatively affecting the property value. This in itself seems to be an additional penalty a property owner would incur for choosing to quit the rental market. And this is different from the currently imposed similar time limits on the owners to re-enter the rental market, limiting and regulating their ability to offer the Ellis-acted units for rent, dictating on the ordinance level when, how, and for how much those units can be offered for rent. In the later, it is obviously a regulation of a rental policy, something the municipalities mostly do (e.g., the rent-control ordinance); but in the first instance, there is no direct connection between the events: the owner may be merging the units for her own use. And, thanks to SFAA v CCSF case, she can do so without first waiting for 10 years.
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