Ability of a Landlord to Go Out of Business

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The Legislature has been quite busy on landlord and tenant legislation over the past month. Let’s take a look at some of those issues that have occupied their time that may be of great interest to you.

Ability of a Landlord to Go Out of Business

AACSC, along with industry partners, has placed a top priority opposing the two bills that were introduced this year to make it all but impossible for a landlord to go out of business.

One of the bills has died, AB 2405 (Ammiano)—a bill that would have forced landlords to play defense whenever the landlord wants to go out of business. It would have prevented all adverse credit reporting against a tenant unless the landlord prevails in court within 60 days. The effect of the bill would have been to encourage tenants to use abusive legal tactics to delay Ellis evictions, run up the landlord’s legal costs and force landlords to settle under unreasonable terms. By proposing to remove adverse credit reporting in the initial stages, there would have been little consequence, especially for those represented free of charge by local legal aid organizations, for employing abusive and frivolous legal tactics to force landlords to settle at great cost. The bill would have also prohibited a landlord from going out of business if the city determines that by the removal of one unit from the rental market would in any way adversely impact the availability of rentals. Thankfully, the bill died in the Assembly Judiciary Committee.

The second bill is still alive as of this writing. The bill, SB 1439 (Leno), is pending on the Senate floor for a vote. It seeks to strip the right of San Francisco landlords from legitimately and lawfully going out of landlord wants to or needs to by requiring five years of ownership prior to using the Ellis Act. It also states that if a rental property owner has ever, in any city in the nation, gone out of the rental housing business, he or she would be prohibited from doing so again on any after-acquired property for at least ten years. At the moment, the bill only applies to San Francisco landlords. Other cities, including Los Angeles, Santa Monica and West Hollywood have asked to be included in the bill.

To say the bill has problems with our indus try is a mild understatement. Prospective purchasers who want to live in their own property will never make an offer to buy rental property. Extended families will be dissuaded from purchasing rental property should they want to owner-occupy some of the dwellings that are for sale.

One has to ask, why did members of the State Legislature introduce bills to eviscerate the Ellis Act? Both bills were introduced as a direct result of San Francisco’s housing crisis. Ownership and rental housing prices in the City are some of the most expensive in the U.S. The City, however, created its own housing woes by successfully courting many thousands of new tech industry jobs in a very short timeframe while failing to build enough hous ing to accommodate the massive population and job growth. The City’s actions, combined with adopting some of the most restrictive landlord and tenant laws in the nation, created the market forces that have encouraged a very limited number of San Francisco landlords (just .06 percent) to go out of business.


Ron Kingston can be reached at This e-mail address is being protected from spambots. You need JavaScript enabled to view it

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