Can landlords seek shelter under the Ellis Act to remodel and evict low-income tenants?

On April 17, a seven-day bench trial commenced by Plaintiff Barrington Plaza Tenant Association, an unincorporated association of tenants living at the Barrington Plaza Apartments located at 11728, 11734 and 11740 Wilshire Blvd., Los Angeles, CA 90025. Barrington Plaza, built in 1961, is made up of three towers and houses approximately 712 units total. Defs.’ Proposed Statement of Decision, p. 6, lines 16-17, quoting April 18, 2024, Trial . . .

The Civil Complaint demands declaratory and injunctive relief against defendants Douglas Emmett, Inc. (A publicly traded company) and its subsidiary, Barrington Pacific LLC to enjoin the Landlord from evicting 558 tenants from the Barrington Plaza Apartments.

This case posits a critical question to the southern California Landlord/Tenant legal landscape:

Can a Landlord use the protections of the Ellis Act to engage in a mass eviction and materially repair its building under the “withdrawal from rental market” protections found under the Ellis Act?

The Ellis Act

The Ellis Act provides “It is the intent of the Legislature in enacting this chapter to supersede any holding or portion of any holding in Nash v. City of Santa Monica 37 Cal.3d 97 … so as to permit landlords to go out of business. Gov. Code § 7060.7.

The landlord Douglas Emmett, Inc.’s reason for eviction

According to the Landlord, the evictions come as a result of a massive undertaking to install fire sprinklers in the buildings. In 2013 and 2020 fires broke out causing damage and personal injury. In the 2020 fire, a young 19-year-old college student tragically passed away. Defs.’ Proposed Statement of Decision, p. 8, lines 24-25.

Robert Lutes, the head of engineering and senior vice president of Douglas Emmett Builders testified that in order “to fully sprinkler the floors, it needed to tear down the floors to concrete slabs and steel.” Defs.’ Proposed Statement of Decision, p. 9, lines 22-23.

At trial, Douglas Emmit executives claim they did everything in their power to try and find a way to effect the renovations without eviction. At trial Jordan Kaplan, president and CEO of both defendants testified “my biggest thought was we don’t want to empty all of these buildings,” and he began searching for a “path” to conduct construction in a “staged way” to avoid vacating all tenants. Defs.’ Proposed Statement of Decision, p. 10, lines 20-22.

The Defendants’ position is that at the time the notice was issued, the Landlord had the intent to withdraw the property “indefinitely” from the market because it did not know when the property reparations would or could be completed. Defs.’ Proposed Statement of Decision, p. 14, lines 23-24.

Plaintiffs’ position is that Defendants cannot use the Ellis Act to withdraw from the rental market under the false pretense of an extensive remodel of the premises

At trial, the Plaintiffs presented evidence showing that the Landlords were planning to “substantially reconstruct” all the rental units at Barrington Plaza. The transformation would include “exterior improvements,” “including the main arrival entrance, and improvements to the garage, the pool/amenity deck, and landscaping. It would also include exterior façade improvements and “refreshing” the balconies. Pltf.’s Proposed Statement of Decision, p. 6, lines 15-20. Thus, when the Landlord produced the 558 Eviction notices, it didn’t have the intent to leave the rental business.

Existing case law supports this argument. A landlord who, like Hirschfield, replaces multiunit dwellings with a single-family dwelling for rent has not gone out of the rental business. Hirschfield v. Cohen 82 Cal.App.5th 648, 668 (2022).

“The legislative history of section 7060.2, subdivision (d), clearly indicates that the statute was enacted to authorize local public entities to promulgate ordinances that discourage landlords from evicting their tenants under the false pretense of going out of business pursuant to the Ellis Act. Apartment Assn. of Los Angeles County, Inc. v. City of Los Angeles 173 Cal.App.4th 13, 27 (2009).

Compliance with a Tenant Habitability Program

At trial Plaintiffs also presented evidence that the Landlord is attempting to circumvent the remedy found under the Los Angeles Rent Stabilization Ordinance’s (“LARSO”) Tenant Habitability Program (“THP”). Los Angeles Mun. Code § 152.01, et seq. The THP requires that when a landlord is undergoing “primary renovation work” it must submit a plan that entails how it is going to deal with mitigating damages to tenants who cannot live on the premises at the time. This plan must include notices, temporary relocation fees, replacement housing and also options for permanent replacement assistance. Los Angeles Municipal Code §§ 152.04, 152.05, 152.06.

At trial, Michele Aronson, the executive vice president, general counsel, and corporate secretary of Douglas Emmett testified that the Landlords met with various city council members to discuss the efforts to put in sprinklers and to “find a way to relocate tenants” that did not involve entering into a THP, which would be “extremely expensive for Douglas Emmett.” Pltf.’s Proposed Statement of Decision, p. 12, lines 9-11. In short, the real reason why the Landlord didn’t want to comply with the THP requirement is it would be too expensive.

The Court’s decision here could lead to rippling repercussions in the Southern California Landlord Tenant Landscape. A decision for the Landlord will likely either result in hundreds of Tenants being displaced in a mass eviction or the Court ruling that Douglas Emmett must find some other alternative to deal with its fire safety and remodel issues. Additionally, a ruling in favor of the Landlord could potentially allow other Landlords to use repairs to evict low-paying tenants and move in tenants willing to pay higher rates.

However, there are safeguards in place via penalties and the right for displaced tenants to re-let the units up to 10 years in certain instances. See Gov. Code §§ 7060.2, 7060.6.

As an advocate for tenants’ rights, the correct course for the court should be to make the commercial real estate investor pay the burdensome relocation fees under a THP plan or truly permanently exit the rental business and sell the property.