Demolition is the New Excuse for Eviction

Demolitions of rent-controlled buildings are a hot topic in Berkeley. Developers are acquiring older buildings for investment purposes and proposing the development of multi-story buildings to the city after demolition of the existing building. The city needs to expand affordable housing and wants to balance this critical need with the need to preserve rent-control and to assist “sitting tenants” in rent-controlled buildings slated for demolition.  

The Berkeley municipal code designed to regulate demolitions was revised in March 2016. See Berkeley Municipal Code Chap. 23C.08. The demolition ordinance cites to the Just Cause for Eviction code which provides that, if all necessary permits are secured, demolition of a rent-controlled building is a just cause for eviction. 

Sitting tenants are offered a nominal relocation benefit ($400) and reimbursement for moving costs which is capped at less than $1,000. See Berkeley Municipal Code Chap. 13.84. When evicted, sitting tenants have a right to the difference in rent paid on their rent-controlled unit versus the rent in a comparable replacement unit; the landlord is required to pay this difference until the new building is built and ready for occupancy. Although construction estimates vary depending upon the building plans, it generally takes one to two years to construct a multi-story building during which this rent differential is required to be paid for every sitting tenant evicted through demolition.

Sitting tenants will also receive the right of first refusal to a comparable unit in the newly constructed building. However, what is “comparable” is not defined in the municipal code leaving an important ambiguity in the ordinance. Moreover, if the developer pays an impact (or mitigation) fee to the City for each of the rent-controlled apartments, sitting tenants will be offered right of first refusal to an apartment in the newly constructed building, but the rent will be at fair market value. However, if the developer decides not to pay the impact fee, sitting tenants must be offered a comparable unit in the new building at below-market rates. There are nuances to the code which must be carefully reviewed since relocation benefits and rental rates at the new building for sitting tenants may also be affected by their income and the percentage of affordable housing offered in the new building.

The impact fee has not been finalized but the fee being discussed is $105,202 and is calculated as follows ($105,202 * the number of rent-controlled units demolished) divided by the number of units in the newly constructed building. Suffice it to say, this impact fee, which is paid by the landlord to the City when the sitting tenants vacate the existing building, is significant and is on top of demolition permit fees, design review committee fees, construction permit fees, etc.  

In Berkeley, it generally takes at least one year to secure a demolition permit and it can be further delayed by public outcry, tenant advocacy groups, and the planning and zoning commission requirements. An example of a hotly debated demolition concerns a building on Durant Avenue which was recently demolished after a court-battle between the developer and the city.

Net, net, if you are a tenant and your rent-controlled building is sold to a new landlord, and if there is talk about demolition, check-in with the rent-control board to determine your legal rights. And, check-in with your fellow tenants, too. Your landlord must continue to invest in the existing building to ensure that your building is habitable until you are actually evicted and your actual eviction, based on demolition, is contingent upon the city issuing all necessary permits including a demolition permit.