AN ELLIS STORY. . .

This is a story, a true story, about a property owner, a building, and tenants in Berkeley;

about tenants who lost their homes; and

about Owners who undoubtedly profited on a real estate investment; and

about a situation that is often played out in the Bay Area, in Los Angeles, and other California cities concerning the Ellis Act, a state law passed in 1985. 

Now, here's the story:

In 1972, a partnership was formed between several individuals, a company (Royston Herts), and an LLC (Channing Prop.) The partnership was recorded with the Alameda County Recorders Office under Instrument Number 72116117 and the name Channing Properties. Between 1972 and 1981, the partnership was modified several times and the modified partnership recorded with the recorder’s office.

According to Property Shark, on December 4, 1998, the property at 2601 Channing Way, Berkeley, California, parcel number 055-187201200, was deeded to Channing Properties. 2601 Channing Way is a 33-unit building. The building was covered by rent control.

It is believed that sometime between 1998 and 1989, Channing Properties served all tenants with an Ellis eviction notice.

On June 28, 1989, Channing Properties “filed a complaint for declaratory relief concerning the validity of the City of Berkeley’s laws restricting removal of housing from the rental market.” See Channing Properties v. City of Berkeley, 14 Cal.Rptr.2d 32, 11 Cal.App.4th 88 (Cal. App., 1992). Channing Properties was contesting the 6-month eviction notice period required by the City on the Ellised tenants and the City mandated $4,500 per unit relocation fee.

On November 9, 1989, the complaint was amended to add “2601 Channing Way Tenants Union” as a real party in interest.

On April 9, 1990, 2601 Channing Way Tenants Union “filed a cross-complaint for injunctive relief against Channing Properties and its general partner.”

On March 7, 1991, the City moved for judgment on the pleadings on the grounds that the municipal code challenged was not preempted by the Ellis Act. (The Ellis Act is state law is found under Cal. Gov. Code sections 7060-7060.7.) The motion was granted on April 17, 1991.

On May 14, 1991, Channing Properties appealed the judgment which was decided in favor of the City. The appellate court overruled the trial court and instead held in favor of the Owner that 1) a six-month notice period conflicts with the notice requirements of the Ellis Act and was invalid, and 2) that Berkeley’s relocation assistance program, if not limited to lower income households, also violated the Ellis Act.

Since the Channing case, Berkeley’s municipal laws have changed and currently require 1) a 120-day notice for all tenants with some exceptions such as senior citizens and/or disabled tenants who receive a 365-day notice, and 2) Berkeley awards a base relocation fee of $15,585 for most tenants plus an additional $5,195 for low income, disabled, elderly citizens, or households with minor children whose tenancies began prior to January 1, 1999. See: https://www.cityofberkeley.info/Rent_Stabilization_Board/Home/Ellis__Explanation_of_Required_Conditions_and_Owner_Obligations.aspx

What happened to the tenants? What happened to the tenants is probably documented in the Berkeley Rent Stabilization files; they relinquished their tenancy rights either through voluntary relocation, a tenancy buyout, a settlement in lieu of eviction, or an actual eviction.

Today, the municipal code, is considerably different than it was in 1989. Today Berkeley Municipal Code states: 

• “Once a Notice of Intent to Withdraw Accommodations has been filed with the Rent Board, no vacancy rent increase may be taken on the affected rent controlled units during the five year period following the date the notice is filed or the actual date of withdrawal, whichever is later. This prohibition applies even if the Notice of Intent is subsequently rescinded or the withdrawal of the units from the market is never completed. Thus, once a Notice of Intent to Withdraw is filed, the rent on the units covered by the notice may be increased only as authorized by the Rent Board, regardless of how many vacancies occur during the next five years. (BMC §13.77.040.A.)”

And the following:

• “You must offer to those [Ellised] tenants who expressed an interest, the opportunity to re-establish their tenancy in your property if you elect to re-rent the property within ten years of the date you withdrew the units from the rental housing market. (BMC § 13.77.040.)”

• “You must notify the City of Berkeley of your intent to re-rent your property.”

Berkeley also limits condominium conversions of Ellised buildings as follows:

• “Berkeley Municipal Code section 21.28.050.A specifically prohibits the conversion to condominium of dwelling units for the 10-year period immediately following the date of filing of a notice of intent to withdraw accommodations from the rental housing business under the Ellis Act. (Note: There is also a 10-year prohibition on condominium conversion from the date of an owner or relative move-in eviction. (BMC § 21.28.060.C.1; B.M.C. 21.28.090 B.1.(a))”

So, what happened to the 33-unit building at 2601 Channing Way? 

Deeds to the property were transferred to different owners[1] until a transfer in 2010 to Royston Apartments, LP The property currently appears to be offered as apartments for rent. See: https://www.apartments.com/royston-apartments-berkeley-ca/0hjy2j2/

Did the owner withdraw housing from the rental market? Yes.

But, it appears that they waited the requisite time to re-rent the apartment units at market rate.

Did the owner also sell some of the units as TIC’s? Only a lot of “digging” will tell.

What’s the real purpose of the Ellis Act? You tell me.

It's Noteworthy:

to note that on June 30, 1993, the City of Berkeley Rent Stabilization Board sued Channing Properties et al in the Superior Court of Alameda County, Case No. C-718880. The case was settled on December 7, 1995 and dismissed on July 8, 1996. The Register of Actions shows a highly litigated record. Another case brought by the City of Berkeley Rent Stabilization board against Panoramic Way Associates was consolidated with the former case (C-718882-8).

See AntiEviction Mapping Project

See: https://www.kcet.org/shows/city-rising/mapping-ellis-act-evictions-throughout-california

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Is Your Building being TIC'ed?

There appears to be a growing trend for land owners to get out of the rental business by using the Ellis Act to evict sitting tenants and then to re-sell the units under a Tenancies In Common Agreement (TIC). At least, this trend appears to be growing in Los Angeles as reported by "Curbed Los Angeles." 

But, exactly what is a TIC? A good explanation of the ownership model is explained in this article, "TIC's could change LA's housing market."

According to the article linked here, Mitch O'Farrell, Los Angeles City Council-member, is "trying to get a handle on just how many rent-controlled tenants are being pushed out to make way for" TIC's. "O'Farrell recently introduced a motion calling on the city planning department to explore creating a tracking system for the number of rent-controlled apartments that have been flipped into TICs." 

A good primer on what a TIC is, how to create one, how to secure a mortgage, and state requirements has been developed by Goldstein & Gellerman. Click here to review.

The California Department of Real Estate provides TIC guidelines here.

The San Francisco Tenants Union advises tenants on how to fight the development and sale of a TIC here: https://www.sftu.org/newtic/ 

Last, Berkeley's municipal code Chapter 21.28, "Condominiums and Other Common Interest Subdivisions" states under B.M.C. 21.28.020A(4):

"The City of Berkeley discourages tenancies in common (TICs) as a less desirable form of home ownership because this form of ownership may be less separable while carrying greater financial and legal risks, despite initial costs appearing more affordable than condominiums, community apartments and stock cooperatives."

If your building is being Ellised, perhaps it's in the plans to sell the units under a TIC relationship. This is definitely worth investigating.

Housing is a Human Right - Join Berkeley Tenants at a Rally on 11/22/2019

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State Closes Loopholes in Ellis Act Eviction Law

An excerpt from a public announcement made by State Assembly Member Richard Bloom is published below: For the full press release, click here.

"The Ellis Act gives rental property owners in rent control jurisdictions the right to exit the rental housing market but also places reasonable conditions and restrictions on landlords in order to avoid unscrupulous use of the bill simply to evict tenants and re-rent one or more units for more money. These conditions include a requirement to notify tenants 120 days prior to withdrawing a unit (or 1 year for tenants who are disabled or over the age of 62. The Act also restricts when owners can re-enter the market, what price they can re-rent units at when they re-enter, and requires that all units in a building be removed simultaneously. As the housing crisis has driven up the market rate for rental units, some landlords have increasingly subverted the intent of the Ellis Act by withdrawing individual units from the rental market, then returning them in a piecemeal manner to avoid the Ellis Act’s restrictions and to evade rent control. In the Los Angeles area alone, over 20,000 rent-stabilized units have been removed from the rental market since 2001, with tens of thousands of tenants evicted in the process.

AB 1399 prohibits this conduct by establishing that there can only be one withdrawal date for a property and by clarifying that the date on which the accommodations are deemed to have been withdrawn from the rental market is the date on which the final tenancy among all tenants are terminated. AB 1399’s reforms mandate that wrongfully evicted tenants be offered the opportunity to re-rent their former unit."

For further details about the changes to the law, please click here.