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A California appeals court has reversed a trial court's ruling in favor of the City of San Francisco in a case challenging a city ordinance which places restrictions on a landlord's ability to evict tenants from their apartments, even if the eviction is for the purpose of the landlord's own use of the property.
In 1998, voters in the City of San Francisco ("City") approved Proposition G ("Ordinance"), which amended the City's residential leasing rules. In relevant part, the Ordinance created the following rules: first, a property owner was allowed, only once, to evict tenant(s) in order to recover a unit for the owner's personal use; second, a property owner is allowed to only recover a unit from tenant(s) for a family member's residency if the owner also lives in the same building; and, finally, certain restrictions were placed upon the property owner's ability to evict older tenants and disabled tenants who have resided on the premises for a certain period of time. A few exceptions to the Ordinance exist, most notably for property built after 1979 and for certain types of temporary housing. In 1999, a collection of property owners and interested groups, including the San Francisco Association of REALTORS®, (collectively, "Plaintiffs") filed a lawsuit seeking an injunction to stop the City from enforcing the Ordinance as well as damages for an inverse condemnation for violations of the Takings Clause of the Fifth Amendment of the United States Constitution. The trial court granted the City's motion to dismiss the lawsuit without leave to amend the complaint, ruling that the Plaintiffs could not prove that the Ordinance was unconstitutional under any theory that they had advanced in their complaint. The Plaintiffs appealed the trial court's dismissal of their claims without first granting them leave to amend their complaint.
The Court of Appeal of the State of California, First Appellate District, reversed the trial court, stated the Plaintiffs are allowed to amend their allegations, and sent the case back to the trial court for further proceedings. An unconstitutional taking without compensation can occur in two instances: a per se taking and a regulatory taking. The court first considered whether the Ordinance could constitute a per se, or direct, taking because it had the effect of permanently excluding a landowner and his/her family members from occupying portions of the landowner's property. A per se taking occurs when the government directly occupies the private property or its regulations leave private property with no economically beneficial use. The court ruled that the Plaintiffs may be able to show that the Ordinance constituted a per se taking, if they can demonstrate that the Ordinance creates life-time tenancies for tenants, ending a landowner's ability to occupy substantial portions of his/her property. Thus, the trial court's dismissal was reversed and the Plaintiffs were allowed to re-allege this claim.
The court next considered whether the Ordinance could constitute a regulatory taking, applying a two-part test. The court considered whether the Ordinance satisfied the first part of the regulatory taking test, requiring a party claiming a taking to demonstrate that the challenged regulation does not substantially advance a legitimate government interest. The City argued that it was entitled to a deferential review of the Ordinance, as the Ordinance was a generally applicable rent control law advancing a legitimate governmental interest, namely creating affordable housing. The court rejected that argument, ruling that the Ordinance did not merely regulate the financial aspects of the leasing process like most rent control laws, but instead limited the manner in which the property owner could use its property. Second, the court also ruled that the Ordinance was not a generally applicable law, as it specifically excluded certain property owners from its restrictions, such as those who owned property built after 1979. Thus, the City had not established that the Ordinance advanced its proclaimed interests, and so the Plaintiffs could amend these allegations in their complaint.
The court next considered the second part of the regulatory taking test, the impact of the regulations upon the landowner. The court stated that the primary consideration for a court when making this evaluation is whether the regulation interferes with a landowner's expected use of his/her property. This analysis is conducted on a case-by-case basis. The Plaintiffs argued that this law essentially forced them to create public housing by keeping certain tenants on their property, and also that there were no mitigating provisions in the Ordinance which allowed them to seek relief. The court agreed that the Plaintiffs could make allegations satisfying the second part of the regulatory taking test, and so the court reversed this ruling as well. Therefore, the Plaintiffs were granted leave to amend all of the allegations in their complaint.
Cwynar v. City & County of San Francisco, 109 Cal. Rptr. 2d 233, 90 Cal. App. 4th 637 (Cal. Ct. App. 2001).
Editor's Note: NAR's Legal Action Committee contributed support to the successful reversal of the trial court's ruling.