Filed 1/24/22
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT
DIVISION FOUR
SAN FRANCISCO APARTMENT
ASSOCIATION et al.,
Plaintiffs and Appellants, A161416
v. (City & County of San Francisco
CITY AND COUNTY OF Super. Ct. No. CPF-19-516566)
SAN FRANCISCO,
Defendant and Respondent.
We here reject an attempt by landlord interest groups to preclude the
City and County of San Francisco (the city) from thwarting bad faith efforts
to circumvent the city’s lawful restrictions on the right to evict residential
tenants whose rent the city cannot regulate.
The Costa Hawkins Rental Housing Act, Civil Code section 1954.50
et seq. (Costa Hawkins) generally exempts newly constructed residential
units, single family homes and condominiums from local rent increase
limitations. (Civ. Code, § 1954.52, subd. (a).) 1 The San Francisco Rent
1Civil Code section 1954.52, subdivision (a) provides: “Notwithstanding
any other provision of law, an owner of residential real property may
establish the initial and all subsequent rental rates for a dwelling or a unit
about which any of the following is true: [¶] (1) It has a certificate of
occupancy issued after February 1, 1995. [¶] . . . [¶] (3) [¶] (A) It is alienable
separate from the title to any other dwelling unit or is a subdivided interest
in a subdivision, as specified in subdivision (b), (d), or (f) of Section 11004.5 of
the Business and Professions Code.”
1
Ordinance (S.F. Admin. Code, 2 § 37 et seq.) (rent ordinance), acknowledges
these exemptions in section 37.3, subdivisions (d) and (g). 3 Costa Hawkins
expressly preserves, however, local authority to “regulate or monitor the
grounds for eviction” on all residential rental properties, including properties
exempt from local rent control. (Civ. Code, § 1954.52, subd. (c) [“Nothing in
this section shall be construed to affect any authority of a public entity that
may otherwise exist to regulate or monitor the grounds for eviction.”].)
In the present action, plaintiffs and appellants San Francisco
Apartment Association, Coalition for Better Housing, San Francisco
Association of Realtors, and Small Property Owners of San Francisco
Institute (collectively, plaintiffs) challenge the lawfulness of an ordinance
enacted by the city. The measure amended the city’s rent ordinance to make
it unlawful for a landlord to seek to recover possession of a rental unit that is
exempt from rent control by means of a rental increase that is imposed in bad
2All statutory references are to the San Francisco Administrative Code
unless otherwise noted.
3 Section 37.3, subdivision (d) provides in relevant part: “Consistent
with [Costa Hawkins] and regardless of whether otherwise provided under
Chapter 37: [¶] (1) Property Owner Rights to Establish Initial and All
Subsequent Rental Rates for Separately Alienable Parcels. [¶] (A) An owner
of residential real property may establish the initial and all subsequent
rental rates for a dwelling or a unit which is alienable separate from the title
to any other dwelling unit or is a subdivided interest in a subdivision as
specified in subdivision (b), (d), or (f) of Section 11004.5 of the California
Business and Professions Code.” Section 37.3, subdivision (g) provides in
relevant part: “(1) An owner of a residential dwelling or unit which is newly
constructed and first received a certificate of occupancy after the effective
date of Ordinance No. 276-79 (June 13, 1979), or which the Rent Board has
certified has undergone a substantial rehabilitation, may establish the initial
and all subsequent rental rates for that dwelling or unit.”
2
faith to coerce the tenant to vacate the unit in circumvention of the city’s
eviction laws. (§ 37.10(A)(i).)
Plaintiffs contend the amendment is preempted by Costa Hawkins
because it seeks to regulate the rent a landlord may charge on exempt
properties. The city contends and the trial court agreed that the amendment
at issue here is a valid exercise of the city’s authority to regulate evictions.
We agree that the amendment is designed to deter landlords from attempting
to avoid local eviction rules by imposing artificially high rents in bad faith,
and thus is a reasonable exercise of the city’s authority to regulate the
grounds for eviction, which is not preempted. Accordingly, we shall affirm
the judgment.
Background
In January 2019, the city adopted an ordinance adding section
37.10(A)(i) to the city’s rent ordinance, making it “unlawful for a landlord to
endeavor to recover possession of a rental unit that is exempt from rent
increase limitations under Section 37.3(d) or Section 37.3(g) by means of a
rent increase that is imposed in bad faith with an intent to defraud,
intimidate, or coerce the tenant into vacating the unit in circumvention of
Section 37.9(a), 37.9A, 37.9B, or 37.9C.” Under the new provision, “[e]vidence
of bad faith may include but is not limited to the following: (1) the rent
increase was substantially in excess of market rates for comparable units;
(2) the rent increase was within six months after an attempt to recover
possession of the unit; and (3) such other factors as a court or the Rent Board
may deem relevant.” (§ 37.10(A)(i).) A landlord’s violation of section
37.10(A)(i) may be asserted by either the rent board or the tenant. At the
same time, the city adopted an ordinance amending section 37.10B,
subdivision (a)(5), to add the same prohibited conduct to the definition of
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tenant harassment, which permits the district attorney to bring
misdemeanor charges against the landlord and permits the tenant to assert
the conduct as an affirmative defense in an unlawful detainer action.
(§ 37.10B, subds. (c)(2), (c)(3).)
In February 2019, plaintiffs filed a petition for writ of mandate and
complaint for injunctive and declaratory relief seeking a declaration that the
amendments are unlawful and preempted by Costa Hawkins. The trial court
denied plaintiffs’ motion for judgment on the writ, holding that the
amendments are not preempted by Costa Hawkins, and shortly thereafter
entered judgment in the city’s favor. 4 Plaintiffs timely filed a notice of appeal.
Discussion
Plaintiffs contend section 37.10(A)(i) is preempted by Costa Hawkins
because it regulates the rent a landlord may charge on exempt property.
They acknowledge that the new provision does not directly limit the amount
of rent a landlord may charge, but argue that the city cannot do indirectly
what it is prohibited from doing directly. We disagree that the provision
regulates rent.
As the trial court noted, the amendments “do not prevent landlords
from earning rent as determined by the free market, and it imposes no caps
to ensure the availability of affordable rental housing.” Rather, the measures
prohibit a landlord from designating as rent an artificial sky-high amount
that the landlord does not intend to collect but intends to cause the tenant to
vacate the unit voluntarily or by eviction for nonpayment of the unrealistic
figure. Section 37.10(A)(i) requires a finding that the rent increase was
intended to coerce the tenant to leave the premises. Costa Hawkins does not
4The city also filed a motion for judgment on the pleadings, which was
taken off calendar after the court’s ruling on plaintiffs’ motion.
4
protect a landlord’s right to use a pretextual rent increase to avoid lawfully
imposed local eviction regulations. (See Action Apartment Assn., Inc. v. City
of Santa Monica (2007) 41 Cal.4th 1232, 1245 [Costa Hawkins authorizes
local governments “ ‘to monitor and regulate the grounds for eviction, in order
to prevent pretextual evictions.’ ”].)
Plaintiffs assert that the plain language of Civil Code section 1954.52,
subdivision (a) protects a landlord’s right to impose “whatever rent they
choose” on an exempt unit. (See Cobb v. San Francisco Residential Rent
Stabilization & Arbitration Board (2002) 98 Cal.App.4th 345, 351 [Costa
Hawkins “permits landlords to impose whatever rent they choose at the
commencement of a tenancy.” (Italics added.)].) As the trial court observed,
under petitioner’s interpretation of Costa Hawkins, “landlords have the right
to impose rent increases even if their only purpose is to force the tenant to
vacate without having to comply with eviction regulations. . . . [T]his outcome
would deprive local eviction regulations of their force” and construe “the
statute in a way that vitiates the authority of public entities to regulate and
monitor the basis for evictions. When [Civil Code section 1954.52,]
subdivision (a) is read together with subdivision (c), it is not reasonable to
conclude that the Legislature intended to authorize a pretextual rent
increase imposed, not for the purpose of collecting additional rent, but to
remove tenants in circumvention of applicable local eviction regulations.” 5
5The argument asserted by amicus curiae, California Apartment
Association (the apartment association), that a local entity has only limited
authority to regulate grounds for evictions on exempt units is not persuasive.
The apartment association suggests that Civil Code section 1954.52,
subdivision (c) “applies, at best, to exempt units which are not yet exempt
and, therefore, subject to local rent controls, or temporarily exempt because of
non-fault evictions of the service of notices of change in terms of tenancy
5
Plaintiffs’ argument that the amendment makes it unlawful to increase
a tenant’s rent to amounts “substantially in excess of market rates for
comparable units” or in any amount within “six months after an attempt to
recover possession of the unit” was correctly rejected by the trial court. As the
trial court explained, plaintiffs confuse “potential evidence of the unlawful
conduct with the unlawful conduct itself. The ordinance does not prohibit
above-market rent increases or rent increases that closely follow attempts to
recover possession. Such increases lead to liability only when and because the
landlord has imposed them in an effort to avoid eviction laws while forcing
the tenant to vacate.”
Plaintiffs argue that the provisions impermissibly require landlords “to
guess whether, in exercising their statutory right to increase rents, they are
subjecting themselves to criminal and severe civil penalties based on the
whims of a future fact-finder,” and “make[] every rent increase a potential
debate over whether it substantially exceeds market rates for comparable
units.” But we do not share the assumption that a landlord — much less the
rent board or a court — is incapable of distinguishing between a reasonable
and a bad faith rental increase. Good faith is hardly an unusual or
which cause former tenants to vacate.” It argues that while “the city’s
eviction controls are needed to make its rent controls effective[,] . . . absent
such rent controls, there is no good reason for eviction controls (or similar
protection) to even apply. Any more expansive reading of sub-section (c)
would simply allow the city to eviscerate rights under sub-section (a).” As the
city notes, many cities in California regulate evictions on units not subject to
rent control and that those regulations serve “permissible purposes besides
the support of rent control laws.” In any event, the interpretation of
subdivision (c) proposed by the apartment association is entirely inconsistent
with the plain language of the statute. (See Civ. Code, § 1954.52, subd. (c)
[“Nothing in this section shall be construed to affect the authority of a public
entity that may otherwise exist to regulate or monitor the basis for
eviction.”].) The city’s request for judicial notice is granted.
6
unacceptable standard to incorporate in statutory requirements or
prohibitions. (See, e.g., Civ. Code, § 1942.5, subd. (d) [“[I]t is unlawful for a
lessor to increase rent . . . for the purpose of retaliating against the lessee
because the lessee . . . has lawfully and peaceably exercised any rights under
the law.”]; id., subd. (g) [“a lessor may recover possession of a dwelling and do
any of the other acts described . . . within subdivision (d), if the notice of . . .
rent increase . . . states the ground upon which the lessor, in good faith, seeks
to . . . increase rent . . . . If the statement is controverted, the lessor shall
establish its truth at the trial or other hearing.”]; Aweeka v. Bonds (1971)
20 Cal.App.3d 278, 280–281 [plaintiff stated claim for retaliatory eviction
where landlord increased rent to an amount that was “unfair, unreasonable
and uneconomical” because it was an almost 100 percent increase to an
amount that was twice the market value].)
Mak v. City of Berkeley Rent Stabilization Bd. (2015) 240 Cal.App.4th
60, is persuasive. In that case, this court upheld a regulation promulgated by
the local rent board that created a rebuttable presumption that a tenancy
which is terminated voluntarily but within one-year of service of notice of
owner move-in “ ‘is presumed to have been terminated by the owner as a
result of the notice’ ” and provided that “ ‘[t]he rental rate for the next
tenancy established in the vacated unit shall be no more than the maximum
allowed under the Rent Ordinance for the tenant who vacated, plus any
subsequent increases authorized by the Rent Board.’ ” (Mak, supra, at p. 65.)
The court rejected plaintiffs’ argument that the rent restriction was
preempted by the “vacancy decontrol” provisions of Costa Hawkins which
protect the landlord’s right to “establish the initial rental rate for a dwelling
or unit.” (§ 1954.53, subd. (a); Mak, supra, at pp. 68–69.) The court explained
that the regulation “ ‘create[s] an administrative deterrent to discourage
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landlords from serving less than good faith owner move-in notices’ ” and that
“ ‘[v]iewed as a sanction for the misuse of owner move-in notices, [the
regulation] does not regulate “the initial rate for a dwelling unit” (. . .
§ 1954.53(a)) and is a permissible regulation of “the grounds for eviction” (. . .
§1954.53(e)).’ ” (Mak, supra, 240 Cal.App.4th at p. 69.) 6 Similarly, the city’s
amendment of its rent ordinance to deter landlords from using pretextual
rent increases to avoid local eviction regulations does not regulate “the initial
and all subsequent rental rates” for exempt units (§ 1954.52, subd. (a)) and is
a permissible regulation of “the grounds for eviction” (§ 1954.52, subd. (e)).
Plaintiffs’ reliance on Bullard v. San Francisco Residential Rent
Stabilization Bd. (2003) 106 Cal.App.4th 488 is misplaced. In Bullard, the
plaintiff challenged a rent-control ordinance requiring a landlord who evicts a
tenant in order to move into the tenant’s unit to offer the tenant another unit
at comparable rent if another unit is available. (Id. at p. 489.) The court held
that the requirement that the landlord offer another unit at comparable rent
was preempted by the vacancy decontrol provision of Costa Hawkins. (Id. at
pp. 491–492.) The court rejected the respondent’s argument that the rent
restriction was not preempted because it was a regulation of evictions within
the meaning of Civil Code section 1954.53, subdivision (e) because the rent
restriction had “no logical connection to the basis for an owner move-in
6 Plaintiffs’ attempt to distinguish Mak is not persuasive. Plaintiffs
suggest that the regulation at issue in that case was permissible because
Civil Code section 1954.52, subdivision (a)(3)(B)(i) expressly provides that the
Act does not prohibit the application of rent-control limits to a new tenant if
the preceding tenant vacates pursuant to an owner move-in termination
notice. (Mak, supra, 240 Cal.App.4th at pp. 69–70.) While Civil Code
section 1954.52, subdivision (a)(3)(B)(i) was undoubtedly relevant to the
analysis, it was not, as plaintiffs’ suggest, the controlling factor in the court’s
decision.
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eviction.” (Id. at p. 491.) The court emphasized that the provision applied “to
landlords acting in good faith as well as unscrupulous landlords” and was
“contingent on the availability of another unit, . . . provid[ing] only an
occasional, weak deterrent.” (Ibid.) The same is not true here. As discussed
above, section 37.10(A)(i) applies only to bad faith, pretextual rent increases
designed to avoid local eviction regulations. It does not regulate permissible
rent increases.
Disposition
The judgment is affirmed.
POLLAK, P. J.
WE CONCUR:
STREETER, J.
BROWN, J.
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Trial court: City & County of San Fancisco
Trial judge: Honorable Charles F. Haines
Counsel for Plaintiffs and Appellants: NIELSEN MERKSAMER
PARRINELLO GROSS & LEONI LLP
James R. Parrinello
Christopher E. Skinnell
DOWLING & MARQUEZ, LLP
Curtis F. Dowling for California
Apartment Association as Amicus Curiae
on behalf of Plaintiffs and Appellants.
Counsel for Defendant and Respondent: DENNIS J. HERRERA, City Attorney
JEREMY M. GOLDMAN, Co-Chief of
Appellate Litigation
10