YOU THINK ALL RESIDENTIAL LANDLORD-TENANT DISPUTES ARE THE SAME AND BORING? NOT THIS ONE

Our focus in this piece is a trial court case for wrongful eviction entitled Follingstad v. Lama, filed in San Francisco about three weeks ago.  That lawsuit, at first seemingly like many others brought over the years by tenants who believe that they were ousted unjustly, is anything but typical.  It is fascinating because it features so many real estate topics right out of today’s news.

The case arose amid the enormous surge of property values and rising rents currently taking place in the Bay Area.  Besides the whole subject of lack of affordable housing and the growing economic/power disparity between landlords and tenants in strong California markets, the Follingstad lawsuit has a little of most everything.  Most notably, it brings into play the dynamics of all of these topics:

  1. a long-term tenant in a rent-controlled unit;
  2. an illegal unit in the building;
  3. the tenant’s pre-eviction listing of her unit with short-term rental giant Airbnb; and
  4. a rather suspect landlord who had recently purchased the building involved.

Follingstad had been paying $2,145 per month for an apartment in what was ostensibly to the outside world a duplex.  As a multiple-unit property, it would be covered by San Francisco’s rent ordinance and would therefore be subject to rent control.  That ordinance currently limits increases in monthly rent as to rent-controlled units to 1.9% during the present year.

Like the regulations in the City of Los Angeles, the San Francisco ordinance excludes single-family dwellings.  Remember that; it is key here.

Enter Lama as the new owner of the property.  Immediately, Lama as landlord issues to Follingstad a “notice of change of terms of tenancy” providing for a rent increase from $2,145 to $8,900 per month — more than 300%!

But wait!  It turns out that the other unit in the property was not lawful.  It was an illegally converted and unpermitted “in-law” unit.  Lama, a “sneaky” but crafty investor, took the illegal second unit — then unoccupied — off the market and declared the building (which also has a garage) to be a single-family house.  (To add to her approach, Lama actually removed the toilet and kitchen sink from the second unit, making it “uninhabitable” under state and local law.)

Lama then moved into the premises rather than renting out the now single-unit house.  This may have been the flaw in her otherwise clever scheme.  Why?  Because that made the eviction one predicated upon “owner move-in” instead of one for nonpayment of rent; and San Francisco, like Los Angeles, requires a “relocation payment” on an owner move-in whereas there is no payment required where the tenant has failed to pay the rent or is evicted for other “just cause.”  San Francisco’s relocation payment is $5,551 per tenant (plus $3,701 more for each tenant who meets the ordinance’s definition of “senior” or “disabled”).

The case is pending and, besides the issues described above, potentially raises some interesting questions.  For example, what would have been the outcome had Follingstad stayed in occupancy and forced Lama to pursue an unlawful detainer?  What if Lama had used as her ground to evict Follingstad the latter’s attempt to rent out the unit on a short-term basis through Airbnb (alleging that this was an unpermitted attempt to sublease)?  What would have been Follingstad’s rights if Lama had, instead of moving in, re-rented the building to a legitimate lessee as a single-family house?  Is there any possibility that a court would decide that the eviction was improper because it was unconscionable or, at least, inequitable?

In a hot rental market, there may be other cases arising which will address some of these open questions.  We at The Joe Cobert Report will let you know what happens in Follingstad as well as other cases which deal with some of these open questions.

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