How Not To Avoid Rent Control in Berkeley.

20 years ago the California Legislature attempted to limit local rent ordinances by allowing landlords to set market rent at the beginning of tenancies through its enactment of the Costa Hawkins Rental Housing Act (the “Act”). Cal. Civ. Code § 1954.53. The Act nevertheless permitted local agencies to limit rent increases if the increase followed the issuance of a notice to vacate issued under Civil Code section 1946.1.

The First District Court of Appeal rejected today an attempt by landlords to avoid Berkeley’s rent ordinance by withdrawing such a notice. The case is Mak v. City of Berkeley Rent Control Board. The landlords served a tenant who had lived at the property for 28 years with a 60-day notice. The parties reached an agreement with her whereby, in exchange for her departure, she agreed that the 60-day notice was “conclusively deemed withdrawn.” They then rented the unit to new tenants at more than double the previous monthly rent. In doing so, they presumed that, because the notice had been withdrawn, Berkeley’s rent ordinance limiting rent increases was preempted. Nevertheless, the new tenants applied to the Berkeley Rent Control Board to limit the permissible rent on the unit. After a hearing, the Rent Board granted their request and reduced the maximum permissible rent. After the owners petitioned for writ of mandate challenging the Rent Board’s decision, the First District upheld the decision. It reasoned:

Since the Rent Board found, based on evidence the sufficiency of which is not challenged, that the Burns tenancy was terminated pursuant to such a notice, it follows without more that its order establishing the maximum rental rate for the property (not claimed to be confiscatory) is valid and enforceable. As the trial court observed, the agreement between Burns and the Maks may provide some evidence as to whether Burns vacated the premises pursuant to the notice, but it is not dispositive and certainly is not binding on non-parties to the agreement, such as the Rent Board and the Ziems. (S.G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341, 349 [“The label placed by the parties on their relationship is not dispositive, and subterfuges are not countenanced.]”

John Claassen practices civil litigation from the offices of Claassen, P.C. in Oakland, California. For more information about his firm, please click here. While this blog entry is published for informational purposes, portions of this blog post may constitute “communications” within the meaning of California Rule of Professional Conduct 1-400. Thus, as a possible “Advertisement” it is not intended to constitute legal advice. Similarly, no statement made in this blog post is intended as a guarantee, warranty, or promise about the outcome of any litigation matter taken on by the firm. This Advertisement is not intended for any matter that would require the rendition of legal services outside of the State of California or under the laws of any jurisdiction outside of the State of California. Copyright 2015. All rights reserved.

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