Ellis Act

The Ellis Act is a state law passed in 1985 that was intended to allow building owners to retire from the landlord business. It is now most often used as a way to "change the use" of a building. It is a lawful way of evicting all of the tenants, and in most cases here in San Francisco those units are then converted into Tenancy In Commons and sold separately as percentage ownership in the entire building. There are many requirements that must be met such as:

1. All tenants must be evicted; not only those who pay the lowest rent.
2. Tenants will receive relocation fees of $4500 per person at a maximum of $13,500 per unit. Elderly and disabled tenants receive an extra $3000 each.
3. Landlords are to give 120 days notice; one year notice for elderly and disabled.
4. The Ellis Act is recorded onto the deed and stays with the building even when ownership is transferred.

In order to prevent landlords from using the Ellis Act as a tool to get higher rents by evicting tenants with low rents and replacing them with tenants paying higher rents, there are rental restrictions placed on a building that has been Ellis Acted. Those restrictions are:

1. No unit in the building can be rented out for the first two years.
2. For the first five years, any unit that is rented out must be rented at the same rate as when the Ellis Act was put in place plus any allowed increases that would have otherwise been allowed under rent control.
3. For ten years after the Ellis Act, the tenant who was evicted has the first right of return should any of the units go back on the rental market. They will pay the same rent that they paid at the time of eviction, plus any allowable increases, provided they have registered for the unit.

Most of the Ellis Acts in San Francisco are for the sale of a building, either as a whole or as separate units. In the case of a sale, the seller would be affected as it lowers the value of the building; some say up to 20%. The buyer is affected because of the rental restrictions. As I said, the Ellis Act stays with the building and so do the restrictions. Aside from the rental restrictions I have mentioned, there is another big one. If you are purchasing a Tenancy in Common and are hoping to one day convert the unit into a condominium, if there was an elderly or disabled person displaced during the Ellis Act you cannot condo convert if the eviction happened after November 16, 2004. My advice when dealing with an Ellis Act is this: If you are considering Ellis Acting a building, call a landlord/tenant attorney. If you are considering purchasing an Ellis Acted building, think about whether or not you might want to rent that unit out in the next ten years. Also, you can look into the eviction and find out if there were any protected tenants (elderly and disabled) displaced. If not, and you just want to owner occupy the property, proceed and enjoy your new home.