§3.10 Going Out of Business—Ellis Eviction

A landlord has the right to “go out of business” by removing rental units from the market—even if the property is habitable and is providing a fair return and the landlord has no approved alternative plans for the property. [See Drouet v Superior Court (2003) 31 C4th 583, 587, 595.] The Ellis Act [GC §§7060–7060.7] sets forth procedures by which a landlord may go out of the residential rental business.

However, there are limitations on the right, such as the following:

• The Ellis Act does not interfere with local authority over land use (e.g., the regulation of the conversion of housing to condominiums or nonresidential use), nor does it preempt local environmental or land use regulations governing the demolition and redevelopment of residential property. [GC §7060.7(a), (b); Lincoln Place Tenants Ass’n v City of Los Angeles (2007) 155 CA4th 425, 447 (developer could not evict tenants without complying with CEQA mitigation conditions).]
• A local government may require landlords to provide 120 days’ notice of intention to remove rental units from the rental market. [GC §7060.4(a), (b).]
• A landlord may not remove from the rental market fewer than all of the rental units in a building. [GC §7060.7(d).]

A landlord has the right to file a UD action to recover rental units that he or she plans to withdraw from the rental market. [GC §7060.6; 31 C4th at 587, 591.] In a UD action under the Ellis Act, a tenant may answer or demur under CCP §1170 and may defend the action on the ground that the landlord failed to comply with the requirements of the act. A tenant may rely on a retaliatory eviction defense only if (1) he or she can controvert the landlord’s “bona fide intent” to go out of business and (2) the landlord is unable to establish the existence of a bona fide intent. [See 31 C4th at 588, 593–600.] The landlord does not have to prove that his or her intent to go out of business was not motivated by the tenant’s exercise of rights under CC §1942.5(a) and (c) (the retaliatory eviction statute).

A local government can limit the landlord’s right to re-rent the withdrawn property to others, raise the rent on the withdrawn property, or sell the withdrawn property. [See GC §§7060.2, 7060.3.]

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