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Rent Control: Santa Monica Ordinance Can't Supercede State Law, Court Rules

Portions of Santa Monica's rent control law have been thrown out by an appellate court because the provisions conflicted with state law. The Second District Court of Appeal said Santa Monica could not modify conditions established by state law under which landlords can increase rents for voluntarily vacated units, and the city cannot demand more information than state law requires when registering rent-controlled units. In reviewing the Costa-Hawkins Rental Housing Act of 1995 (Civ. Code §1954.50), the court found that the state "fully occupied" the field of law governing the right of landlords to establish rental rates, whether or not the units are subject to rent control. Because the field is "fully occupied," the city cannot adopt additional regulations, the court ruled. The case involved the setting of rents for rent-controlled units that have been voluntarily vacated. Under Costa-Hawkins, a landlord — effective January 1, 1999 — can set initial and subsequent rental rates for new tenancies, even for units subject to rent control. In an interim period from January 1, 1996 to December 31, 1998, landlords were limited to a 15% increase, or 70% of the prevailing market rate, after a tenant voluntarily vacated, abandoned or was properly evicted from a unit. The City of Santa Monica adopted regulations to address this interim period. The regulations defined "voluntary" and "non-voluntary" vacancies, required a four-month tenancy before a vacancy rent increase could be sought and set other conditions. In January 1997, Cabinda LLC became owner of a 20-unit apartment complex subject to the city's rent control law. In March and April 1997, Cabinda applied to the city for vacancy rent increases for three units but was denied by the city's Rent Control Board because the previous tenants left after less than four months. Cabinda filed for another vacancy rent increase in June 1998 but was again denied, this time because the tenant claimed she was harassed into leaving. Cabinda then sued, claiming that the city violated its rights under Costa-Hawkins. The landlord also sought administrative mandamus, and declaratory and injunctive relief. Los Angeles County Superior Court Judge Hugh Gardner III ruled that the city's regulations were preempted by Costa-Hawkins, so they were invalid. The appellate panel said the question before it was narrow: How fully did the Legislature intend to occupy the field of law regarding setting of rental rates? The city argued not fully because the Legislature did not define "voluntary vacancy" for purposes of interim increases, and because local entities retain jurisdiction to monitor health and safety code violations, and evictions. But the unanimous three-judge appellate court rejected both contentions. The term "voluntary vacancy" is readily understood, ruled the court, which quoted from Black's Law Dictionary and Webster's 3rd New International Dictionary. As for local jurisdiction over health and safety codes, Costa-Hawkins's specific provisions "demonstrate the Legislature's desire to preserve to local government and other local entities particular aspects of regulatory oversight, while occupying the remainder of the field itself," Justice Norman Epstein wrote for the court. Costa-Hawkins granted landlords the right to set rates, exempted certain properties, and established an interim period. "This is a comprehensive treatment of the field of decontrol of residential rental rates, indicating the Legislature's intent to fully occupy the field," Epstein wrote. The court found that Santa Monica's criteria for non-voluntary vacancies could preclude rent increases permitted by Costa-Hawkins; therefore, the local law is preempted. "The [city] regulation not only set up additional criteria in order for an owner to utilize the authority granted by Costa-Hawkins, it also gave to the Board the power to challenge an owner's vacancy rent increase ‘if a question of fact arises' regarding the correct registered rent, and places on the owner the burden to prove to the Board that the vacancy was a qualifying vacancy. Costa-Hawkins does not preserve any such authority to the Board," Epstein wrote. The appellate court also said that the trial court properly barred Santa Monica from enforcing local regulations regarding rent registration under the Petris Act, which mandates that rent control jurisdictions with registration requirements certify permissible rent levels within certain timelines. The city can require only a tenant's name, and can only request the extensive information sought under the local ordinance, the court said. The Case: Cabinda LLC v. Santa Monica Rent Control Board, No. B133077, 00 C.D.O.S. 3743, filed May 11, 2000. The Lawyers: For Cabinda: Gordon Gitlen, (310) 883-3333. For the city: Doris Ganga, Rent Control Board general counsel, (310) 458-8781.
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