Passed in 1986 by the California state legislature in response to the California Supreme Court’s ruling in Nash v. City of Santa Monica, 37 Cal. 3d 97 (1984), The Ellis Act is a California state law that permits property owners to evict tenants if the property owner’s intent is to "go out of the rental business." That is, the property owner takes the necessary steps to take the rental property off the rental market.
Some important aspects of the Ellis Act include:
Ellis Act Abuse – There is significant concern from many corners that the Ellis Act is abused by real estate developers who simply purchase a multi-unit rental property, invoke the Ellis Act to evict the tenants, and then convert the units to TIC’s (tenancies in common) in which case they can then be sold for a substantial profit on the open market.
Ellis Act Landlord Restrictions – First, landlords must evict all tenants in a given building. They can not just evict one tenant or invoke the Ellis Act for just one unit. Ellis affects the whole building or nothing, all tenants or none. There is no such thing as a partial Ellis eviction. The landlord must then take the property off the rental market. Landlords must keep a property off the market for at least two years from the date of withdrawal or be subject to possible legal damages. Once a landlord invokes the Ellis Act as cause for evicting a tenant the landlord can not re-rent the unit, except for the same rent price paid by the evicted tenant, for a period of five years following the Ellis eviction.
What does “Withdrawal from the market” mean? The landlord files a Notice of Intent To Withdraw Units From The Rental Market with the San Francisco Rent Board. A property is considered “withdrawn" 120 days after the landlord files this notice. During this 120 day period, the withdrawal remains an "intent" which means the landlord retains the option to change their mind. After 120 days, the intent becomes an act as the property is filed as “withdrawn” with the County Recorder. At this point the property is considered to be "Ellised".