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How One Sunset Couple’s $4,800 Rent Increase Could Shatter Eviction Protections for Thousands of Bay Area Tenants

A case headed to court this fall could have major ramifications for renters.

Outer Sunset tenants Danielle Phillips and Paul Kelly lived in a two-bedroom house (center)—until their landlord more than tripled their rent. 

 

In San Francisco there are two classes of renters: those with rent control and those without. But even renters who live in units without rent control—namely, single-family homes and condos—enjoy some protections from eviction under the San Francisco Rent Ordinance. At least, that’s what Outer Sunset residents Danielle Phillips and Paul Kelly thought, until they came home one day and found a rent increase so high that it seemed to be an eviction in disguise. It was February 2016, and the couple had been paying $1,900 to live in a two-bedroom house not far from the beach. Their new landlord, attorney Matthew Dirkes, raised the rent to a whopping $6,700, more than triple their previous rent and far above the $4,600 median asking rent for single-family homes in San Francisco at the time, according to Zillow. 

Phillips, who works as a bank manager in Marin, and Kelly, an electrician, couldn’t afford to pay, and they were forced to move out. But because their landlord didn’t technically evict them, they were out the relocation payments required by law—in their case about $20,000. When the couple left, Dirkes moved in. “Let’s be honest, any person could see that he was doing this to get rid of us,” Kelly says. “He knew we couldn’t pay $6,700 in rent—nobody in their right mind would pay it.” 

Phillips and Kelly sued, arguing that the drastic rent increase was an attempt to get around San Francisco’s eviction laws. In May the Superior Court of San Francisco sided with the landlord and blocked the tenants’ suit. When the case goes before California’s First District Court of Appeal this fall, a judge will rule for the first time on how strong the eviction protections for single-family homes and condos really are. 

Landlord attorneys and tenant attorneys don’t agree on much, but they do agree on this: The question of whether a rent increase of any size—even to $1 million and beyond—is allowable on single-family homes and condos has not yet been tested by the courts. The landlord side holds that California’s Costa-Hawkins Rental Housing Act places no limits on rent increases for these units, regardless of landlord motive. The tenant side argues that exorbitant rent increases are an attempt to weasel out of doing an above-board eviction and paying tenant relocation fees. “If we lose this case on appeal, there will be no eviction protections at all for single-family homes and condos across the entire state,” says tenant attorney Joe Tobener, who is representing Phillips and Kelly. 

In Bay Area cities—including San Francisco, Oakland, Richmond, Berkeley, and East Palo Alto—up to about 56,000 single-family homes and condos are hanging in the balance, according to a San Francisco analysis of data from the real estate research website PropertyRadar. (That number is likely lower: S.F. has an unknown number of single-family homes that actually are under rent control because they have an illegal in-law unit on the property. These tenants are safe from big rent increases like the one Phillips and Kelly got.) 

The tension between the eviction protections in local rent ordinances and the carte blanche Costa-Hawkins gives to landlords has been lurking in the law for years. So far, tenants have appeared to have the upper hand—if they decide to fight. “We’ve probably had 20 of these cases and they’ve all settled,” says Tobener, who earlier this year won a $400,000 settlement for Deb Follingstad, the Bernal Heights tenant whose 315 percent rent increase swept the internet in 2015.

Even the San Francisco Apartment Association, a landlord advocacy group, has urged landlords to keep their rent increases in check. In a legal advice Q&A on the SFAA website, attorney David Semel advises one landlord not to raise the rent on a single-family home indiscriminately, lest the landlord risk running afoul of eviction protections. “If you raise the rent with the intention of forcing the tenants out, you will be exposed to potential liability for wrongful eviction,” he writes. “You should be safe from liability if you serve your tenants with a valid written notice of a rent increase to the market rate.” 

This is sound advice not because the law is clear, but because it isn’t, says landlord attorney Andrew Zacks, who is representing Dirkes. “It’s not supported by any particular legal requirement,” Zacks explains. “But if we know there are tenant lawyers out there suing clients because they raise rent too high, it’s the job of lawyers to tell clients, ‘You probably have the right to do this, but you could still be sued.’”

Zacks doesn’t actually accept that premise—that there’s such a thing as rent that’s “too high” under Costa-Hawkins. “There simply is no qualification in the law that says the tenant gets to decide how much the rent is when there’s no rent control,” he says. Zacks doesn’t bother to argue with the Phillips and Kelly’s accusation that Dirkes wanted them out. Asked why his client didn’t do a standard owner-move-in eviction, Zacks answers automatically, “Because he didn’t have to.” In his view, quibbles over why a landlord jacked up someone’s rent are beside the point, because Costa-Hawkins allows landlords of single-family homes and condos to set the rent, period. “The landlord gets to decide, without any obligation of good faith,” he says. 

Now, for better or worse, Phillips and Kelly’s appeal is going to force a ruling one way or another. Landlord groups are watching this case closely. “It’s on our radar,” says attorney Dave Wasserman, who serves on the board of the San Francisco Apartment Association. Tenant groups are, too. A win for Phillips and Kelly “would be a big deal for the cities that have just-cause eviction protections on single-family homes,” says Daniel Saver, senior attorney at Community Legal Services in East Palo Alto.

The threat to eviction protections gets more theoretical in Oakland, where the loopholes are larger than in San Francisco. Owner-move-in evictions already favor landlords, notes Leah Simon-Weisberg, managing attorney of the tenants’ rights program at Centro Legal de la Raza. “The landlord serves notice saying ‘I’m moving in,’ and they don’t have to pay relocation fees,” she says. But Phillips and Kelly’s suit, if they win, would close the loophole for Oakland tenants who live in homes managed by corporations—a business model that proliferated in the wake of the foreclosure crisis as companies formed to buy up cheap renter-occupied housing. Because those companies can’t use the owner-move-in process, they do have a motivation to force tenants out with a fat rent increase. “If people are legitimately buying a house and moving in, that’s great,” Simon-Weisberg says. “What we don’t want is corporations that make a business model of buying up rental housing and displacing people. That’s not what Costa-Hawkins envisioned.”

If Phillips and Kelly prevail, a clear avenue would open up for tenants to fight astronomical rent increases. In today’s fuzzy legal climate, most of the tenants Simon-Weisberg sees just give in. “They move out,” she says, “99 percent of the time.” 

 

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