S.F. Apartment Ass'n v. City of San Francisco

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SAN FRANCISCO APARTMENT ASSOCIATION et al., Plaintiffs and Appellants, v. CITY AND COUNTY OF SAN FRANCISCO, Defendant and Appellant.

A161866

California Court of Appeals, First District, Third Division

May 2, 2023

NOT TO BE PUBLISHED

(City & County of San Francisco Super. Ct. No. CPF20517087)

TUCHER, P.J.

The City and County of San Francisco (the City) adopted Ordinance No. 36-20 (Ordinance 36-20) in 2020, amending the requirements for "buyout" agreements between landlords and tenants and classifying certain types of unlawful detainer settlements as buyout agreements. Four associations (the associations, or plaintiffs), three of them representing residential rentalproperty owners and one representing realtors, brought this facial challenge to the ordinance, alleging it conflicted with state law and seeking a writ of mandate and declaratory relief. The trial court granted the writ petition, and subsequently entered judgment in plaintiffs' favor.

The City and the associations have both appealed. The City contends the associations did not meet their burden to show they have standing to bring this action. The associations argue the trial court erred by entering judgment granting narrower relief than indicated in its initial order granting the writ petition. We find no error and accordingly affirm.

FACTUAL AND PROCEDURAL BACKGROUND

I. Tenant Buyout Ordinance and Amendments

In 2014, the City adopted section 37.9E of the Administrative Code (Ordinance 37.9E, or the buyout ordinance), entitled "Tenant Buyout Agreements." (Section 37.9E; Ord No. 225-14, Oct. 21, 2014) In enacting the buyout ordinance, the City found that some landlords who wished to charge market-rate rent for rent-controlled apartments or to sell their property offered cash buyouts to tenants in exchange for the tenants vacating the units. These buyouts allowed landlords to circumvent restrictions that applied to no-fault evictions, such as additional time for a tenant to move out or funds to cover relocation costs. And, according to the City, landlords sometimes used high-pressure tactics and intimidation to persuade tenants to sign the agreements. (Ord. 37.9E, subd. (a).)

To remedy these problems, the City enacted Ordinance 37.9E. Originally, the ordinance required landlords to provide tenants with a disclosure of their rights before beginning buyout negotiations (id., subd. (d)); required buyout agreements to be in writing and include statements about the tenants' rights (id., subd. (f)); allowed tenants to rescind buyout agreements for up to 45 days (id., subd. (g)); required landlords to report buyout negotiations and agreements to the City's Rent Board (id., subds. (e), (h)); provided for the creation of a publicly available database of buyout agreements (id., subd. (i)); and authorized tenants and certain non-profits to bring actions for violations of the ordinance (id., subd. (k)). As originally enacted, Ordinance 37.9E defined a" 'Buyout Agreement'" as "an agreement wherein the landlord pays the tenant money or other consideration to vacate the rental unit. An agreement to settle a pending unlawful detainer action shall not be a 'Buyout Agreement.'" (Id., subd. (c), italics added.)

The City amended the buyout ordinance on February 3, 2020, when it passed Ordinance 36-20, the measure at issue in this appeal. The City found that the buyout ordinance's exclusion of unlawful detainer settlements from the protections of Ordinance 37.9E had "developed into a significant loophole. Elevating form over substance, some landlords will start buyout negotiations, but then file unlawful detainer actions so that they can resolve the negotiations as 'settlements' rather than 'buyouts,' and thereby avoid complying with the Buyout Ordinance. This undermines the goals of the Buyout Ordinance." (Ordinance 36-20, § 1.) The City also identified concerns "that some landlords continue to employ the high-pressure tactic of giving tenants very little time to conduct buyout negotiations," and some disregard their obligation under the buyout ordinance "to give tenants a set of written disclosures before buyout negotiations start," rather than when the negotiations are about to conclude. (Ibid.) "In light of these various problems," the City revised the buyout ordinance "to modify certain prenotification disclosure rules, so that the process is fairer and so that the City can better monitor compliance." (Ibid.)

Ordinance 36-20 amends the definition of" 'Buyout Agreement'" to include an agreement to settle a pending unlawful detainer action if the action was filed within 120 days after commencement of buyout negotiations. (Ord. 36-20, subd. (c).) The amendments also require the party filing a buyout agreement to inform the Rent Board whether the agreement concerns an unlawful detainer action, and require the Rent Board to redact confidential information regarding the unlawful detainer action. (Id., subd. (i).) Ordinance 36-20 additionally contains a number of changes not directly related to unlawful detainer actions. It specifies additional information landlords must disclose to tenants before buyout negotiations begin (id., subd. (d)(11)); requires landlords to declare under penalty of perjury that they provided the required disclosures before negotiations began (id., subd. (e)); requires landlords to notify the Rent Board of the assessors' parcel number and the address of the relevant building and of the date the tenant received the required notice (ibid.); requires at least 30 days between commencement of negotiations and execution of a buyout agreement (id., subd. (f)(1)); allows tenants to void language in a buyout agreement waiving rights or releasing claims if the landlord does not file the agreement with the Rent Board within 59 days (id., subds. (f)(2), (h)); and makes other minor changes. It includes a severability clause. (Ord. 36-20, § 5.)

II. Petition for Writ of Mandate

The associations-San Francisco Apartment Association (SFAA), San Francisco Association of Realtors (SFAR), Coalition for Better Housing (CBH), and Small Property Owners of San Francisco Institute (SPOSFI)- brought this action on May 12, 2020. On August 5, they filed a verified amended petition for writ of mandate and complaint for declaratory relief (the petition) and moved for a hearing on the petition.

The petition alleges that, as amended by Ordinance 36-20, the buyout ordinance is facially invalid. Specifically, the petition alleges the ordinance violates the state litigation privilege by placing procedural and substantive burdens on offers to settle unlawful detainer actions, thus interfering with landlords' rights of access to the judicial process; the ordinance's procedures conflict with, and are thus preempted by, California's summary unlawful detainer statutes (Code Civ. Proc, § 1159 et seq.);^[1] and the ordinance undermines the courts' authority to promote and enforce settlement agreements by requiring landlords to wait 30 days before executing a buyout agreement that settles an unlawful detainer case, then delaying finality of the agreement for 45 days until the tenant's right of rescission expires, and preventing courts from enforcing the agreement if the landlord misses the 59-day deadline to file it with the Rent Board. Based on these alleged violations, the petition sought a declaration that Ordinance 36-20 (particularly as to sections (c), (f)(1), and (h)) is facially invalid, and a writ of mandate prohibiting enforcement of Ordinance 36-20. The petition did not challenge the originally enacted provisions of the buyout ordinance. The parties stipulated to extend the City's time to answer until after the court issued its ruling, and the trial court so ordered.^[2]

A hearing took place on September 15, 2020, and on October 8, 2020, the trial court issued an "Order Granting Petition for Writ of Mandate." The court first ruled the associations had sufficiently alleged standing to challenge Ordinance 36-20. We discuss the allegations regarding standing in greater detail below.

On the merits, the trial court found Ordinance 36-20 invalid in three respects. First, the ordinance interferes with section 664.6, which authorizes courts to enter judgment pursuant to the terms of a settlement agreement, by imposing restrictions on settlement for all unlawful detainer actions brought within 120 days of the commencement of negotiations. Second, the ordinance is preempted by state law, which occupies the field of summary procedures to recover possession of real property in unlawful detainer actions (citing Birkenfeld v. City of Berkeley (1976) 17 Cal.3d 129, 151), because the ordinance delays recovery of possession and allows agreements to be rescinded if the landlord fails to record them as required with the Rent Board. Third, the ordinance violates the litigation privilege (Civ. Code, § 47, subd. (b)) by imposing liability on all landlords who threaten an unlawful detainer action but do not also comply with the ordinance. (Ord. 37.9E, subd. (k)(1) &(2).) The court therefore found "Ordinance 36-20 is invalid and unenforceable" and concluded, "[a]ccordingly, [¶] (1) A writ of mandate shall issue, commanding Respondent City to set aside the actions approving and enacting Ordinance 36-20; and [¶] (2) Respondent City is enjoined from enforcing Ordinance 36-20, per the findings set forth above." Notice of entry of order was served on October 13, 2020.

Over the next several weeks, the parties engaged in negotiations regarding a possible settlement under which they would agree to a judgment and writ that invalidated only the offending portions of Ordinance 36-20, but they were unable agree on the scope of such a judgment.

The City filed an ex parte application for...