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Embassy LLC v. City of Santa Monica

June 14, 2010

EMBASSY LLC ET AL., PLAINTIFFS AND APPELLANTS,
v.
CITY OF SANTA MONICA ET AL., DEFENDANTS AND RESPONDENTS.



APPEAL from a judgment of the Superior Court of Los Angeles County. James C. Chalfant, Judge. Reversed. (Los Angeles County Super. Ct. No. BS119080).

The opinion of the court was delivered by: Armstrong, J.

CERTIFIED FOR PUBLICATION

This case arises under the Ellis Act, Government Code section*fn1 7060, et seq. The Ellis Act gives landlords "the unfettered right," as outlined in the statute, to remove their residential units from the rental market (City of Santa Monica v. Yarmark (1988) 203 Cal.App.3d 153, 165) and means that cities cannot prevent residential landlords from going out of the landlord business. (§ 7060.7.)

In this case, a contract between appellants Embassy LLC and PRG Embassy Properties, L.P., and respondents City of Santa Monica and its Rent Control Board (collectively, the City) included appellants' waiver of their Ellis Act rights as to 19 tenant units in their apartment hotel.

Appellants contend, inter alia, that the Ellis Act prohibits the City from enforcing that waiver. We agree, finding that with section 7060.1, the Ellis Act prohibits public entities from enforcing contractual Ellis Act waivers in all circumstances except those specified in the statute. We further find the City was not entitled to prevail on demurrer on either of its alternate grounds of estoppel and statute of limitations.

Facts*fn2

Appellants own the Embassy Hotel Apartments ("the Embassy") in the City of Santa Monica. Throughout its history, the Embassy has been operated as a hotel apartment housing both tenants and hotel guests.

When the Embassy registered with the Rent Control Board, in 1978, all units were registered as hotel units and apartment units. In 2000, a dispute arose between the City and appellants concerning appellants' alleged failure to pay a transit occupancy tax in connection with people who stayed at the Embassy for fewer than 30 days, and concerning the application of the City's rent control law to the Embassy. The dispute was resolved in October 2000, through a settlement agreement which provided that the 38 units in the Embassy would be separated into two classes. Half the units would be hotel units exempt from the rent control law and half would be apartment units subject to that law. Appellants also agreed to pay the City a sum for the transit occupancy tax, to file transit occupancy tax returns, and to pay that tax in the future.

The settlement agreement included the provision that "Owner hereby waives the right to withdraw the Tenant Units from the rental housing market pursuant to the Ellis Act (CA Gov't Code §§ 7060 et seq.) separate and apart from other units at the Embassy, unless either: (1) such Tenant Units become uninhabitable, or (2) the City adopts a law(s) which confirms that the Tenant Units may be operated as hotel rooms or otherwise occupied by individuals on a daily or weekly basis and not as tenants."*fn3

In August 2008, appellants notified the City of their intent to remove the 19 tenant units from the rental housing market. (§ 7060.4.) The City refused to accept the filing, citing the Ellis Act waiver in the settlement agreement.

Appellants filed a petition for writ of mandate and complaint for declaratory relief, seeking an order compelling the City to permit the removal of the units from the rental housing market and a declaration that the Ellis Act waiver was unenforceable.

The trial court sustained the City's demurrer without leave to amend on the ground that appellants had waived their Ellis Act rights, finding that the Ellis Act did not bar enforcement of the waiver.

Discussion

1. The Ellis Act ...


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