A ruling last month in the highly divisive Barrington Plaza case would prevent the owners of the Westside apartment complex from evicting existing tenants. While it’s being hailed as an enormous win for already cash-strapped renters in Los Angeles, property managers and other critics say the ruling could be a lose-lose for landlords and tenants in the long run.
Douglas Emmett Inc., a Santa Monica-based real estate investment trust managing high-end properties throughout L.A. and Honolulu, likely won’t have to struggle hard to weather the result of the ruling, according to Daniel M. Yukelson executive director and chief executive of Koreatown-based Apartment Association of Greater Los Angeles. But that may not be true for the city’s independent housing providers that comprise the majority of the city’s landlords.
“I’m not worried for Douglas Emmett. I’m worried about the ramifications for smaller companies. Just over 80% of the city’s rental properties are operated by mom-and-pop owners,” Yukelson said. “These are not mega corporations. Most of them are just regular people with approximately five to 10 units to oversee and at most, one to three properties.”
Ruling could undermine state’s Ellis Act
Yukelson says the state’s Ellis Act has been a critical tool for property owners, acting as an emergency safety rope when their businesses have become unviable. Entered into law in 1986, the Ellis Act allows landlords to evict rent-stabilized tenants in order to “get out of the rental business,” even if the action is opposed by local municipalities. The Los Angeles Rent Stabilization Ordinance further clarifies that landlords, acting in good faith, may recover possession of a rental unit and remove units from use, so long as “the landlord plans on demolishing or permanently withdrawing the units from the rental housing market.”
Douglas Emmett sought to evict nearly 600 tenants from the complex at the time of its initial 2023 filing, reasoning the evictions were necessary to allow for the installation of sprinklers and other modern fire safety upgrades. The company said these upgrades were necessary to bring the building up to modern standards for fire safety following two major blazes at the property between 2013 and 2020, one which claimed a tenant’s life.
Douglas Emmett did not respond to a request for comment
Yukelson noted that mandated sprinkler systems and other fire safety standards implemented in 1974 weren’t in place 50 years ago when Barrington Plaza opened for business but were necessary to prevent the likelihood of further incidents.
“This would require extensive work, which would not provide a safe condition for tenants to remain at the building,” said Yukelson. “From my standpoint, the company was pushed into this position. They had hundreds of millions of dollars worth of work to do on this renovation, but they could not get an opportunity to put these plans into action.”
How permanent is permanent?
Central to the court’s analysis in the Barrington Plaza case was the issue of permanency, according to Los Angeles Superior Court Judge H. Jay Ford III, who issued an opinion in the plaintiffs’ favor on June 13.
“Permanent” may seem like a black-and-white term to the average observer, according to real estate attorney David Almaraz, a partner at the Sherman Oaks-based law firm Grant Shenon PC. But Almaraz notes its use in landlord-tenant disputes leaves a fair bit of wiggle room under state and municipal code.
“Under the city’s municipal code, you cannot bring a property back to market (after invoking the Ellis Act) in the next zero to five years, unless you’re offering the same rent in place before renovations began,” Almaraz said. “But the city has contemplated, and has created exceptions for, situations where a landlord would genuinely change their mind and bring their property back to market.”
Almaraz has previously represented Barrington Plaza tenants.
Douglas Emmett’s biggest misstep seems to be how loudly and emphatically it seemed to state its intention to renovate and reopen, Almaraz said. In his ruling, Ford highlighted several statements by Douglas Emmett made prior to its invocation of the Ellis Act that strongly indicated its intent to reopen the property for business once renovations were completed.
“They had to have planned all of these changes before serving the Ellis Act notices, and that means they would have met with the city and tried to gain approval for the renovation. When they found out they couldn’t get approval from the city, that’s when they went with the alternative plan,” said Almaraz. “The case was unique, as there was overwhelming evidence that this was not some permanent removal from the market.”
The fact that Douglas Emmett was so clear in its intent may be good news for the average mom-and-pop owner in Los Angeles, he added.
“Those small mom-and-pop landlords may have the intention, but it’s reasonable to expect over five or 10 years there would be factors that may change their mind about leaving the real estate business. This may just be a one-off because of the specific facts of the case, which appeared to be a blatant attempt to run around the city’s Rent Stabilization Ordinance,” said Almaraz.
But in conjunction with an increasing number of local and state laws protecting tenants and an increasingly aggressive stance among city officials towards landlords, Almaraz said it’s reasonable that the result would have the average independent housing provider in Los Angeles concerned for the future.
 “The city council could find a way to apply these standards to the mom-and-pop owners, which is the agenda of tenant’s rights advocates. But that could cut both ways, as now landlords can’t upgrade their buildings,” said Almaraz. “I’ve personally already observed an increase in habitability cases in relation to landlord-tenant disputes. And I think that’s the rub – how do the landlords maintain the viability of their properties, when it’s just going to get harder and harder for them?”
Yukelson voiced similar concerns about the potential cumulative effect on independent property owners.
“We’ve already seen the city threaten to use eminent domain to force the turnover (of rental properties) and this will just embolden the city more,” said Yukelson. “These are people who have just come out of four years of Covid regulations, and they’re finally allowed to implement some sort of rent increase. They’re already struggling to get a return. And it seems like we’re just going to get more and more of this sort of thing.”
