L.A. Moves to Curb "Cash-for-Keys" Rent-Control Landlord Scams

Housing is quickly becoming a major issue for many in Los Angeles
Housing is quickly becoming a major issue for many in Los Angeles
Jared Cowan

The Los Angeles City Council is expected to approve a new measure Wednesday to more closely monitor the cash buyouts that landlords offer tenants to vacate leases in rent-stabilized residences. Such "cash-for-keys" buyouts provide landlords with a legal loophole around the city's Rent Stabilization Ordinance (RSO), which generally limits rent increases to between 3 and 10 percent a year. But once a tenant accepts a buyout, the landlord is free to adjust the rent as high as the next tenant agrees to pay, at which point the RSO's rent-increase limits resume from the newly adjusted amount.  

City officials and tenant advocates say the cash-for-keys buyouts encourage unscrupulous behavior and pressure tactics by some landlords — especially against elderly and non-English-speaking tenants — while also depleting the city's already beleaguered market for affordable housing.

The new City Council measure, already approved by the Housing Committee, would require landlords to inform tenants of their rights under the RSO, including a period of between 60 and 120 days to move and a relocation fee of between $7,900 and $19,700, depending on factors such as the length of the tenancy and the number of dependents in the household. The measure also would permit the tenant a grace period of up to 30 days to renege on the deal, and it would require landlords to file a copy of the buyout agreement with the Housing Department's Rent Stabilization Division. 

Landlords who failed to meet the new standards could be prosecuted by the city attorney's office and exposed to civil action from the tenants. Fred Sutton, a spokesman for the Apartment Association of Greater Los Angeles, which opposes the bill, emphasized to L.A. Weekly that the buyouts were legal, private agreements between tenant and owner. `

Sharon Lowe, a deputy on staff for City Councilmember Gil Cedillo, chair of the Housing Committee, said that tenants in rent-stabilized homes have reported being pressured to accept a buyout without proper time or adequate information. 

"If you're in a unit and you've been there 20-plus years and pay a very low rent, and someone offers you a cash-for-keys deal, you may not realize how expensive the rent burden is to remain in the same neighborhood," Lowe said.

On Tuesday, the L.A. Tenants Union convened a march against landlord harassment at the Vermont/Beverly Metro Red Line Station, timed for the day prior to the City Council vote. "The neighborhoods around Vermont and Beverly are being especially hit with voluntary vacates resulting in widespread displacement and health consequences due to harassment," the group announced in a Facebook post. 

Los Angeles currently has about 641,000 residential units covered under rent stabilization. Last year, more than 1,000 Angelenos were evicted from their rent-controlled apartments under a state law known as the Ellis Act, which allows landlords to evict tenants in order to get out of the rental business. That figure was double the number evicted in 2013. Some of the landlords who evicted tenants from rent-controlled units then listed the units on Airbnb, a violation of the law, which requires landlords to pay for relocation fees and notify tenants if they intend to re-rent the units within five years.

"The landlords have become a lot bolder and are using illegal tactics and offering cash to get tenants out and avoid the Ellis Act," said Larry Gross, executive director of the Coalition for Economic Survival, a group that was instrumental to the effort to win rent control for L.A. in the late 1970s. 

Gross called the city's latest proposal a step in the right direction. He said the main priority is to save the rent-controlled units. The most rapidly gentrifying areas of the city are the most at risk, he added, mentioning one particular rent-control tenant in the now-fashionable neighborhood of Los Feliz, who was offered $75,000 to relocate. 

"Even if tenants agree to a higher amount, they're going to end up paying much higher rents and won't be able to continue living in the neighborhood," he said. "But more importantly, we’ll lose the affordable housing units." 

In March, an New York University study of the 11 largest metro areas in the United States found that L.A. renters are the second-most burdened by their housing costs: 60 percent of respondents pay more than 30 percent of their income to rent — the standard for "moderate burden" — and a third of respondents pay more than 50 percent of income for rent, which is considered a "severe burden."  

The Housing Committee also is expected this week take up a new proposal that would require landlords to register with the Housing and Community Investment Department the amount of rent charged for each individual rent-controlled unit. This information would be a required entry added to the renewal of the registration certificate that landlords must file with the city each February. 

Lowe said the new registry would ask for apartment unit numbers, the amount charged for rent and the number of bedrooms and bathrooms or if the unit is a studio. Lowe said that the committee will move to have the full City Council take up the registry proposal for approval on Tuesday. "It will help us keep track of unjust rental hikes," she said, "because there are bound to be a certain amount each year." 

Fred Sutton, of the Apartment Association of Greater Los Angeles, said the registry created "an additional bureaucratic burden" for what he said amounted to a small number of cases, which the current system is capable of addressing. As an alternative, Sutton referred to the procedure in place in Santa Monica and West Hollywood, where landlords register the amount of rent one time and update it upon every re-rental. "You create that history there that you can go off of for any type of illegal increases if there's complaints that come for that, to be able to monitor it. But it's not every single year you have to go through every single rent and basically reduplicate."

Officials Cedillo's office said they expect the registry to go into effect by December, in time to be part of the next renewal cycle in February.

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