With property values steadily rising throughout Los Angeles, it isn't too surprising that building owners and landlords are looking for ways to charge 2017 market-rate rents on some of the approximately 624,000 rent-controlled units in the city — that estimate coming from the rent control division of the city's housing agency.
L.A has lost more than 2,600 rent-controlled units since January 2016, according to a report released in October by the nonprofit Coalition for Economic Survival, which keeps a quarterly tally. The latest Apartment List Los Angeles Rent Report found a 3.9 percent increase in rents so far in 2017 compared with the same period last year.
The city’s Rent Stabilization Ordinance (RSO) limits rent increases to 3 percent a year. But landlords in Los Angeles can circumvent the RSO through cash buyouts known as “voluntary vacate” or “cash for keys.” Once a rent-controlled tenant accepts such a buyout and moves out, the landlord is free to increase the rent as high as the next tenant agrees to pay, at which point the RSO's rent-increase limits apply to the higher amount.
Affordable-housing advocates have long argued that cash-for-keys agreements become more common as the rental market gets more and more expensive. “When the economy gets good, landlords do this,” says Elena Popp, executive director of the Eviction Defense Network.
A state law known as the Ellis Act allows property owners to mass-evict tenants from rent-controlled apartments regulated under the city's rent-stabilization ordinance and convert them to condos or tear down the building and begin anew. Cash-for-keys offers can be useful to expedite the process of vacating rent-controlled buildings through the Ellis Act.
City housing records show that, starting in 2016, the majority of the rent-controlled units that landlords requested be removed from the housing market under the Ellis Act were already vacant (36 percent of apartments that lost Ellis Act protection in 2015 were vacant — and 59 percent are in 2017 so far). Affordable housing advocates say the data reinforce what they’ve been saying for years: Cash buyouts, in which tenants are vacated ahead of schedule, are becoming more common.
“Something is going on there, and our conclusion is either there's a lot more tenant buyouts going on or there's a lot more intimidation and illegal harassment to get tenants to move out, thinking they have no choice,” says Larry Gross, executive director of the Coalition for Economic Survival.
In January, the Los Angeles City Council began requiring landlords to notify the city of all cash-for-keys agreements. City records show there were a total of 696 cash-for-keys agreements filed in the first nine months of 2017.
Gross says many people living in rent-controlled units are unaware that in the event of an Ellis eviction, aka no-fault eviction, tenants are guaranteed payment in the form of relocation assistance.
Here are some tips on what to do if your landlord comes to you with a cash-for-keys offer on your rent-controlled apartment:
- The city's rent-stabilization ordinance specifies how much landlords must pay tenants to move out of a rent-controlled unit — and that amount is a useful starting point in negotiations for tenants who are willing, for the right price, to spare their landlord the time-consuming process of an Ellis eviction.
- In January, Los Angeles began to require that landlords — prior to offering a cash buyout — disclose the minimum amount of relocation money a tenant is owed. The relocation fee ranges between $8,050 and $20,050, depending on factors such as the length of the tenancy, the presence of child dependents in the household and whether a tenant is a senior, disabled or has an income below the federal poverty limit. “When people are offered $20,000, it feels like a lot of money to them,” Popp says. “But taking $20,000 to move out of your two-bedroom in Echo Park you’re renting for $600 is a lousy deal.”
- Popp advises tenants to determine the value of their home before giving it up, and she recommends using a formula that subtracts the current rent you pay from the rent the owner would be able to get for the unit at market rate, and then multiplying the difference by your life expectancy. “While this is not a precise calculation,” she says, “it will give the tenant an idea of what they are giving up.”
- Prior to the cash buyout offer, landlords also are required to inform tenants that they have the right to not accept the offer and that they are protected from retaliation from the landlord if they choose to turn down the offer. Tenants have the right to consult an attorney, a housing advocate or the city housing agency before deciding on an offer, and the right to change their minds and rescind the offer within 30 days after it has been signed.
Gross says that despite the city’s efforts to more closely monitor cash-for-keys agreements, illegal evictions continue to be a problem.
He says tenants of an apartment building on James M. Wood Boulevard in Westlake came to his organization with notices from their landlord that informed them the building was being converted to condos and they had 90 days to move out. But the legal eviction procedure under the rent-stabilization ordinance gives tenants at least 120 days to move out, with the opportunity to extend it to one year. Despite new city regulations, Gross says, landlords still have little to lose by trying to evict tenants illegally.
“The key to all this,” Gross says, “is that tenants need to know their rights”