Rent Control vs Public Report

A vote in November could provide a major change for the current California rent control laws and the housing crisis. Although the specifics aren’t completely clear, one thing is certain: big changes are headed our way.

The ballot initiative aims to repeal the Costa-Hawkins Rental Housing Act which places limits on rent control and prohibits “vacancy control.”  (For more info on Costa-Hawking click HERE and HERE).  If repealed, the power to control rents would be back in the hands of the cities.

Looking back, two very important cases come to mind… both in West Hollywood, interestingly:

  • In 1991, the City of West Hollywood attempted to impose conditions on a project that was already underway. The case of the City of West Hollywood v. Beverly Towers, Inc. is a prime example of the need for a Public Report.

The developer owned an entire apartment complex and had done a condo conversion, making it a condominium development. He was renting all the units and still operating it as apartments – no HOA had been formed. The property had been annexed into the city, and the city was trying to impose rent control, including design requirements and off-street parking requirements.  The City passed an ordinance requiring a conditional use permit to sell individual units.

In this case, the developer had obtained approval for and recorded a Final Subdivision Map for the development, and they obtained a Public Report from the DRE.  No units had been sold when the City decided to impose further conditions on the project. The California Supreme Court sided with the developer, stating that once Beverly Towers, Inc. had an approved map and an active Public Report, the City was no longer in a position to place further conditions on the project. The developer did not have to comply because he had met all the requirements of the map act and had an active DRE Public Report.

 

  • Again, in 2003, a nearly identical case, the City of West Hollywood v. 1112 Investment Co., had very different results. In this instance, the developer had an approved map, but while he had obtained a Public Report, he had let it expire. No units had been sold, and the City elected to impose rent control on the project.  In this case, the appellate court in Los Angeles held in favor of the City because the developer did not maintain an active Public Report.

 

The only difference in these two nearly identical cases is the fact that one developer had an active Public Report and one did not. With the possibility of wide-sweeping rent control on the table this November, developers cannot go wrong in choosing to obtain a Public Report.

Currently, our office processes dozens and dozens of public reports every year for what we call “shelf-condos,” which are condominium developments for which you get a Public Report and then ‘put it on a shelf’ and continue to rent the units.

No one knows what will happen in November, and we’re not attorneys, but if you want a Public Report, we can get you one before the vote in November!