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First District Court of Appeal Unanimously Rules the Ellis Act Preempts San Francisco’s 10-Year Ban on Residential Unit Mergers

The First District Court of Appeal issued a unanimous ruling on September 19, striking down a San Francisco ordinance that sought to ban the merger of residential units (i.e., merging two smaller units into one larger one, or merging part of one unit into another unit) for 10 years after an owner exercises rights under the Ellis Act to remove the units from the rental market. The decision was published and is citable as binding legal precedent.

The plaintiffs were the San Francisco Apartment Association, Coalition for Better Housing, and San Francisco Association of Realtors. The plaintiffs were represented by Nielsen Merksamer attorneys Chris Skinnell, Jay Carson and James Parrinello.

Unit mergers have become a popular avenue in recent years to provide suitable housing for growing families, but the challenged ordinance categorically banned the approval of such mergers for 10 years in an express effort to discourage evictions under the Ellis Act. In contrast, the owners of buildings where no Ellis Act evictions had occurred were allowed to apply for merger approvals at any time.

The Court found the ordinance imposed an impermissible penalty on property owners: “[W]e conclude the Ordinance does in fact penalize property owners who leave the residential rental marker, at least those property owners leaving the marker for the purpose of merging a withdrawn rental unit with one or more of the owners’ other units. In fact the Ordinance also penalizes owners seeking to merge multiple units of their property for the purpose of selling the property as a single family residence, and not just to exercise their personal right to exit the residential rental market….the ordinance imposes a mandatory restriction on the rights of property owners that far exceeds the scope of permissible local governance delineated by the Ellis Act.”