Tuesday, February 14, 2017

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C.A. Upholds Rent Control Waivers of Rights

By KENNETH OFGANG, Staff Writer

A tenant’s right to move back into a rent-controlled apartment, if the landlord vacates it after removing the tenant in order to personally occupy the unit, may be waived in exchange for consideration, the First District Court of Appeal has ruled.

Div. One Friday certified for publication its Jan. 24 opinion upholding judgment in favor of landlord Joseph Shalizi. The panel ruled that a buyout agreement between Shalizi and former tenant Brian Geraghty was binding on the latter.

Geraghty lived in the four-unit apartment building for about 22 years, and was paying $938 per month in rent when Shalizi bought the building in 2011. Shalizi’s attorney then sent Geraghty a letter saying the new landlord had decided to remove the unit from the rental market and live there himself, as permitted by the state’s Ellis Act.

The letter also contained an offer: in order to avoid eviction proceedings, Shalizi was willing to allow Geraghty to remain on the premises for a period of time and pay him a sum of money in return for which he would be required to leave on the agreed-upon date and waive all rights under San Francisco’s rent control ordinance.

Agreement Reached

After nearly three months of negotiations, the parties agreed to a July 2011 move-out date and a $25,000 payment.

Geraghty vacated as agreed and received his money from Shalizi. The landlord then began renovating the unit, and he and his wife moved in during October of that year.

The following year, however, Shalizi moved to Cupertino to be nearer his new job and rented the unit to a new tenant for $3,700 monthly. In July 2013, after discovering Shalizi had moved out, Geraghty sued him for rent control violations, negligence, and fraud, and sought rescission of the buyout agreement.

San Francisco Superior Court Judge Lillian K. Sing granted the landlord’s motion for summary judgment. She said there was no evidence Shalizi misrepresented his intention to live in the unit once Geraghty left, and that the landlord would have been within his rights in evicting Geraghty had he not moved out.

She also said Geraghty’s claim that he would have exercised his right to move back into the unit “was speculative at best.”

Banke’s Opinion

Justice Kathleen Banke, writing for the Court of Appeal, said that Geraghty failed to present sufficient evidence of misrepresentation to survive summary judgment.

Shalizi told Geraghty the truth when he said he intended to move into the premises, the jurist said. And there was no evidence as to whether Shalizi represented that he would evict Geraghty under the rent control laws, since the attorney letter said he would do so only if a buyout agreement could not be reached.

“…The entire premise of the buyout agreement was to dispense with rent ordinance provisions in exchange for a significant amount of money,” Banke wrote. “Otherwise, the deal would have been pointless.”

The justice went on to reject Geraghty’s claim that the waiver was contrary to public policy. Citing Kaufman v. Goldman (2011) 195 Cal.App.4th 734, she wrote:

“…We conclude the parties should be held to the terms of their negotiated disposition, which afforded benefits to both and avoided burdening the court with a lawsuit.”

Prior Decision

Kaufman held that the section of the city’s rent control ordinance barring waivers of rights did not apply to the settlement of a similar move-out dispute that had resulted in a lawsuit.

Banke also noted that, in seeking to fashion remedies for tenants who might be otherwise disadvantaged by buyout agreements, the city’s supervisors had “recognized the existence of such agreements and set forth a host of procedures to be followed when a landlord and tenant wish to negotiate one.”

The justice said it was “inescapable that these agreements have been utilized and honored for decades,” and that the city has interpreted its ordinance as allowing them, as long as they have been fairly negotiated.

The case is Geraghty v. Shalizi, 17 S.O.S. 722.