Local Landlord Sues to Stop Rental Unit Registration

City of Beverly Hills is named as a defendant in the first lawsuit to target our rent stabilization program. Local landlord Hank Dayani filed for a temporary restraining order to prevent the city from requiring him and his family trust to register his rental properties; and to keep any information collected by the city in relation to rental property registration confidential. The battle has moved from Council chambers to the the courtroom!

Plaintiff Dayani appeared in Superior Court the morning of September 15, 2017 to seek a temporary restraining order to enjoin Beverly Hills from requiring the registration of rental units and to prevent the city from disclosing to the public any landlord or tenant information obtained through the registration process.

The judge granted a temporary restraining order to keep the information confidential. The judge then set an October hearing where the city will have to show cause as to why that information should not be kept confidential. The limited scope of the order ensured that the city could continue the registration of rental units.

The case is about much more than landlord and tenant information. As the litany of allegations in the plaintiff’s first complaint and amended complaint that is the subject of this hearing make clear, this landlord is taking aim at the heart of the rent stabilization program: rental unit registration and the registry itself.

About the Registry

In January of 2017 City Council required Beverly Hills rental property owners to register with the city each rental unit subject to rent stabilization and some aspects of each tenancy (start date, reason for vacancy, and the rent amount). Council reaffirmed the registration requirement in an ordinance in February:

A landlord must register every rental unit that is subject to the provisions of this chapter within 30 days of receipt of notice from the city that registration is required, unless the rental unit is specifically exempt under this Chapter. Registration is complete only when all required information has been provided to the city and all outstanding fees and penalties have been paid…When a rental unit is re-rented after a vacancy, the landlord must reregister the unit with the city within thirty days after the re-rental.

The registry is critical to the Rent Stabilization Program because it tracks owners, units, and lawful rents and provides the means to enforce the ordinance. However landlords have objected to registration on various grounds: burdensome bureaucracy, cost to comply, disclosure of confidential information, invasion of tenant privacy, and even unconstitutional search and seizure. The effort seems more focused on hobbling rent control than, say protecting tenants’ privacy.

Request for a Temporary Restraining Order

The amended complaint heard by the court expands on an earlier complaint filed with the court that alleged the recent changes to the rent stabilization ordinance were unconstitutional and arbitrary; adopted without a factual basis; are punitive to landlords; constitute a ‘taking’; and are generally “facially invalid” as a matter of law. The laundry list of thirteen alleged deficiencies suggest a landlord plenty unhappy about rent control.

The amended complaint finds plaintiff narrowing the scope to several key issues, most notably that rental unit registration “does not comply with certain statutory requirements” under state law. Dayani also objected to the city’s collection of landlord and tenant information required for registration, claiming it confidential and proprietary.

Those claims suggest some overreach. First, numerous rent control cities have enacted rental unit registration requirements and state courts recognized those programs in opinions going back 30 years. Second, plaintiff Hank Dayani filed his amended complaint and request for a temporary restraining order on the very same morning that Beverly Hills detailed regulations for the registration of rental units. That would appear to moot his central claim.

Before we look at plaintiff’s claims, we need to explain the Petris Act, an obscure but important aspect of state tenancy law.

What is the Petris Act?

The Petris Act refers to a section in state law that kicks-in when a locality controls the price of rental housing. In order to cap or control the price, the locality must first identify (or ‘certify’) the maximum lawful rent for each rent-controlled unit. That process must allow both the tenant and landlord to file an appeal (due process) before the locality determined the certified rent.

That figure is important because the certified rent amount then becomes the benchmark on which future rent adjustments are calculated. It is also a reference should any dispute later arise.

Importantly, the Petris Act also relieves the landlord of an excessive or unjust penalty if he is found not to be in compliance with rent control regulations if he has tried in good faith to comply. Each of these provisions is raised in the lawsuit.

Plaintiff’s Claims

Claim: Beverly Hills registration process does not satisfy requirements under the Petris Act. The allegation is that the rental unit registration process failed to include “legislatively proscribed [sic] protections for landlords.”

False. The city created a program that meets the state requirements. As it happened, those regulations, in development as the plaintiff’s first complaint was filed, were detailed the very morning of the hearing. So the full details of the registration process — including the required appeals provision under Petris — were agendized by the city on September 15th for the next Tuesday’s City Council meeting (September 19th).

It is likely the registration regulations were known to the plaintiff even as his injunction was heard by the court. The regulations were formally adopted on September 19th — before the rental unit registration window closed on September 22nd.

Claim: Beverly Hills compels him to violate his tenants’ right to privacy by collecting from the landlord details about tenancies that were proscribed under the law. Plaintiff cites specifically the city’s request for “detailed information about the nature of any eviction or vacancy” as an example of the city’s overreach.

False. The registration process collects no tenant name, as plaintiff concedes, nor does it collect any other information about his tenants at all. The registration form asks for scant information about the tenant except the start date of the tenancy and which utilities or select housing services are included. Here is the form:

registration form: tenancy information
The tenancy portion of the registration form.

In fact, the city does not know the names of tenants unless either the tenant or the landlord appeals the landlord-reported rent amount, or otherwise brings a dispute forward to the city. (That’s why mail to renting households is labeled only ‘occupant.’)

Moreover, questions concerning the reason for a vacancy are only applicable if the unit is presently vacant. That may suggest something about the landlord’s business practices, or it may suggest something about the prior tenant, but it is not relevant to any current tenant.

Registration form vacancy section
Section of the registry form applicable to vacant units.

Besides, Beverly Hills and other rent control cities have long required landlords to report the reason for any involuntary termination, like major remodeling say. In fact, landlords must apply to remove tenants for remodeling or under the state’s Ellis Act — and that entails providing tenant information. Plaintiff has not sought any injunction to stop those practices. So why the registry?

Claim: Beverly Hills uses the registration process to ascertain unlawful information on tenants. Here plaintiff relies on speculation: “Defendant [Beverly Hills] has made clear it intends to request significantly more information from Plaintiff and other landlords.” To that point, he calls the registration process a “backdoor” through which additional tenant information — confidential and private information — is obtained via the landlord in contravention of state law.

From the amended complaint:

The city has twice affirmed its intention to audit information provided by Plaintiff and this likely will result in Defendant’s obtaining the tenant’s name and other information unless the Court provides injunctive relief.

This is simply overreach. The city has no interest in identifying tenants individually or in the aggregate. The city has its hands full enough with landlord lawsuits!

Claim: Plaintiff and other landlords will be “irreparably and/or greatly harmed” if actual rent amounts become public information. Specifically plaintiff speculates that disclosing actual rents drives down asking rents if prospective tenants knew what other tenants are paying.

Moreover, plaintiff claims that disclosing rents contravenes the Costa Hawkins Rental Housing Act because — here he theorizes — that a depressed asking rent interferes with his right to establish the rent he chooses on a vacant unit.

These claims are false. There is zero evidence to support the claim that making rents public will harm the plaintiff or any landlord. Any rent control city must make public the certified rent as a very condition of imposing the price control on that rent. That is a requirement of the Petris Act. Santa Monica makes it searchable by address. West Hollywood requires a public records request. Nevertheless it is all public information.

On the Costa Hawkins claim, there is no support offered. Common sense suggests that the market dictates how much rent plaintiff can ask, and the market is certainly broader than his one property. Where is the harm?

Claim: “Strict compliance” demanded by the city’ rental unit registration program “strong arms” the Plaintiff. He argues that the $500 per-unit penalty contravenes the Petris Act because it penalizes the landlord for providing information that (plaintiff alleges) he is not lawfully at liberty to provide.

False. There is a kind of circular reasoning here. Plaintiff claims that the registration information demanded of him by the city is not lawful for him to provide because it is “beyond the statutorily permissible scope” of state law. So he then goes on to say that sanctioning the plaintiff for not providing that information, which he says he can’t lawfully provide, violates the Petris Act.

Temporary Restraining Order Granted!

While we expect this challenge to the registration process and rental unit registry will ultimately fail. But the judge, when presented with plaintiff Hank Dayani’s carefully prepared amended complaint, agreed pending a hearing scheduled for October.

But there is some irony in granting plaintiff’s argument. The Petris Act does provide landlords relief when they in good faith attempt to comply with the rent control program regulations. But these ungrounded, speculative and sometimes specious claims, not to mention exaggeration (“strong arm” city tactics), is evidence that plaintiff is not making a good-faith effort to comply with the regulations.

Indeed plaintiff Hank Dayani’s complaint is part of a broad obstruction strategy by this landlord and industry association AAGLA to: 1) resist registration of rental units; 2) protect even basic information about their business and practices; and 3) generally hobble the Rent Stabilization Program by invalidating the registry.