Landlords File Federal Lawsuit to Invalidate Registry

Dan Yukelson landlord crusader coverBeverly Hills landlords have never liked the city’s rental unit registry. That year-old ledger of landlords, properties and tenancies is a must-have tool for the city to hold landlords accountable. That’s why landlords fought tooth and nail against it. Last fall their Apartment Association of Greater Los Angeles brought a lawsuit in Superior Court to tank it. Having failed, the AAGLA is back with a literal federal case and a local landlord as plaintiff. Let’s take a look!

The landlords claim that the city is demanding confidential and proprietary business information, as well as personal information about tenants, in a manner that violates constitutional protections.

AAGLA filed its complaint (case #2:18-cv–06840-PSG-E) in United States District Court on behalf of association members and one named co-plaintiff, Ms. Orit Blau (case #2:18-cv–06840-PSG-E). A press release accompanying the filing talks about unlawful search and seizure of “sensitive information, including monthly rental amounts paid by tenants, unit numbers, utility payments and onsite parking availability among other things.” The AAGLA Board calls the registry a “fishing expedition” and “clearly unconstitutional” and is pressing for damages and injunctive relief (an end to the registry).

Unconstitutional? Nearly every city that controls rents has such a registry. It is nothing more than a tool that allows the city to collect information from providers of rental housing and to regulate the leasing of apartments in line with a rent stabilization law. Alas, that’s the rub: regulation!

Here’s what AAGLA executive director (and local fourplex-owner) Daniel Yukelson has to say about the lawsuit:

The City of Beverly Hills has undertaken a vicious campaign against small residential income property owners by forcing them to comply with burdensome administrative reporting requirements. The Tenant Rental Registry is just one aspect of the City’s high cost, rent stabilization infrastructure, which at last count has added nearly a dozen new rent stabilization employees to the City’s already bloated headcount, and is costing taxpayers of the City upwards of two million dollars a year.

Okay, it’s not a tenant registry. There is no information collected from landlords about tenant identities. And the administration is nothing compared to operating rental housing. I don’t hear landlords complain about tenant screening. They love it! As for “high cost,” the city has funded our rent stabilization program at fifty cents on the dollar. The city’s getting away cheap. Those employees? Temps and part-timers. The program budget is under $700,000.

But the federal complaint includes none of that nonsense because it is not factual. It is all press release puffery.

Nothing exercises Mr. Yukelson like the specter of regulation. You may remember seeing letters to our local newspapers that rail against rent stabilization as a communist-era holdover. In his view, rent stabilization is crafted purely to give tenants a free ride at the landlord’s expense. He summed up that perspective at City Council last week. Watch the video!

Clearly Yukelson is in the driver’s seat over at AAGLA, but he’s also the force behind this lawsuit: his wife (and fourplex co-owner) Orit Blum is the only named plaintiff!

Crux of the Lawsuit

AAGLA brought the lawsuit in its capacity as a trade association representing member landlords who own and lease housing in Beverly Hills. The twist: AAGLA is also representing tenants who have some basic information about their tenancies divulged in contravention of our “fundamental liberty and property interest” in privacy under the California Constitution. The complaint continues:

On September 27 , 2016, the City passed and adopted [the rent stabilization ordinance or RSO] to require that a property owner subject to the RSO, as a condition of obtaining a rental registration statement from the City permitting a property owner to rent units in the City, provide to the City, beginning January 1, 2017, without consent of the property owner, or consent of the property owner’s tenants, or a court order as required under the Fourth Amendment of the United States Constitution, a list of tenant rental information for each unit rented including the name of the tenant and the amount of rent charged.

The federal complaint goes on to identify the ordinance as an infringement of AAGLA members’ civil rights given what it views as an unconstitutional, compelled seizure of records. It also alleges a violation of the Equal Protection Clause of the Fourteenth Amendment.

  • The search-and-seizure aspect of the complaint simply objects to being forced to divulge business information as a condition of operating their business. The complaint asserts that this is an undue exercise power “under the color” of local authority.
  • The due process aspect of the complaint asserts that members are treated different from other providers of accommodations — namely hotels and motels — which are not subject to rent stabilization.

But here the AAGLA lawsuit disingenuously conflates two completely different business types: hotels and motels and apartment leasing. Hotels and motels are in the hospitality business; they operate under a conditional use permit and collect a transient occupancy tax for the city. By law they have to show their guest list to authorities on demand. Yet I don’t hear motels and hotels complaining about over-regulation or privacy infringement.

In contrast landlords are relatively free from regulation: no landlord need obtain a conditional use permit to operate and he need show no list of tenants. He collects no hospitality tax. But he must pay a business tax on gross receipts, though, because apartment renting and leasing is a business.[1]

Yet the AAGLA argues that despite the lightest of regulation the landlords have actually suffered harm from the rent stabilization registry requirement. (Indeed the complaint alleges “extreme hardship.”) The complaint seeks both economic damages and injunctive relief (so that no landlord need provide information to the registry).

Why file this lawsuit now? Because rents are about to be re-certified by the city and tenancy information will be updated. Having lost in Superior Court the fight to invalidate the rental unit registry, AAGLA now turns to their only option left: a federal lawsuit on civil rights and constitutional grounds. This it is the second such federal lawsuit against a registry that the ‘Voice of Multi Family Housing’ has filed.

Our Take

The AAGLA seeks a jury trial so far be it from us to presume judgment on the merits of the civil rights aspect of the complaint. But we can’t help but point out that landlords are hardly as burdened as they say by the city’s registry.

For one thing, AAGLA claims that the registry infringes on tenants’ privacy because it collects information about tenants. Not only is that not true, it’s simply disingenuous: only general information about the tenancy is required (no tenant names). And the landlords are asked for general business information that they themselves say is already available elsewhere. In fact Renters Alliance debunked these claims last fall.

We can’t help but feel that landlords are simply trying to escape regulation. Philosophically speaking we hear it in Yukelson’s anti-government and anti-regulation rhetoric. He likes to trot out his ‘free-market’ view. Anti-regulation has a personal dimension for him: he advocates for exempting all fourplexes just like his from local rent regulations. (Mind you, he’s not calling for the exemption of triplexes and duplexes only.)

Strategically, AAGLA puts forth a sympathetic “mom-and-pop” facade for our councilmembers. But mom-and-pop operators are a small, and shrinking, minority in Beverly Hills. But in any case are Yukelson and his wife really mom-and-pop owners? They bought their income-generating investment (9556 W. Olympic Boulevard) four years ago, he said, precisely as a retirement investment. This sophisticated buyer enjoyed a career in finance so presumably he’s more inclined toward cash flow and asset appreciation rather than warm-and-fuzzy home-and-hearth.

  1. The AAGLA’s own magazine describes as its “core service” to members the protection “your investment.” As far as operations go, the Bureau of Labor Statistics explicitly excludes from the changing cost of consumer goods and services the inputs to rental housing. It is viewed as a commercial enterprise and the property is regarded as a commercial asset. (Meanwhile housing is a service provided to consumers.) Why are landlords in the property speculation and apartment leasing business so resistant to being regulated?  ↩

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