Probationary Tenancy: Beverly Hills Backtracks on Ending No-Just-Cause

City Council’s most significant step since it revisited the rent stabilization ordinance is the new prohibition on no-just-cause termination. Unfortunate tenants will remember the traumatic moment they received notice to find a new home. Some didn’t even know it could happen. We are grateful that the city put an end to it. But City Council recently backtracked by agreeing to create a probationary tenancy by making the first lease year a ‘trial’ period, after which the landlord could terminate for no cause and with no relocation fee. The provision would affect more than 400 households with new tenancies each year.

For more on the potential impact to new tenants from the probationary tenancy provision, scroll down to the section titled, Tenant Impact: The Probationary Provision. To learn about what constitutes no-just-cause termination read on!

What is No-Just-Cause?

The city’s consultant HR&A Advisors states it clearly in an issue memo on the topic:

No-cause evictions are involuntary terminations of tenancies for which no reason for eviction is stated by the housing provider. In contrast, just-cause evictions are involuntary terminations of tenancies for reasons stated under California Code of Civil Procedure or the terms of a rent stabilization ordinance. — HR&A Advisors, ‘No-Cause Eviction Policies in the Beverly Hills Rent Stabilization Context’ (2018)

Indeed the law allows for a tenancy to be involuntarily terminated due to reasons that include failure to pay rent, damage to the unit, unlawful activity in the unit, the landlord’s repossession of the unit for his own use and more. These are not no-just-cause terminations, though, but rather are for-cause terminations but not because the tenant is at fault. (That is a reminder of the critical distinction between owning and renting: nobody can take your home if you own it, but it’s far too easy to take it when you rent it.)

No-just-cause termination occurs not because the tenant is at fault; or even if she is not at fault but the law allows the tenancy to be ended. No-just-cause is an end to the tenancy for no reason at all and solely at the discretion of the landlord. In California the landlord need only give the tenant 60 days notice. Here is the subsection in the California Civil Code that makes 60-day no-just-cause termination lawful:

An owner of a residential dwelling giving notice pursuant to this section shall give notice at least 60 days prior to the proposed date of termination.— CIV §1946.1 (B)

That’s it: only 26 words. And the landlord need not pay any relocation fee! However that is where rent control comes in: nearly every city in California that has adopted some form of rent control has also chosen to prohibit the landlord from evicting a tenant for no-just-cause. Only substantiated tenant fault or an allowed reason under the law for termination suffices in those cities.

Until last month, though, Beverly Hills was not one of those cities. While Beverly Hills has protected Chapter 5 rent stabilization tenants from no-just-cause termination since 1978, there was no such protection when it created Chapter 6 three decades ago.

Here is the relevant Chapter 6 section from Municipal Code section that allowed it until last month:

Written notice provided in accordance with state law shall be given to any tenant in order for a landlord to terminate the tenancy of a rental unit subject to this chapter. — BHMC 4–6–6 INVOLUNTARY TERMINATION OF TENANCIES BY LANDLORDS

That’s the entirety of the Chapter 6 section titled ‘Involuntary Termination of Tenancies By Landlords.’  Only 31 words! The landlord only needed to comply with lawful notice to the tenant (and some who evicted tenants for no-just-cause didn’t even meet that condition).

Over three decades, City Council never did muster three votes to end the practice. However last month the current City Council took a significant step when it banned no-just-cause termination. Councilmember Lili Bosse and John Mirisch supported this clear win for tenants so that no longer could a landlord use the threat of termination for no cause to discourage complaints about rent increases or substandard housing conditions. (However we have no local protection against bad-faith actions like ‘constructive eviction’ or retaliation.[1])

No sooner had our councilmembers unanimously shut the door on no-just-cause termination than did it swing open that door again.

Trial Tenancy: A New Worry for Tenants

City Council on November 20th agreed to make each new tenancy probationary. When the lease expires, or at the conclusion of a six-month period following notice (whichever is later), the landlord can decline to offer a new lease and decline to continue accepting rent. At that point the tenancy is discontinued and the occupant(s) will move.

When ending a tenancy at the conclusion of that first ‘trial’ year, the landlord need not give any cause and need not pay any relocation fee. (However he cannot raise the rent for the next tenant. But a 1-year old tenancy is probably close to market rent anyhow.)

The December 18th staff report describes the probationary tenancy this way:

This provision re-instates no-cause eviction during the first year occupancy at a property and partially reverses City Council’s recent urgency ordinance to remove no- cause evictions for Chapter units. This provision would allow owners to evict a tenant for no-cause and provides the tenant no relocation fees….Tenants the first year of the tenancy may not have the ability to recoup their costs of moving into the current unit because of their short length tenancy. This makes difficult for a tenant to save funds to move yet again one year after their last move. — Staff report (December 18)

The staff report helpfully points out that the tenant bumped during the ‘trial’ year may be put in a difficult place. “With no funds, or limited funds, tenants may choose to attempt to contest the eviction or stay longer without paying rent” to result in an unlawful detainer and deeper trouble.

The staff report also cites the potential for abuse:

The fact that relocation fees would not have to be paid for a no cause eviction during the first year of a tenancy may create a financial incentive for a housing provider to terminate the tenancy at that time. — Staff report (December 18)

How Would the Probationary Tenancy Work in Practice?

City Council didn’t talk about the potential for abuse or even the scenarios where it may happen in good faith. Let’s take three examples.

  1. Six months after moving in to a new apartment a tenant is notified that she will have to move once the lease expires. The six-month notice period coincides with the last six months of the first-year’s lease. At lease expiration she’s out.
  2. Nine months into a lease the landlord notifies the tenant that he will not continue her tenancy after the lease expires. But because he must give six months notice, she can remain in the apartment for an additional three months beyond the lease.
  3. Just as the lease is about to expire, the landlord notifies the tenant that her tenancy will be discontinued. The required notice is six months so she can stay six additional months beyond the lease expiration. The duration of her tenancy is a total of 18 months.

The first instance is the most problematic: six months after moving into the apartment, the tenant knows she will move again at lease expiration. However she cannot move any sooner because she’s locked into the lease; she will continue to pay the rent through lease-end. And she can’t move a day later because the lease expires and she’s out of the unit.

That tenant is held hostage because of the probationary provision. Which may be news to Mayor Gold, who said he believed that leases exist to protect tenants. (However Councilmember Bob Wunderlich responded correctly that leases protect landlords too.)

In the latter two cases, the tenant could move out after the expiration of the lease with the required 30 days notice to the landlord. But she will pay rent through that notice period at the same time as she raises money for the first and last months rent and a deposit on the new place (not to mention to pay the movers again). She will leave with zero relocation dollars and she won’t get her deposit back from the former landlord for weeks.

City Council did not discuss the ‘hostage’ scenario, nor did City Council even talk seriously about awarding a relocation fee. Councilmember Lili Bosse raised the fee issue but there were four votes to move ahead. Instead of talking about a fee, the seven-plus minutes spent on this topic was focused solely on providing the landlords with the benefit of the ‘trial’ year. That provision exists in no other rent control city in the country as far as I know.

Tenant Impact: The Probationary Provision

City Council agreed to the probationary provision without any discussion about anticipated impacts on new tenants much less the unanticipated consequences. That is understandable because the discussion lasted only seven-and-a-half minutes! But is it excusable? No: too many tenants every year will be affected by the ‘trial year.’ How many? We can do a back-of-the-envelope calculation.

Because the reach of the provision is directly proportional to the number of new tenancies created, we can look to the American Community Survey for estimates on household turnover in Beverly Hills. These are estimates based on actual surveys; it is the best data we have and it comes from the Census bureau. But the data they provide doesn’t say how many new tenancies are created every year. We have to impute that from the tenure ranges that the bureau gives us in the most recent 2012-2016 dataset.

The relevant tenure/turnover data is presented in this table:

Year householder
moved into unit
Proportion of renting
Moved in 2015 or later 7%
Moved in 2010 to 2014 56%
Moved in 2000 to 2009 23%
Moved in 1990 to 1999 9%
Moved in 1980 to 1989 2%
Moved in 1979 or earlier 3%

We see a pretty large proportion of households moved into their current apartment in the 2010-2014 period. That doesn’t tell us much but it suggests we look for some measure for the survey periods (which vary in duration). We can impute an annualized rate of turnover from those figures like so.

Year householder
moved into unit
Imputed annualized
rate of turnover
Moved in 2015 or later 4%
Moved in 2010 to 2014 11%
Moved in 2000 to 2009 2%
Moved in 1990 to 1999 1%
Moved in 1980 to 1989 0%

Clearly the 2010-2014 period shows the highest rate of turnover across all units. Multiplying by the 7,700 rent-stabilized units gives us a rough estimate of the number of units that would turn over in any given year (as imputed from the period categories provided by the survey).

Period Units turned over
in each year (inputed)
2015 or later 288
2010 to 2014 863
2000 to 2009 174
1990 to 1999 67
1980 to 1989 16

Unfortunately the available data do not allow us to nail down a good estimate of new tenancy creation. The best we can do is make a guess by averaging the number of tenancies created in any year for the periods reported in the survey’s tenancy tenure data. It is hardly precise! But it suggests more or less 8% turnover over the past decade (about 600 per year).

If that is at all an accurate gauge of turnover — and I bet it is conservative! — there will be about 800 new tenants every year who will be entering a first ‘trial’ year and subject to termination without relocation fees.

More alarming, city consultant HR&A Advisors estimated the number of new tenancies to be much, much higher. As the staff report noted, “According to the [HR&A] data brief, the turnover rate for tenants in Beverly 24% could place approximately 1,848 tenants a position of being required to move no relocation funds.”

The actual impact of the probationary period won’t be known any time soon — not until a couple of years of actual turnover data comes though the rental unit registry. By then, no doubt, some new tenants will learn about the probationary tenancy provision the hard way: eviction and no relocation fee.

Key Concerns

Landlords may use the probationary tenancy provision as a practical way to screen tenants after the fact. Today screening happens largely on paper; a prudent landlord is a careful landlord. But the probationary tenancy gives the landlord a year to reconsider his decision to house that tenant and then summarily send them packing if he feels he erred. If the landlord makes a mistake, the tenant pays.

Landlords may invoke the probationary tenancy provision to discriminate on any basis. California protects 13 classes of people from discrimination. But it can have no purchase when no reason is given to terminate. That’s how no-just-cause termination and probationary tenancy are exactly alike: it’s a license to discriminate no reason needed. A veteran with psychological trauma getting run off by a landlord is perfectly legal because with the probationary tenancy the landlord answers to no one.

And finally, some proportion of new tenants are existing residents in rental housing who chose to move or are obligated to find replacement housing because they’ve been displaced in accord with our laws. Imagine a 20-year Beverly Hills resident, perhaps a senior, who must move and now faces an uncertain future after the first year. It will happen.

This is a Backtrack on Ending No-Just-Cause

Vice-Mayor John Mirisch is the proponent of the probationary provision. And that’s a head-scratcher because he was among the councilmembers most supportive of ending no-just-cause in the first place! He explained his rationale this way:

If you [the landlord] have a year lease but no ability to terminate it, then you don’t have a year lease – you have a forever lease…If I sign a car leas for a year it’s for a year – it’s not forever. Without a ‘trial year’ we’re effectively saying a lease is forever.

But rental housing is not like a leased car; it is a home. Perhaps a better analogy is the mobile home. It’s a home but it’s on rented land. Yet the state has enacted very significantly restrictions on how landlords can treat mobile home residents. And that protection is much different than is afforded any car buyer. It seems to me that the Vice-Mayor fails to recognize the difference.

[Note: this post has been updated to reflect the draft ordinance provisions and the December 18th staff report.]

  1. Tenants often contact Renters Alliance is to complain about conditions that appear to fall short of even the state’s minimum standards for ‘tenantable’ premises. Those conditions would meet the definition of ‘constructive eviction’ in any other rent control city. But the state law’s prohibition on constructive eviction was simply an academic point in Beverly Hills: our complaint-based code enforcement system could not hold bad-apple landlords accountable when tenants were afraid to complain. They either left of their own accord; were given a 60-day notice and then departed; or complained about conditions, received a 60-day notice and then departed.  ↩

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