Eviction for Major Remodeling: Finally Off the Books After 43 Years

Beverly Hills City Council in January eliminated the landlord’s ability to evict a rent-stabilized household for the purpose of major remodeling. The provision was complicated and infrequently used but nevertheless represented a threat to tenants in an overheated rental housing market. The problem was the definition of ‘major remodeling’ in the rent stabilization ordinance: an expenditure as little as $7,000 on interior upgrades could qualify and result in a no-fault eviction. Not only is it good to have it off the books — but merely taking that step represents city council’s first effort to amend the rent stabilization ordinance in FIVE years.

What is Major Remodeling?

The major remodeling provision provided the landlord of a rent-stabilized tenant a reason to evict for no-cause if the landlord undertook “remodeling or reconstruction of more than one apartment unit” at the property. The eviction was involuntary as the tenant didn’t have to consent to the improvements, of course, because those improvements were for the next tenant. Importantly the term ‘major remodeling’ was not defined in terms of degree of reconstruction. The landlord only had to meet the expenditure thresholds that are included in the rent stabilization ordinance.

The major remodeling provision provided an incentive to evict the longest-tenure households. For one thing the rent is likely be much lower than market rent and so the financial upside is that much greater after a remodel. And landlords who hadn’t upgraded apartments over some extended period of time could now recover the cost of remodeling (and more) by renting the place to new market-rate tenants.

A real problem with the major remodeling provision is that the thresholds that could trigger a no-fault eviction were last adjusted in 2004 but were not adjusted by city council for inflation in the intervening two decades. The practical effect of not adjusting these thresholds for inflation is that a landlord could meet the eviction threshold today by undertaking that much smaller of a remodeling job.

Indeed two decades of inflation have eroded the value of today’s construction dollar. The $15,000 two-bedroom remodel budget in 2004 buys only a $9,000 remodel today — which is effectively a 66% decrease in the scope of work that is the trigger for an eviction. Instead of revisiting these numbers city council simply eliminated the provision from the rent stabilization ordinance.

Rent Stabilization Commission Recommended Elimination

Ordinance 23-O-2871 eliminating rent major remodeling was adopted by city council on January 24, 2023. In the preamble it says that the city’s rent stabilization commission had earlier agreed to strip the provision from the rent stabilization ordinance. The commission had a say because city council tasked the commission with policy recommendations to council about remodeling and other matters.

The commission discussed the major remodeling provision in mid-2020. Helen Morales, now the former deputy director of the rent stabilization division, presented the major remodeling provision to the commission with a staff recommendation not to eliminate it but instead to simply update the numbers for 2020. Morales called the provision  “a balance between incentivizing owners to maintain rental properties while continuing to stabilize rents.”

In our comment to the commission we called that out as simply wrong:

Landlords do not need an incentive to maintain the property; that obligation is implicit in the rental agreement. Fixtures and systems must function properly and exterior treatments must be renewed periodically. Such Maintenance should be planned by every leasing business and no incentive is necessary…Please consider recommending the elimination of the remodeling provision from chapter 5 and chapter 6. — Renters Alliance comment

Alternately we provided the commission with some analysis showing how the thresholds could be adjusted not for inflation but in line with an industry standard: the building cost index.

Turns out we overestimated the commission’s interest in analysis. Commissioners tied themselves into knots trying to determine the correct adjustment to the thresholds. Another challenge was the complexity of the provision: at 3,700 words it comprises more than 25% of the entire rent stabilization ordinance. It was simply a lot to work through for a commission not very conversant with our rent stabilization ordinance.

There is some backstory here. Morales put this on the inexperienced commission’s agenda as an introduction to amending the rent stabilization ordinance. It was a softball pitch to a batter just getting warmed up. But after hours of discussion it was a swing and a miss: instead of tweaking the thresholds, as recommended by staff, the commission instead chose to simply scrap it.

Ironically the landlord commissioners joined the at-large commissioners to vote 4-2 to eliminate a provision that could benefit a landlord. The two tenant commissioners (since departed) should have voted to eliminate it but instead they voted to retain it!  This was an early indication of how dysfunctional this commission could be.

Unanimous City Council: Eliminate the ‘Major Remodeling’ Provision

The rent stabilization office brought the matter to city council for discussion on December 13, 2022 and for a second reading on January 24, 2023. (Read the staff report.) This was more than two years after the rent stabilization commission recommended that the provision be eliminated from the rent stabilization ordinance. City council of course makes the final decision.

Councilmember Sharona Nazarian asked, “Why now?” Helen Morales, the former deputy director of the rent stabilization division, told council that there has been an eviction moratorium has been in place for nearly three years during which time the provision could not be used. Now that the last eviction protections were expected to expire in Los Angeles County on December 31st, landlords could use the provision to evict tenants for the purpose of major remodeling. “We felt it was urgent to bring it forward at this time,” Morales said.

The ensuing city council discussion touched on a number of issues. How often was it used? The city didn’t maintain data on evictions so there was no way to know.  The only data in hand was the zero complaints that tenants filed in connection with an eviction for major remodeling.

“I don’t know if anybody is even utilizing these codes [sic] according to the way they are written,” said one councilmember. Another added, “We didn’t have any record — none was presented to us — of anybody utilizing this ordinance [sic].”

Who would be most affected? The city’s small-and-shrinking Chapter 5 households, which are predominantly lower-income seniors, could be disproportionately affected, Morales said. And then of course there were those outdated thresholds. A landlord could evict a tenant to spend as little as $7,000 on a remodel. That didn’t sit right with Mayor Lili Bosse.

While several councilmembers expressed support for landlords, but given the scant use of the provision in the past, and the potential to destabilize tenants in the future, city council unanimously supported the commission’s recommendation to eliminate it from the rent stabilization ordinance.

Funny aside: A councilmember asked about the rent stabilization commission’s 4–2 split vote. Morales said that at-large commissioners and tenant commissioners joined to recommend that the major remodeling provision be eliminated. Undoubtedly that’s the alignment that councilmembers expected. But that was wrong: it was the landlord commissioners that voted with at-large commissioners to scrap it while our two tenant commissioners actually voted against eliminating the provision. (Read the minutes of the commission meeting.)

History of the Provision

Eviction for ‘major remodeling’ is gone now but the history of the provision is worth reviewing because it says something about our city’s halting progress in extending tenant protections.

When the rent stabilization ordinance was initially adopted in 1978 the landlord could not evict for remodeling. But that changed in 1980 with urgency ordinance 80-O-1768 that added a provision to evict rent-stabilized tenants for “alternation work on a building for purposes of major remodeling.” That language suggests council was thinking about remodeling at the scale of the property rather than, say, interior improvements to a unit.

Six years later city council returned to the matter with ordinance 86-O-1967 which clarified that ‘major remodeling’ applied to individual units too. For the first time council defined remodeling to mean a threshold expenditure above which a landlord could evict a rent-stabilized tenant. In 1986 the landlord of a two-bedroom rent-stabilized tenant could evict her if he spent $7,500 to remodel.

More problematic for landlords, though, the 1986 ordinance also established a complicated process for evicting a tenant for the purpose of remodeling. (We go into those conditions in our explainer, Major Remodeling: What You Need to Know.) For most landlords the provision was simply too complicated to use. At 3,700 words it comprised 25% of the rent stabilization ordinance text.

City council amended the provision only one other time: in 2004 it adopted ordinance 04-O-2449 to double the required expenditure that was set nearly two decades prior. The doubled thresholds more than compensated for inflation between 1986 and 2004 however those thresholds were never again adjusted. How to adjust them and what other changes to make in the major remodeling provision stymied the commission. In the frustrated commissioners simply said, Get rid of it. City council agreed without much debate.

On January 24, 2023 city council adopted ordinance 23-O–2871 to eliminate the major remodeling provision. Tenants and landlords weren’t informed and no press release announced it. Shouldn’t it have been announced? After all it was the first amendment to the ordinance in FIVE years.

If you have been evicted using the former major remodeling provision please get in touch with Renters Alliance. We want to hear from you!