Burien, LLC v. Wiley , 179 Cal. Rptr. 3d 14 ( 2014 )

Filed 10/22/14
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FIVE
BURIEN, LLC, B250182
Plaintiff and Appellant, (Los Angeles County Super. Ct.
No. SC114545)
v.
JAMES A. WILEY,
Defendant and Respondent.
APPEAL from a judgment of the Superior Court of Los Angeles, Gerald
Rosenberg, Judge. Affirmed.
Dennis P. Block & Associates, Dennis P. Block, Daniel Costas, for Plaintiff and
Appellant.
Campbell & Farahani, Frances M. Campbell, Nima Farahani, for Defendant and
Respondent.
________________________________
A landlord converted a rent-controlled apartment building to condominiums,
obtained a new certificate of occupancy in 2009 based on the change in use, and raised
the rent. When a tenant objected, the landlord sought a declaration from the court that the
unit was exempt from local rent control ordinances under the Costa-Hawkins Rental
Housing Act (Civ. Code, § 1954.50, et seq.).1 The trial court found the unit was not
exempt and entered judgment in favor of the tenant. On appeal, the landlord contends the
unit is exempt from rent control under section 1954.52, subdivision (a)(1), which
provides an exemption for units that have a certificate of occupancy issued after 1995.
We conclude section 1954.52, subdivision (a)(1), refers to certificates of occupancy
issued prior to residential use of the unit. We affirm.
FACTS AND PROCEDURAL HISTORY
A certificate of occupancy was issued in 1972 for the apartment building at issue
on Sawtelle Boulevard in Los Angeles, California. Defendant and respondent James A.
Wiley (Tenant) leased a unit in the building in 1981. Tenant’s rent was controlled by the
Los Angeles Rent Stabilization Ordinance (Los Angeles Mun. Code, § 151.00 et seq.)
(LARSO). The Costa-Hawkins Rental Housing Act, effective January 1, 1996, exempted
certain units from local rent control ordinances, including units with a certificate of
occupancy issued after 1995 and condominiums meeting certain conditions.
Plaintiff and appellant Burien, LLC (Landlord) purchased the building. Landlord
converted the building to condominiums and obtained a new certificate of occupancy in
2009 based on the change of use from apartments to condominiums. On March 17, 2011,
Landlord served Tenant with a 60-day notice of change of terms of tenancy stating the
rent would be increased from $1,401 to $3,000 per month. Tenant refused to pay the
1 All further statutory references are to the Civil Code, unless otherwise stated.
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increased amount. The Los Angeles Housing Department sent a letter to Landlord stating
the attempted rent increase violated LARSO. The Housing Department referred the
matter to the City Attorney’s Office for further proceedings.
On October 19, 2011, Landlord filed a complaint against Tenant for declaratory
relief and intentional interference with prospective economic advantage. A bench trial
was held on June 25, 2013. The trial court concluded the rent increase violated LARSO.
Landlord filed a premature notice of appeal from the ruling. The court entered judgment
in favor of Tenant on July 22, 2013. In the interests of justice, we treat the notice of
appeal as filed immediately after entry of the July 22, 2013 judgment. (Cal. Rules of
Court, rule 8.104(d)(2).)
DISCUSSION
Standard of Review and Principles of Statutory Interpretation
The interpretation of a state statute presents a question of law, which we review de
novo. (Apartment Assn. of Los Angeles County, Inc. v. City of Los Angeles (2009) 173
Cal.App.4th 13, 21.) Well-established rules govern construction of a statute. Our
primary task is to determine the intent of the legislative body, so as to construe the statute
to effectuate that purpose. (Doe v. Brown (2009) 177 Cal.App.4th 408, 417.) We begin
with the words of the statute. (Ibid.) “Words used in a statute or constitutional provision
should be given the meaning they bear in ordinary use. [Citations.] If the language is
clear and unambiguous there is no need for construction, nor is it necessary to resort to
indicia of the intent of the Legislature . . . . [Citations.]” (Lungren v. Deukmejian (1988)
45 Cal.3d 727, 735.)
But the court is not prohibited “from determining whether the literal meaning of a
statute comports with its purpose or whether such a construction of one provision is
consistent with other provisions of the statute. The meaning of a statute may not be
determined from a single word or sentence; the words must be construed in context, and
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provisions relating to the same subject matter must be harmonized to the extent possible.
[Citation.] Literal construction should not prevail if it is contrary to the legislative intent
apparent in the statute. The intent prevails over the letter, and the letter will, if possible,
be so read as to conform to the spirit of the act. [Citations.] An interpretation that
renders related provisions nugatory must be avoided [citation]; each sentence must be
read not in isolation but in the light of the statutory scheme [citation]; and if a statute is
amenable to two alternative interpretations, the one that leads to the more reasonable
result will be followed [citation.].” (Lungren v. Deukmejian, supra, 45 Cal.3d at p. 735.)
“If . . . the statutory language is ambiguous or reasonably susceptible to more than
one interpretation, we will ‘examine the context in which the language appears, adopting
the construction that best harmonizes the statute internally and with related statutes,’ and
we can ‘“‘look to a variety of extrinsic aids, including the ostensible objects to be
achieved, the evils to be remedied, the legislative history, public policy,
contemporaneous administrative construction, and the statutory scheme of which the
statute is a part.’”’ [Citation.]” (Pacific Sunwear of California, Inc. v. Olaes Enterprises,
Inc. (2008) 167 Cal.App.4th 466, 474.)
“‘We must select the construction that comports most closely with the apparent
intent of the Legislature, with a view to promoting rather than defeating the general
purpose of the statute, and avoid an interpretation that would lead to absurd
consequences.’ [Citation.]” (Realmuto v. Gagnard (2003) 110 Cal.App.4th 193, 199.)
“We presume that the Legislature, when enacting a statute, was aware of existing related
laws and intended to maintain a consistent body of rules. [Citation.]” (Manhattan Loft,
LLC v. Mercury Liquors, Inc. (2009) 173 Cal.App.4th 1040, 1056.)
Exemption Based on Certificate of Occupancy
Landlord contends Tenant’s unit is exempt from rent control under section
1954.52, subdivision (a)(1), because a certificate of occupancy was issued for the unit
after February 1, 1995. Tenant contends the exemption refers to the first certificate of
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occupancy issued for the unit, and does not apply in this case, because his tenancy was
established long before the new certificate of occupancy. We conclude the language of
subdivision (a)(1), standing alone, is susceptible to both parties’ constructions, but
reading the section as a whole, the exemption can only apply to certificates of occupancy
that precede residential use of the unit.
Section 1954.52, subdivision (a), provides three exemptions from local rent
control laws, any of which allow an owner to establish the initial and subsequent rental
rates for a unit.2 The first exemption is for a unit that has “a certificate of occupancy
issued after February 1, 1995.” (§ 1954.52, subd. (a)(1).) The second exemption is for
2 Section 1954.52, subdivision (a), as originally enacted, provided:
“Notwithstanding any other provision of law, an owner of residential real property may
establish the initial and all subsequent rental rates for a dwelling or unit about which any
of the following is true: [¶] (1) It has a certificate of occupancy issued after February 1,
1995. [¶] (2) It has already been exempt from the residential rent control ordinance of a
public entity on or before February 1, 1995, pursuant to a local exemption for newly
constructed units. [¶] (3) It is alienable separate from the title to any other dwelling unit
or is a subdivided interest in a subdivision as specified in subdivision (b), (d), or (f) of
Section 11004.5 of the Business and Professions Code. This paragraph shall not apply to
a dwelling or unit where the preceding tenancy has been terminated by the owner by
notice pursuant to Section 1946 or has been terminated upon a change in the terms of the
tenancy noticed pursuant to Section 827. [¶] Where a dwelling or unit in which the
initial or subsequent rental rates are controlled by an ordinance or charter provision in
effect on January 1, 1995, the following shall apply: [¶] (A) An owner of real property
as described in this paragraph may establish the initial and all subsequent rental rates for
all existing and new tenancies in effect on or after January 1, 1999, if the tenancy in
effect on or after January 1, 1999, was created between January 1, 1996, and December
31, 1998. [¶] (B) Commencing on January 1, 1999, an owner of real property as
described in this paragraph may establish the initial and all subsequent rental rates for all
new tenancies if the previous tenancy was in effect on December 31, 1995. [¶] (C) The
initial rental rate for a dwelling or unit as described in this paragraph in which the initial
rental rate is controlled by an ordinance or charter provision in effect on January 1, 1995,
may not, until January 1, 1999, exceed the amount calculated pursuant to subdivision (c)
of Section 1954.53. An owner of residential real property as described in this paragraph
may, until January 1, 1999, establish the initial rental rate for a dwelling or unit only
where the tenant has voluntarily vacated, abandoned, or been evicted pursuant to
paragraph (2) of Section 1161 of the Code of Civil Procedure.”
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units already exempt from rent control “pursuant to a local exemption for newly
constructed units.” (§ 1954.52, subd. (a)(2).) The third exemption is for a unit that is
“alienable separate from the title to any other dwelling unit or is a subdivided interest in
[a community apartment project, a stock cooperative project, or a limited equity housing
cooperative].” (§ 1954.52, subd. (a)(3).) Condominium units are included in the third
exemption, because they are alienable separate from the title to any other dwelling unit.
The third exemption does not apply if the prior tenancy terminated because the landlord
served a notice of termination or a change in the tenancy’s terms.
Effective January 1, 2002, the Legislature amended the third exemption for
condominium units to exclude “[a] condominium dwelling or unit that has not been sold
separately by the subdivider to a bona fide purchaser for value . . . . However, if a
condominium dwelling or unit meets the criteria of paragraph (1) or (2) of subdivision
(a), or if all the dwellings or units except one have been sold separately by the subdivider
to bona fide purchasers for value, and the subdivider has occupied that remaining unsold
condominium dwelling or unit as his or her principal residence for at least one year after
the subdivision occurred, then subparagraph (A) of paragraph (3) shall apply to that
unsold condominium dwelling or unit.” (§ 1954.52, subd. (a)(3)(B)(ii).)3
3 Section 1954.52, subdivision (a), currently provides: “Notwithstanding any
other provision of law, an owner of residential real property may establish the initial and
all subsequent rental rates for a dwelling or a unit about which any of the following is
true: [¶] (1) It has a certificate of occupancy issued after February 1, 1995. [¶] (2) It
has already been exempt from the residential rent control ordinance of a public entity on
or before February 1, 1995, pursuant to a local exemption for newly constructed units.
[¶] (3)(A) It is alienable separate from the title to any other dwelling unit or is a
subdivided interest in a subdivision, as specified in subdivision (b), (d), or (f) of Section
11004.5 of the Business and Professions Code. [¶] (B) This paragraph does not apply to
either of the following: [¶] (i) A dwelling or unit where the preceding tenancy has been
terminated by the owner by notice pursuant to Section 1946.1 or has been terminated
upon a change in the terms of the tenancy noticed pursuant to Section 827. [¶] (ii) A
condominium dwelling or unit that has not been sold separately by the subdivider to a
bona fide purchaser for value. The initial rent amount of the unit for purposes of this
chapter shall be the lawful rent in effect on May 7, 2001, unless the rent amount is
governed by a different provision of this chapter. However, if a condominium dwelling or
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The legislative history of the amendment is instructive. As explained in the
analysis by the Assembly Committee on the Judiciary on Senate Bill No. 985 (2001-2002
Reg. Sess.) as amended May 17, 2001, at pages 5-6: “According to the sponsors, this
amendment is necessary to close a loophole in law that allows landlords to avoid local
rent control laws. The exemption was originally created to spur construction of
condominiums, seen as an affordable housing alternative, and in recognition that
condominiums were built with the same purpose as apartment units. [¶] However, the
language was broadly written and, as a consequence, some apartment property owners
have taken advantage of the law by obtaining a permit to convert to condominiums, but
never completing the process. In the meanwhile, the property owners continue to rent the
apartment units, free from local rent controls because of the Costa-Hawkins exemption.
In some cases, proponents assert, the condo-conversion permits were pulled up to eight
years ago, but the owners are still renting the unit to tenants. This bill would close that
unit meets the criteria of paragraph (1) or (2) of subdivision (a), or if all the dwellings or
units except one have been sold separately by the subdivider to bona fide purchasers for
value, and the subdivider has occupied that remaining unsold condominium dwelling or
unit as his or her principal residence for at least one year after the subdivision occurred,
then subparagraph (A) of paragraph (3) shall apply to that unsold condominium dwelling
or unit. [¶] (C) Where a dwelling or unit in which the initial or subsequent rental rates
are controlled by an ordinance or charter provision in effect on January 1, 1995, the
following shall apply: [¶] (i) An owner of real property as described in this paragraph
may establish the initial and all subsequent rental rates for all existing and new tenancies
in effect on or after January 1, 1999, if the tenancy in effect on or after January 1, 1999,
was created between January 1, 1996, and December 31, 1998. [¶] (ii) Commencing on
January 1, 1999, an owner of real property as described in this paragraph may establish
the initial and all subsequent rental rates for all new tenancies if the previous tenancy was
in effect on December 31, 1995. [¶] (iii) The initial rental rate for a dwelling or unit as
described in this paragraph in which the initial rental rate is controlled by an ordinance or
charter provision in effect on January 1, 1995, may not, until January 1, 1999, exceed the
amount calculated pursuant to subdivision (c) of Section 1954.53. An owner of
residential real property as described in this paragraph may, until January 1, 1999,
establish the initial rental rate for a dwelling or unit only where the tenant has voluntarily
vacated, abandoned, or been evicted pursuant to paragraph (2) of Section 1161 of the
Code of Civil Procedure.”
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loophole and provide that the exemption would apply only when the unit is sold
separately to a bona fide purchaser for value. Thus, apartment units that have remained
rentals would be subject to local rent control laws.”
“After the Legislature passed the bill and sent it to Governor Davis for signature,
its author (Senator Sheila James Kuehl) wrote the governor: ‘[T]he bill closes a loophole
in Costa-Hawkins that allows landlords to . . . raise rents by falsely “preparing” to
convert a rental unit to a condominium. Under [Senate Bill] 985, in cities that have rent
control, the landlord would be required to actually sell a unit, rather than merely initiate
the conversion paperwork, in order to have rent controls removed.’” (City of West
Hollywood v. 1112 Investment Co. (2003) 105 Cal.App.4th 1134, 1144.)
When a building is constructed, added on to, or altered, a certificate of occupancy
is generated at the conclusion of all inspections to certify that the building meets local
building code requirements for occupancy. A common sense interpretation of section
1954.52, subdivision (a)(1), is that it excludes buildings from rent control that are
certified for occupancy after February 1, 1995. Buildings that were certified for
occupancy prior to February 1, 1995, are not excluded. This interpretation furthers the
purpose of the exemption by encouraging construction and conversion of buildings which
add to the residential housing supply. In this case, because Landlord’s building was
certified for occupancy long before February 1, 1995, it is not excluded from rent control.
Landlord, reading subdivision (a)(1) in isolation, contends the plain language does
not limit the exemption to the initial certificate of occupancy and instead applies broadly
to any certificate of occupancy issued after February 1, 1995. Although the language is
susceptible to this construction, the result does not further the purpose of the statute. A
certificate of occupancy based solely on a change in use from one type of residential
housing to another does not enlarge the supply of housing.
Landlord’s construction would also render the exclusion of certain condominium
units in subdivision (a)(3) nugatory. In 2002, in order to curb abuse of section 1954.52
through false condominium conversions, the Legislature carefully excluded
condominium units which have not been sold separately to a bona fide purchaser. If a
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certificate of occupancy issued after February 1, 1995, based on a change in use from
apartments to condominiums triggers the exemption under subdivision (a)(1), there
would never be a determination under subdivision (a)(3) of whether the unit was sold
separately to a bona fide purchaser. A unit would always qualify for the exemption under
subdivision (a)(1) based on the new certificate of occupancy. Interpreting section
1954.52, subdivision (a)(1) to apply to any certificate of occupancy issued after 1995
would circumvent the tenant protection enacted by the Legislature under subdivision
(a)(3) for buildings converted to condominiums. Landlord’s suggestion that tenant
protection created in 2002 applies only to condominium conversions initiated prior to the
effective date of the original statute more than seven years earlier is untenable. The
Legislature amended section 1954.52 to remedy an abuse that was permissible under the
broad language of the original statute. The plain language and intent of the provision is
to provide protection to tenants in condominium conversions from the effective date of
the legislation into the future.
Similar exemptions in local rent control ordinances encourage the creation of new
residential housing. For example, LARSO exempts housing from rent control if the first
certificate of occupancy was issued after October 1, 1978, unless the building was first
occupied for residential purposes prior to October 1, 1978. It states in pertinent part:
“Housing accommodations, located in a structure for which the first Certificate of
Occupancy was issued after October 1, 1978, are exempt from provisions of this Chapter.
If the property was occupied for residential purposes prior to October 1, 1978, and a
Certificate of Occupancy for the subject building was never issued or was not issued until
after October 1, 1978, the housing accommodation shall be subject to the provisions of
this Chapter if relevant documentation, such as a building permit, establishes that the
building was first occupied for residential purposes prior to October 1, 1978.” (Los
Angeles Mun. Code, § 151.02.)
The City of Oakland’s Residential Rent Adjustment Program provides a similar
exemption from rent control: “Dwelling units which were newly constructed and
received a certificate of occupancy on or after January 1, 1983. This exemption does not
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apply to any newly constructed dwelling units that replace covered units withdrawn from
the rental market in accordance with O.M.C. 8.22.400, et seq. (Ellis Act Ordinance). To
qualify as a newly constructed dwelling unit, the dwelling unit must be entirely newly
constructed or created from space that was formerly entirely non-residential.” (Oakland
Mun. Code, § 8.22.030, subd. (A)(5).)
In Da Vinci Group v. San Francisco Residential Rent etc. Bd. (1992) 5
Cal.App.4th 24 (Da Vinci), the appellate court considered the scope of the exemption
under San Francisco’s Residential Rent Stabilization and Arbitration Ordinance. The San
Francisco ordinance exempts “[r]ental units located in a structure for which a certificate
of occupancy was first issued after the effective date of this ordinance [in 1979.]” (S.F.
Admin. Code, ch. 37, § 37.2, subd. (r)(5).) In Da Vinci, a commercial warehouse built in
1905 was used residentially beginning in 1980, renovated, and granted a certificate of
occupancy in 1986. The local rent control board interpreted the rent control exemption to
apply only to newly constructed rental units, or converted warehouses with new
certificates of occupancy when there had been no prior residential use. The Da Vinci
court concluded the board’s interpretation was consistent with the “goal of easing the
housing shortage by encouraging creation of new residential rental units where there were
none before.” (Da Vinci, supra, at p. 30.) The certificate of occupancy for the
warehouse property created legal residential units from existing residential use, but did
not enlarge the city’s available housing. (Ibid.) The units did not qualify for the
exemption, because they “were not newly constructed, nor was the building restructured
to permit new residential use.” (Ibid.)
In this case, Tenant’s unit is not exempt under subdivision (a)(1) of section
1954.52, because Tenant occupied the unit prior to the issuance of the 2009 certificate of
occupancy. The 2009 certificate of occupancy did not precede the residential use of the
property. The trial court properly determined Tenant’s unit was subject to rent control
and not exempt. We affirm the judgment.
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DISPOSITION
The judgment is affirmed. Respondent James A. Wiley is awarded his costs on
appeal.
KRIEGLER, J.
We concur:
TURNER, P. J.
MOSK, J.
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