1041 20th Street v. Santa Monica Rent Control Bd.

Filed 7/30/19
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FIVE
1041 20TH STREET, LLC, B290242
Plaintiff and Respondent, (Los Angeles County
Super. Ct. No. SS028966)
v.
SANTA MONICA RENT CONTROL
BOARD,
Defendant and Appellant.
ASN SANTA MONICA, LLC, B290956, B291240
Plaintiff and Respondent, (Los Angeles County
Super. Ct. Nos. SS026542,
v. SS029136)
SANTA MONICA RENT CONTROL
BOARD,
Defendant and Appellant.
APPEALS from judgments of the Superior Court of Los
Angeles County, Gerald Rosenberg, Judge. Reversed with
directions.
Donald F. Woods, Jr., for Plaintiff and Appellant.
Santa Monica Rent Control Board, J. Stephen Lewis; Best
Best & Krieger, John C. Cotti and Gregg W. Kettles for
Defendant and Appellant.
No appearance for Plaintiff and Respondent.
I. INTRODUCTION
Plaintiffs, 1041 20th Street, LLC and ASN Santa Monica,
LLC, filed petitions for writs of administrative mandamus (Code
Civ. Proc., § 1094.5), and 1041 20th Street, LLC also filed a
complaint for declaratory relief, requesting, among other things,
a finding that defendant Santa Monica Rent Control Board (the
Board) was equitably estopped from asserting that rental
properties were subject to rent control.1 The trial court granted
the petitions and the requested declaratory relief. The Board
appeals, contending that it did not have authority to permanently
exempt rental units from rent control by a permit pursuant to the
1 The rental properties at issue are located at 1041 20th
Street (20th Street property) and 1915 Ocean Avenue (Ocean
Avenue property) in Santa Monica (sometimes collectively
referred to as the rental properties). 1041 20th Street, LLC is the
current owner of the 20th Street property, and ASN Santa
Monica, LLC is the current owner of the Ocean Avenue property.
This appeal refers to the prior and current owners of those
properties. For ease of reference, we will refer to the current and
prior owners of the 20th Street property as “20th Street Owner”
and to the current and prior owners of the Ocean Avenue
property as “Ocean Avenue Owner.”
2
Santa Monica City Charter, article XVIII, section 1803(t),2 and
thus could not be equitably estopped. We agree and reverse.3
2 Later undesignated section references are to article XVIII
of the Santa Monica City Charter, known as the Rent Control
Law. We will adopt the terminology used by the parties and refer
to permits obtained pursuant to section 1803(t) as “removal
permits.”
3 The Board moved to dismiss 20th Street Owner’s cross-
appeal, asserting that plaintiff lacked standing because it was
not aggrieved. “In a mandamus proceeding, just as in a civil
action, ‘[a]ny party aggrieved may appeal’ from the final
judgment. (Code Civ. Proc., . . . §§ [902,] 904.1, subd. (a)(1),
1109.) ‘One is considered, “aggrieved” whose rights or interests
are injuriously affected by the judgment.’ [Citation.] Conversely,
‘[a] party who is not aggrieved by an order or judgment has no
standing to attack it on appeal.’” (El Dorado Irrigation Dist. v.
State Water Resources Control Bd. (2006) 142 Cal. App. 4th 937,
977.) In its cross-appeal, 20th Street Owner seeks only to affirm
the judgment below and argues alternative grounds to affirm.
Because 20th Street Owner does not seek additional relief, it is
not aggrieved and we dismiss the cross-appeal. We will, however,
address 20th Street Owner’s alternative arguments to the extent
they are directly responsive to the Board’s appeal. (See Little v.
Los Angeles County Assessment Appeals Bds. (2007) 155
Cal. App. 4th 915, 925, fn. 6 [“Respondents are free to urge
affirmance of the judgment on grounds other than those cited by
the trial court”].)
3
II. BACKGROUND
A. Santa Monica’s Rent Control Law
“In April 1979, the City of Santa Monica (the City) adopted
a rent control charter amendment (. . . the Rent Control Law) and
created an elected rent control board (Board) to regulate rentals.
Among other things, the Rent Control Law requires that owners
register each rental unit and pay annual registration fees to the
Board, establishes maximum allowable rents, provides for annual
general adjustments and individual adjustments of allowable
rents, prohibits evictions except for specified reasons, and
prescribes remedies for violations of its provisions.” (Santa
Monica Beach, Ltd. v. Superior Court (1999) 19 Cal. 4th 952, 957
(Santa Monica Beach).)
“The stated purpose of the Rent Control Law, as expressed
in the preamble to the charter amendment[s], [is] as follows: ‘A
growing shortage of housing units resulting in a low vacancy rate
and rapidly rising rents exploiting this shortage constitute a
serious housing problem affecting the lives of a substantial
portion of those Santa Monica residents who reside in residential
housing. In addition, speculation in the purchase and sale of
existing residential housing units results in further rent
increases. These conditions endanger the public health and
welfare of Santa Monica tenants, especially the poor, minorities,
students, young families, and senior citizens. The purpose of this
Article, therefore, is to alleviate the hardship caused by this
serious housing shortage by establishing a Rent Control Board
empowered to regulate rentals in the City of Santa Monica so
that rents will not be increased unreasonably and so that
4
landlords will receive no more than a fair return.’” (Santa
Monica Beach, supra, 19 Cal.4th at p. 957.) One stated intent of
the Rent Control Law is “to enable the Board to provide relief to
persons facing particular hardship and to protect and increase
the supply of affordable housing in the [C]ity.” (Id. at p. 988.)
Another purpose is to “attempt[] to provide reasonable
protections to tenants by controlling removal of controlled rental
units from the housing market . . . .” (§ 1800.)
Section 1803(t) provides one means for controlling removal
of units from the housing market, the removal permit. It states:
“Any landlord who desires to remove a controlled rental unit from
the rental housing market by demolition, conversion or other
means is required to obtain a permit from the Board prior to such
removal from the rental housing market in accordance with [the]
rules and regulations promulgated by the Board. In order to
approve such a permit, the Board is required to find that the
landlord cannot make a fair return by retaining the controlled
rental unit.” (§ 1803(t).)
In 1983, the Board implemented regulations that govern
the granting of removal permits. Those regulations, which are
currently suspended, describe four categories of removal permits.
Category A permits are for landlords who are “unable to collect
the current Maximum Allowable Rent (MAR) on the unit.”
Category C permits are for landlords who prove a controlled
rental unit “is uninhabitable and cannot be made habitable in an
economically feasible manner.”
In 1984, voters approved an amendment to the Rent
Control Law which was intended, among other things, “to ensure
due process of law for landlords and tenants, effective remedies
5
for violation of the law, and consistency with constitutional
requirements.”4
B. In 1993, the Board Granted a Category C Removal Permit
to 20th Street Owner
In 1989, 20th Street Owner purchased the 20th Street
property for $880,000.5 The 20th Street property, which
consisted of 13 residential rental units, was registered with the
Board on June 15, 1979. The 20th Street property was in poor
condition at the time of purchase.
On June 14, 1993, 20th Street Owner filed an application
for a Category C removal permit. The application stated it was
“hereby made for a permit to remove a controlled rental unit from
the residential rental market pursuant to the Santa Monica City
Charter . . . and the rules and regulations of the [Board].” 20th
Street Owner indicated on the application that the removal was
for “Renovation of Building.”
On October 14, 1993, the Board held a hearing on 20th
Street Owner’s application. At the hearing, the Board discussed
a staff report, including findings by its property inspector. The
staff report found that the 20th Street property was
4 We previously granted the Board’s request for judicial
notice of the Rent Control Law as adopted by the voters on
November 6, 1984.
5 James Corrigan purchased the property with another
person having a 10 percent interest. By 1990, Corrigan was the
sole owner. The property’s owner eventually became 1041 20th
Street, LLC, with Corrigan as the company’s owner and manager.
6
uninhabitable, the costs for repairs to bring the building to a
habitable condition exceeded the maximum collectable rent, and
the owner would not be able to repair the property to habitability
in an economically feasible manner.
At the hearing, a Board commissioner asked a Board staff
attorney to describe the effect of a Category C removal permit.
The two engaged in the following exchange:
“COMMISSIONER []: Why don’t you walk through it with
me. What is the meaning of the Category ‘C’ removal at this
point?
“[STAFF ATTORNEY]: It means that Mr. Corrigan can
rent these units for whatever he wishes. They are no longer
subject to rent control.
“COMMISSIONER []: They go to market, they’re called
market rates, rental rates.
“[STAFF ATTORNEY]: Right, right. If, in fact, he wished
to redevelop this property, the [R]ent [C]ontrol Board would sign
off on any development permit that came before it, the staff
would. We would settle it as a property that was not governed by
rent control.”6 (Italics added.)
On October 14, 1993, following the hearing, the Board
granted 20th Street Owner a removal permit, and made the
following findings: “1. The subject property is uninhabitable . . . .
[¶] 2. The repairs necessary for habitability cannot be completed
in an economically feasible manner.”
6 The audio recording of the October 14, 1993, hearing was
played during the 2016 administrative hearing, and was
transcribed as part of that hearing.
7
C. In 1994, the Board Granted a Category A Removal Permit
to Ocean Avenue Owner
On May 14, 1987, Ocean Avenue Owner purchased the
Ocean Avenue property, which was comprised of 70 residential
rental units.7 On March 31, 1994, Ocean Avenue Owner applied
for a Category A removal permit for seven of its 70 units.8 As
with 20th Street Owner’s application, the first paragraph of
Ocean Avenue Owner’s application provided that it was for “a
permit to remove a controlled rental unit from the residential
rental market pursuant to the Santa Monica City Charter . . .
and the rules and regulations of the [Board].”
By the time of the hearing, three of the units for which
Ocean Avenue Owner sought a removal permit were rented. The
staff report recommended that the Board grant the Category A
removal permits for the remaining four units.
On July 14, 1994, the Board held a hearing. On
July 28, 1994, the Board issued its decision granting the removal
7 The Ocean Avenue property’s prior address was 110-120
Pico Boulevard. BLD Associates II, Ltd. was the owner who
applied for the removal permit at issue. The Ocean Avenue
property went through several ownership changes. On
February 27, 2013, ASN Santa Monica, LLC purchased the
Ocean Avenue property.
8 The Board repealed Regulation 5014(a), which governed
Category A removal permits, on May 5, 1994. Applications for
Category A removal permits pending before the repeal were
allowed to proceed.
8
permit as to three units, including the unit at issue, Unit 211, as
the owner had rented one additional unit by this time.
D. The Board’s Treatment of Removed Residential Rental
Units as Exempt from Rent Control
Following its issuance of the removal permits, the Board
consistently treated all of 20th Street property’s rental units and
particular units of the Ocean Avenue property as exempt from
rent control. In its communications with 20th Street Owner and
Ocean Avenue Owner, as well as in its internal communications,
the Board unequivocally stated that the properties had been
granted permanent exemptions from the Rent Control Law and
did not need to be registered with the Board.
E. In 2016, the Board Notified 20th Street and Ocean Avenue
Owners that Rental Units Remained Subject to Rent
Control
On January 27, 2016, an information analyst from the
Board sent a letter to Ocean Avenue Owner, stating: “Units
# 211 [and others] at 1915 Ocean Avenue are subject to the Rent
Control Law. Although removal permits were granted for these
units on July 14, 1994, they were not demolished or converted
and continue to be used for residential rental purposes.
Accordingly, they remain subject to the Rent Control Law . . . .”
On March 7, 2016, J. Stephen Lewis, the Board’s general
counsel, sent a letter to a tenant in the 20th Street property
advising that 20th Street Owner, after displacing tenants
pursuant to a removal permit, had returned the property to the
9
rental market and thus the property was “fully subject to the rent
level and eviction protections afforded under . . . Santa Monica’s
rent control law . . . .”
On March 16, 2016, Lewis sent an email to 20th Street
Owner, acknowledging that Board staff had previously opined
that “a removal permit is a permit to ‘remove a property from
rent control[.]’” Lewis continued, “Under the law’s plain
language, the Board granted you a permit to remove your
property from the rental housing market. I understand that you
did that, but that the property is now again being rented. The
property is, therefore, subject to the rental control law.” (Italics
original.) Lewis indicated that the Board was not seeking
recovery of any benefits that 20th Street Owner had gained
during the period the 20th Street property was exempted from
rent control. Lewis, however, instructed 20th Street Owner to
register the 20th Street property’s residential rental units with
the Board without delay.
F. Excess Rent Complaints
Following the Board’s letters, various tenants of the 20th
Street property and the Ocean Avenue property filed complaints
with the Board, asserting that the owners had collected excessive
rent under the Rent Control Law.9
9 For Unit 211 of the Ocean Avenue property, two excessive
rent complaints were filed, one for the period of August 1, 2015,
to February 9, 2016, and one for the period of March 2016 to
August 17, 2016.
10
The Board conducted an administrative proceeding and
found in favor of the tenants, concluded that the units were
subject to rent control, and awarded the complaining tenants
various amounts for excess rent. Among other findings, the
Board concluded that it lacked authority under the Rent Control
Law to grant permanent exemptions from rent control by a
removal permit.
G. 20th Street Owner’s Petition for Writ of Administrative
Mandamus and Complaint
On March 20, 2017, 20th Street Owner filed a combined
petition for writ of administrative mandamus and complaint for
declaratory relief. It argued that the Board’s current
interpretation of the Rent Control Law, that is, that units for
which the owner had previously obtained removal permits
remained subject to rent control, was incorrect and not supported
by past interpretation or policy.
20th Street Owner argued that under the doctrine of
“administrative finality”— referring to the doctrine that an
administrative agency cannot reopen or reconsider a final
administrative decision—the Board had no authority to amend,
modify, revoke, or otherwise nullify the 1993 granting of the
removal permit. 20th Street Owner asserted that under the
doctrine of equitable estoppel the Board was prohibited from
“nullifying or revoking . . . vested rights . . . granted in . . . 1993
. . . .” It maintained that it had detrimentally relied on the
Board’s statement that the 20th Street property would be exempt
from rent control by investing approximately $100,000 in the
11
property and obtaining a $2.55 million loan secured by the
property.
20th Street Owner requested that the petition be granted
and that the trial court issue a writ of administrative mandamus
requiring the Board to set aside its determinations in the excess
rent complaints and to order the Board to refund the registration
fees imposed after March 2016. 20th Street Owner also
requested various forms of declaratory relief, including that:
(1) it was entitled to continue operating the 20th Street property
without restrictions imposed by the Rent Control Law; (2) the
Board had no authority to revoke or nullify its 1993 removal
permit; (3) the Rent Control Law did not grant the Board any
power or duty to revoke removal permits; (4) a removal permit
under section 1803(t) removed ‘“a controlled rental unit from the
rental housing market”’ such that the unit could be rented free of
rent control; and (5) fees paid after March 2016 should be
refunded. 20th Street Owner also sought an award of costs and
fees.
H. Ocean Avenue Owner’s Petitions for Writ of Administrative
Mandamus
On September 26, 2016, Ocean Avenue Owner petitioned
for a writ of administrative mandamus on the first excess rent
complaint that had been filed by the tenant of Unit 211 of the
Ocean Avenue property. Ocean Avenue Owner argued, among
other theories, that the Board was equitably estopped from
holding it liable for excessive rent, citing the Board’s treatment of
Unit 211 as permanently exempt from rent control. Ocean
Avenue Owner sought to set aside the Board’s decision in
12
connection with the first complaint, as well as an award of costs
and fees.
On May 25, 2017, Ocean Avenue Owner petitioned for a
writ of administrative mandamus regarding the second excess
rent complaint to set aside the Board’s decision, as well as an
award of costs and fees.
I. Trial Court’s Statements of Decision and Judgments
On April 12, 2017, the trial court issued an order that the
respective petitions of 20th Street Owner and Ocean Avenue
Owner were related cases. On March 5, 2018, the court heard
argument on all the petitions.
1. 20th Street property
On April 18, 2018, the trial court issued its statement of
decision on 20th Street Owner’s petition. The court found,
contrary to the Board’s decision, that 20th Street Owner had
detrimentally relied upon the Board’s representations that the
20th Street property was not under rent control by commencing
and completing renovations and improvements in the total
amount of $494,554.85. It further found that 20th Street Owner
undertook loan obligations in 2002 and 2013 on the assumption
that the loan would be repaid by rental proceeds based on market
rents unrestricted by rent control.
On April 23, 2018, the trial court issued its amended
judgment. The court ordered that a peremptory writ of
administrative mandamus should issue, ordering the Board to
reverse and set aside its decision in the excess rent complaints
13
against 20th Street Owner, and to reconsider those decisions in
light of the court’s findings of fact and conclusions of law. The
court also declared that the Board “is equitably estopped from
denying that since October 14, 1993 all thirteen (13) units of the
subject property have been and are permanently exempt from the
rent control laws and outside the jurisdiction of the [Board].”
2. Unit 211 of Ocean Avenue property
On May 23, 2018, the trial court issued its statement of
decision on both of Ocean Avenue Owner’s petitions. The court
found the Board was “estopped from denying that the units are
decontrolled units.”10 The court found the Board had delayed
over 21 years before asserting that Unit 211 was not exempt from
rent control.
10 The court did not explain what it meant by the term
“decontrolled units.” In context, it appears the court considered
“decontrolled units” to be rental units that are permanently
exempt from rent control. As we will explain, “decontrol” under
the Rent Control Law refers to a limited circumstance related to
a high vacancy rate. (§ 1803(r).)
14
The trial court issued its judgment on May 23, 2018. The
court ordered that a peremptory writ of administrative
mandamus should issue, remanding the matter to the Board, and
commanding that (1) the Board set aside and reverse its decision
regarding the excessive rent complaints and (2) reconsider its
decision in light of the statement of decision.11
11 Although the matters were remanded to the Board for
reconsideration, the judgments are final. “‘“[I]t may be said that
where no issue is left for future consideration except the fact of
compliance or noncompliance with the terms of the first decree,
that decree is final, but where anything further in the nature of
judicial action on the part of the court is essential to a final
determination of the rights of the parties, the decree is
interlocutory.”’” (Dhillon v. John Muir Health (2017) 2 Cal.5th
1109, 1115.) Because the trial court ordered that the Board was
equitably estopped from finding the removed rental units were
subject to rent control, nothing remained to be done in the court,
and the judgments are appealable.
15
III. DISCUSSION
A. The Trial Court Erred by Applying Equitable Estoppel12
The Board contends that the trial court erred by applying
the doctrine of equitable estoppel to require it to act beyond its
statutory authority and in contravention of the Rent Control
Law. We agree.
“‘The doctrine of equitable estoppel is founded on concepts
of equity and fair dealing. It provides that a person may not deny
the existence of a state of facts if he intentionally led another to
believe a particular circumstance to be true and to rely upon such
belief to his detriment. The elements of the doctrine are that
(1) the party to be estopped must be apprised of the facts; (2) he
12 20th Street Owner and the Board dispute whether this
court should review the trial court’s or the Board’s factual
findings for substantial evidence. When an administrative
decision affects a fundamental vested right, the trial court must
exercise its independent judgment on the evidence. (Schafer v.
City of Los Angeles (2015) 237 Cal. App. 4th 1250, 1260 (Schafer).)
If no fundamental vested right is affected, the trial court reviews
the agency’s factual findings under the substantial evidence test.
(Ibid.) On appeal, if the substantial evidence test applies below,
this court reviews the agency’s findings under the same
substantial evidence test. (Antelope Valley Press v. Poizner
(2008) 162 Cal. App. 4th 839, 851.) Likewise, if the independent
judgment test applies, we review the trial court’s findings under
the substantial evidence test. (Ibid.)
We ultimately need not decide whether a fundamental
vested right was affected. The material facts are undisputed and
we will assume for purposes of this appeal that each of the
elements of equitable estoppel exists.
16
must intend that his conduct shall be acted upon, or must so act
that the party asserting the estoppel has a right to believe it was
so intended; (3) the other party must be ignorant of the true state
of facts; and (4) he must rely upon the conduct to his injury.
[Citation.]’” (City of Goleta v. Superior Court (2006) 40 Cal. 4th
270, 279; accord, Estill v. County of Shasta (2018) 25 Cal.App.5th
702, 710-711; Attard v. Board of Supervisors of Contra Costa
County (2017) 14 Cal.App.5th 1066, 1079.)
“The doctrine of equitable estoppel may be applied against
the government where justice and right require it.” (Driscoll v.
City of Los Angeles (1967) 67 Cal. 2d 297, 306.) “Where, as here, a
party seeks to invoke the doctrine of equitable estoppel against a
governmental entity, an additional element applies. That is, the
government may not be bound by an equitable estoppel in the
same manner as a private party unless, ‘in the considered view of
a court of equity, the injustice which would result from a failure
to uphold an estoppel is of sufficient dimension to justify any
effect upon public interest or policy which would result from the
raising of an estoppel.’ (Long Beach v. Mansell (1970) 3 Cal. 3d
462, 496-497 . . . .)” (City of Oakland v. Oakland Police & Fire
Retirement System (2014) 224 Cal. App. 4th 210, 240; see Lusardi
Construction Co. v. Aubry (1992) 1 Cal. 4th 976, 994-995
[“estoppel will not be applied against the government if to do so
would nullify a strong rule of policy adopted for the benefit of the
public”].)
However, “principles of estoppel may not be invoked to
directly contravene statutory limitations.” (Medina v. Board of
Retirement (2003) 112 Cal. App. 4th 864, 869; accord, In re Joshua
G. (2005) 129 Cal. App. 4th 189, 197; Emma Corp. v. Inglewood
Unified School Dist. (2004) 114 Cal. App. 4th 1018, 1028-1029; see
17
Longshore v. County of Ventura (1979) 25 Cal. 3d 14, 28 [“no court
has expressly invoked principles of estoppel to contravene
directly any statutory or constitutional limitations”]; Santa
Monica Unified Sch. Dist. v. Persh (1970) 5 Cal. App. 3d 945, 953
[“the principal of estoppel is not applicable to a municipal agency
which has not acted in compliance with a statute which is the
measure of its power”].)
“The existence of equitable estoppel generally is a factual
question for the trier of fact to decide, unless the facts are
undisputed and can support only one reasonable conclusion as a
matter of law.” (Schafer, supra, 237 Cal.App.4th at p. 1263;
Feduniak v. California Coastal Com. (2007) 148 Cal. App. 4th
1346, 1360.) Questions of law are reviewed de novo. (Schafer,
supra, 237 Cal.App.4th at p. 1264.)
We consider whether the application of equitable estoppel
here, to require the Board to permanently exempt the 20th Street
property and Unit 211 of the Ocean Avenue property from rent
control regulations, would require the Board to act in excess of its
authority. According to 20th Street Owner, the granting of a
removal permit exempts rental units from rent control; in other
words, section 1803(t) authorizes the Board to exempt rental
units from rent control regulations. The plain terms of section
1803(t), however, do not support this position. That section
provides that “[a]ny landlord who desires to remove a controlled
rental unit from the rental housing market by demolition,
conversion or other means is required to obtain a permit from the
Board prior to such removal from the rental housing market.”
(§ 1803(t), italics added.) A “market” is “[a] place of commercial
activity in which goods or services are bought and sold.” (Black’s
Law Dict. (10th ed. 2014) p. 1113, col. 2.) Thus, section 1803(t)
18
“prevent[s] landlords from evicting tenants in order to go out of
the residential housing business absent permits from the City
and the Board. (City of Santa Monica v. Yarmark (1988) 203
Cal. App. 3d 153, 157 . . . .)” (Santa Monica Rent Control Bd. v.
Bluvshtein (1991) 230 Cal. App. 3d 308, 314.) Removal permits
allow “removal from the rental housing market”; they do not
allow removal from the rent control market. (§ 1803(t)(1).) “‘“If
the words of the statute are clear, the court should not add to or
alter them to accomplish a purpose that does not appear on the
face of the statute or from its legislative history.”’” (Goodman v.
Lozano (2010) 47 Cal. 4th 1327, 1332.)
Had voters intended for a removal permit to remove a unit
from regulation (rather than from the rental housing market),
they could have so stated. Indeed, voters knew how to exempt
properties from rent control and did just that in section 1801(c),
which provides that: “All residential rental units in the City [are
subject to the Rent Control Law] . . . except single family homes
. . . and those units found by the Board to be exempt under one or
more of the following provisions[.]”13 (§ 1801(c).) None of the
13 The listed exemptions under section 1801(c) are: “[r]ental
units in hotels, motels, inns, tourist homes and rooming and
boarding houses”; “[r]ental units in any hospital, convent,
monastery, extended medical care facility, asylum, non-profit
home for the aged, or dormitory owned and operated by an
institution of higher education”; “[r]ental units which a
government unit, agency or authority owns, operates, manages,
or in which governmentally subsidized tenants reside”; “[r]ental
units in owner-occupied dwellings with no more than three (3)
units”; “[r]ental units and dwellings constructed after the
adoption of this Article”; and “[w]here a unit is actually used for
19
listed exemptions includes a unit that is the subject of a section
1803(t) removal permit. (Mason v. Retirement Board (2003) 111
Cal. App. 4th 1221, 1229 [“we must ‘“construe every statute with
reference to the entire scheme of law of which it is part so that
the whole may be harmonized and retain effectiveness”’”].) “‘“[I]f
exemptions are specified in a statute, [courts] may not imply
additional exemptions unless there is a clear legislative [history]
to the contrary. [Citation.]”’” (Imperial Merchant Services, Inc. v.
Hunt (2009) 47 Cal. 4th 381, 389.) We observe no such legislative
history to the contrary.
Nor does section 1801(c) or any other provision of the Rent
Control Law authorize the Board to create new categories of
properties that are exempt from rent control. An administrative
agency, such as the Board, can only act within the scope of its
delegated authority. (See Association for Retarded Citizens v.
Department of Developmental Services (1985) 38 Cal. 3d 384, 391
[“Administrative action that is not authorized by, or is
inconsistent with, acts of the Legislature is void”]; Schneider v.
California Coastal Com. (2006) 140 Cal. App. 4th 1339, 1348
[same]; City and County of San Francisco v. Board of Permit
Appeals (1989) 207 Cal. App. 3d 1099, 1109-1110 [administrative
appeals board had no power to disregard or amend ordinances
defining its authority].)
The Rent Control Law provides the Board with the
following powers and duties: to set rent ceilings for all controlled
rental units; to require registration of all controlled rental units
purposes of providing, on a non-profit basis, child care or other
residential social services.” None of these exemptions are
applicable in this case.
20
(§ 1803(q)); to establish a base rent ceiling (§ 1804(b)); to make
adjustments to the rent ceiling (§ 1805); to set rents at fair and
equitable levels to achieve the intent of the Rent Control Law; to
hire and pay necessary staff to issue orders, rules and
regulations, conduct hearings, and charge fees; to make studies,
surveys, and investigations, conduct hearings, and obtain
information necessary to carry out its powers and duties; to
report annually to the City Council of the City of Santa Monica
on the status of controlled rental housing; to remove rent controls
(§ 1803(r))14; to issue permits for removal of controlled rental
units from the rental housing market (§ 1803(t)); to administer
oaths and affirmations and subpoena witnesses; to establish rules
and regulations for deducting penalties and settling civil claims
(§ 1809); to refer violations of the Rent Control Law to
appropriate authorities for criminal prosecution; to seek
14 Section 1803(f)(9) provides that the Board can “[r]emove
rent controls under [s]ection 1803(r).” Section 1803(r), entitled
“Decontrol,” states that the Board can temporarily remove rent
controls from rental units when there is no housing shortage, as
measured by a high vacancy rate. Specifically, “[i]f the average
annual vacancy rate in any category, classification, or area of
controlled rental units exceeds five (5) percent, the Board is
empowered, at its discretion and in order to achieve the
objectives of this Article, to remove rent control from such
category, classification or area.” (§ 1803(r).) If a unit is
decontrolled under section 1803(r), the Board shall reimpose rent
control if the average annual vacancy rate falls below five
percent. Thus, decontrol of rental units under section 1803(r)
does not permanently remove a rental unit from rent control.
20th Street Owner expressly asserts that section 1803(r) does not
apply.
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injunctive and other civil relief (§ 1811); and to charge and collect
registration fees, including late payment penalties. (§ 1803(f).)
Furthermore, the Board “shall issue and follow such rules and
regulations, including those which are contained in this Article,
as will further the purposes of the Article.” (§ 1803(g).) None of
these listed powers and duties authorize the Board to create
categories of rental properties that are exempt from rent control.
We conclude the Board was not authorized to exempt the
owners’ residential rental units from rent control.15 Accordingly,
the trial court erred in concluding that the Board was equitably
estopped from denying that the residential rental units that were
the subject of removal permits were permanently exempt from
rent control. As that was the sole basis for the grant of the
petitions for writ of administrative mandamus, the trial court
likewise erred by granting the petitions on this ground.
B. The Board Did Not Revoke or Modify the Removal Permits
20th Street Owner contends that we should affirm the trial
court’s judgment on alternative grounds. It first argues that the
Board’s effort to regulate its property is equivalent to revoking
the removal permit, which the Board lacks authority to do under
the Rent Control Law. Ocean Avenue Owner also raised this
argument before the trial court.
As we noted above, the Rent Control Law enumerates the
powers and duties of the Board, which include authority to issue
15 We do not express any opinion on whether the doctrine of
equitable estoppel could apply to require the Board to act in a
manner that is expressly authorized by the Rent Control Law.
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removal permits, but not to revoke such permits. Even assuming
for purposes of this opinion that the Board was not authorized to
revoke removal permits, the Board did not revoke such permits in
2016. As the Board concedes, the removal permits remain valid
and the owners can thus remove the rental units from the rental
housing market by demolition, conversion, or other means.
Rather, the Board, in 2016, changed its interpretation of section
1803(t) to conclude, correctly, that a removal permit did not
exempt a rental unit from rent control.
“‘“In the general case, of course, an administrative agency
may change its interpretation of a statute, rejecting an old
construction and adopting a new. [Citations.] Put simply, ‘an
administrative agency is not disqualified from changing its mind
. . . .’ [Citation.]”’” (Citicorp North America, Inc. v. Franchise Tax
Bd. (2000) 83 Cal. App. 4th 1403, 1420; Californians for Political
Reform Foundation v. Fair Political Practices Com. (1998) 61
Cal. App. 4th 472, 488.) Accordingly, we conclude that the Board
did not revoke the section 1803(t) removal permits; it merely
changed its interpretation of these permits to clarify that they
did not operate to exempt units from rent control.
C. The Doctrine That an Administrative Agency May Not
Reopen or Reconsider a Prior Decision Does Not Compel
Affirmance
20th Street Owner contends that the Board is bound by its
prior 1993 decision, regardless of whether it was contrary to the
Rent Control Law. 20th Street Owner cites Olive Proration etc.
Com. v. Agri. etc. Com. (1941) 17 Cal. 2d 204 (Olive Proration) in
support of its contention. The court in Olive Proration held:
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“[T]he question whether the administrative agency may reverse a
particular determination depends upon the kind of power
exercised in making the order and the terms of the statute under
which the power was exercised. As to the first factor, almost
without exception, courts have held that the determination of an
administrative agency as to the existence of a fact or status which
is based upon a present or past group of facts, may not thereafter
be altered or modified.” (Id. at p. 209.) Olive Proration does not
support affirmance here.
We will assume for purposes of this appeal that the
doctrine of administrative finality precluded the Board from
reconsidering its granting of a removal permit to 20th Street
Owner in 1993. In granting the Category C removal permit, the
Board concluded that the 20th Street property was uninhabitable
and could not be made habitable in an economically feasible
manner. Even if the Board could not revisit that decision 23
years later, that is not what the Board did here. As discussed
above, the Board has conceded that 20th Street Owner remains
free to remove its units from the rental housing market, even if
the property is now habitable.
To the extent 20th Street Owner argues that the Board
may not reconsider its prior conclusion that removal permits
exempt units from rent control, the doctrine of administrative
finality does not apply when an agency acts beyond its authority:
“Implicit in the cases denying a board’s power to review or
reexamine a question, however, is the qualification that the board
must have acted within its jurisdiction and within the powers
conferred on it. Where a board’s order is not based upon a
determination of fact, but upon an erroneous conclusion of law,
and is without the board’s authority, the order is clearly void
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. . . .” (Aylward v. State Board etc. Examiners (1948) 31 Cal. 2d
833, 839; Helene Curtis, Inc. v. Los Angeles County Assessment
Appeals Bds. (2004) 121 Cal. App. 4th 29, 39-40.) Accordingly, the
doctrine that an administrative agency cannot reconsider a final
administrative decision does not operate here to require the
Board to exempt the 20th Street property’s rental units or Unit
211 of the Ocean Avenue property from rent control.16
D. A Landlord’s Entitlement to a Constitutionally Fair Return
is Not Affected by the Board’s Interpretation of
Section 1803(t)
20th Street Owner contends that the Board’s current
interpretation of section 1803(t) violates its constitutional right to
a fair return, citing City of Berkeley v. City of Berkeley Rent
Stabilization Bd. (1994) 27 Cal. App. 4th 951 (City of Berkeley). In
City of Berkeley, the court held: “[A] rent control provision which
does not permit a just and reasonable return on a landlord’s
investment is confiscatory; and if a rent control measure does not
expressly assure the landlord of that fair return on investment,
such a condition will be implied.” (Id. at p. 962, citing Birkenfeld
v. City of Berkeley (1976) 17 Cal. 3d 129, 169.) We disagree with
20th Street Owner’s reliance on City of Berkeley.
One purpose of the Rent Control Law is to provide
consistency with constitutional requirements such as allowing
16 We also reject 20th Street Owner’s related argument that
res judicata and collateral estoppel require affirmance of the
judgment. The Board’s 1993 decision granting a removal permit
as to the 20th Street property’s rental units remains in effect.
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landlords a fair return. (§ 1800.) To accomplish this purpose, the
Board is empowered to adjust the rent ceiling and set rents at
fair and equitable levels. (§ 1803(f)(4), (5).) Section 1805(c)
allows a landlord to petition for an increase to the maximum
allowable rent. Section 1805(e) provides that the Board may
consider all relevant factors in determining its fair return
formula, including: “increases or decreases in operating and
maintenance expenses,” “necessary and reasonable capital
improvement of the controlled rental unit as distinguished from
normal repair, replacement and maintenance,” “substantial
deterioration of the controlled rental unit other than as a result
of . . . wear and tear,” “the landlord’s rate of return on
investment, the landlord’s current and base date Net Operating
Income, and any other factor deemed relevant by the Board in
providing the landlord a fair return.” Thus, the Rent Control
Law as written does not deprive 20th Street Owner of receiving a
constitutionally fair return. Furthermore, as City of Berkeley,
supra, 27 Cal. App. 4th 951 held, any rent setting power “[is]
expanded by the constitutional requirement that the Board
provide landlords with a just and reasonable return on
investment.” (Id. at p. 962.) Because 20th Street Owner has not
petitioned for an increase to the maximum allowable rent, any
argument it will not receive a constitutionally fair return is not
ripe for review. (See Pacific Legal Foundation v. California
Coastal Com. (1982) 33 Cal. 3d 158, 169 [“a basic prerequisite to
judicial review of administrative acts is the existence of a ripe
controversy”].) Accordingly, 20th Street Owner’s argument that
the Board’s, and this court’s, interpretation of section 1803(t) will
prevent it from receiving a constitutionally fair return is
unavailing.
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IV. DISPOSITION
The judgments are reversed. On remand, the trial court is
directed to deny 1041 20th Street, LLC’s petition for writ of
administrative mandamus and complaint for declaratory relief,
and ASN Santa Monica, LLC’s petitions for writ of
administrative mandamus. The Santa Monica Rent Control
Board is entitled to recover its costs on appeal.
KIM, J.
We concur:
BAKER, Acting P. J.
MOOR, J.
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