Judge Curtis A. Kin, Case Number: 23STCP01575, Date: 2024-05-23 Tentative Ruling

Petitioner 8242 Samo LLC petitions for a writ of mandate directing respondents City of West Hollywood and Rent Stabilization Commission of the City of West Hollywood (collectively, “City”) to set aside Resolution RSC No. 23-622, which affirmed a decision finding that a unit located at 8242 ½ Santa Monica Blvd. in West Hollywood is subject to the Rent Stabilization Ordinance.

“The Costa-Hawkins [Rental Housing] Act, enacted in 1995, generally prohibits public entities from applying rent control laws to certain categories of dwellings….” (Hirschfield v. Cohen (2022) 82 Cal.App.5th 648, 663.) Civil Code section 1954.52, contained within the Costa-Hawkins Act (“Act”), sets forth dwellings that are exempt from local rent control. As pertinent to this proceeding, “an owner of residential real property may establish the initial and all subsequent rental rates for a dwelling or a unit” if “[i]t is alienable separate from the title to any other dwelling unit….” (Civ. Code § 1954.52(a)(3)(A).) The Act defines “residential real property” to include “any dwelling or unit that is intended for human habitation.” (Civ. Code § 1954.51(e).) Neither “dwelling” nor “unit” are defined within the Act.

In 1985, the City of West Hollywood (“City”) enacted the Rent Stabilization Ordinance (“RSO”) to “protect tenants from unreasonable and excessive rents, to protect tenants from involuntary displacement, to keep rents within the city at a moderate level and at the same time to ensure a just and reasonable return to landlords.” (West Hollywood Municipal Code [“WHMC”] § 17.04.020; see RJN Ex. C.) The RSO requires landlords to register rental units unless specifically exempt. (WHMC § 17.28.010(a)(1).) “[S]ingle-family residences, condominiums, cooperatives, and other residential rental units which are separately alienable” are exempt from the RSO.[1] (WHMC § 17.24.010(a)(11).)

Since March 15, 2012, real party in interest Derek Ferguson (“Tenant”) has been a tenant at the residential unit located at 8242 ½ Santa Monica Boulevard (“Unit”) in the City. (AR 16.) The Unit sits on top of a commercial unit located at 8242 ½ Santa Monica Boulevard. (AR 16, 101.) The residential unit and commercial unit share the same assessor parcel number. (AR 16.)

In May 2012, Tenant’s then-landlord registered the Unit with the City as subject to the RSO. (AR 36, 45.) On May 14, 2023, the City determined that the maximum allowable rent for the Unit for the tenancy was $1,700 per month. (AR 16, 52-53.) The Unit is now owned by petitioner 8242 Samo LLC (“Landlord”). (AR 16.)

On August 17, 2022, Tenant applied to the City’s Rent Stabilization Division for a rent adjustment under the RSO. (AR 16, 41-42.) At the time of the application, Tenant’s rent was $1,900 per month. (AR 16.)

On November 14, 2022, a hearing was held before a Hearing Examiner. (AR 16.) Tenant argued that the Unit is subject to the RSO because it has been registered pursuant to the RSO since 2012. (AR 45-49, 102-03 [HT 19:440-20:476], 105-06 [HT 22:528-23:544].) Landlord argued that the Unit was exempt from the RSO because it was the sole residential unit in the building. (AR 35-36.)

On December 21, 2022, the Hearing Examiner issued a decision. (AR 34-39.) With respect to Landlord’s claim that the Unit is exempt from the RSO, the Hearing Officer determined, “The subject property is not a single-family house or condominium unit that can be alienated separate from the main building under RSO section 17.24.010(a)(11) and is therefore not subject to exemption from the requirements of the RSO.” (AR 37.) The Hearing Examiner’s decision makes no mention of the RSO exemptions set forth in Civil Code section 1954.52 of the Act.

On January 5, 2023, Landlord appealed the Hearing Examiner’s determination to the Rent Stabilization Division. (AR 17.) Landlord argued that the Unit is not subject to the RSO because it “consists of a single dwelling unit that is joined by a commercial unit.” (AR 17.) Citing the Act and its legislative history, as well as Owens v. City of Oakland Housing, Residential Rent and Relocation Board (2020) 49 Cal.App.5th 739, staff of the Rent Stabilization Division determined that the Unit is subject to the RSO because the Unit is not separately alienable from the property in its entirety, i.e., from the commercial unit.[2] (AR 19-21.) On February 9, 2023, the City’s Rent Stabilization Commission (“Commission”) adopted Resolution No. 23-622, which, in relevant part, affirmed the Unit’s status as a rent-controlled residential rental unit subject to the RSO. (AR 73-79.)

On May 10, 2023, petitioner filed a Verified Petition for Writ of Administrative Mandate. On August 15, 2023, real party filed an Answer. On August 16, 2023, real party filed an Amended Answer. On September 25, 2023, respondents filed an Answer.

On March 19, 2024, petitioner filed an opening brief. On April 23, 2024, respondents filed an opposition. On May 8, 2023, petitioner filed a reply and filed the administrative record.[3] Real party has not filed any brief.

WHMC section 17.44.010(4) requires the City to conduct a hearing on rent adjustment applications. CCP § 1094.5 is applicable to “any final administrative order or decision made as the result of a proceeding in which by law a hearing is required to be given, evidence is required to be taken, and discretion in the determination of facts is vested in the inferior tribunal….” (CCP § 1094.5(a).)

Under CCP § 1094.5(b), the pertinent issues are whether the respondent has proceeded without jurisdiction, whether there was a fair trial, and whether there was a prejudicial abuse of discretion. An abuse of discretion is established if the agency has not proceeded in the manner required by law, the decision is not supported by the findings, or the findings are not supported by the evidence. (CCP § 1094.5(b).)

The sole issue presented in the instant writ is whether Civil Code section 1954.52(a)(3)(A) applies to the Unit. The interpretation of a statute or regulation is a question of law. (See State Farm Mut. Auto. Ins. Co. v. Quackenbush (1999) 77 Cal.App.4th 65, 71.) “On questions of law arising in mandate proceedings, [the Court] exercise[s] independent judgment.’” (Christensen v. Lightbourne (2017) 15 Cal.App.5th 1239, 1251.)

Respondents’ request to take judicial notice of Exhibit A (California Bill Analysis, Assembly Floor, 1995-1996 Regular Session, Assembly Bill 1164, July 20, 1995) and petitioner’s request to take judicial notice of Exhibit A (California Bill Analysis, Senate Judiciary Committee, 1995-96 Regular Session, Senate Bill 1257, April 4, 1995) are GRANTED. (Whaley v. Sony Computer Entertainment America, Inc. (2004) 121 Cal.App.4th 479, 487, fn. 4 [taking judicial notice of legislative history in appeal involving statutory construction].)

Respondents’ request to take judicial notice of Exhibit B (California Bill Analysis, Assembly Committee, 2001-2002 Regular Session, Senate Bill 985, July 11, 2001) is DENIED. As Exhibit B post-dates enactment of Section 1954.52(a)(3)(A), the Legislative could not have considered it before enacting the statute. (See ibid. [“Post enrollment documents are not proper indicia of legislative intent because it is not reasonable to infer that they were ever read or considered by the Legislature”].)

Respondents’ request to take judicial notice of Exhibit C, portions of the West Hollywood Municipal Code is GRANTED, pursuant to Evidence Code section 452(b).

Landlord seeks a determination that the Unit is exempt from the RSO under the Costa-Hawkins Act. Civil Code section 1954.52(a)(3)(A) states, in relevant part:

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: . . . It is alienable separate from the title to any other dwelling unit….

“The general principles that guide interpretation of a statutory scheme are well[ ]settled. Our function is to ascertain the intent of the Legislature so as to effectuate the purpose of the law. To ascertain such intent, courts turn first to the words of the statute itself, and seek to give the words employed by the Legislature their usual and ordinary meaning. When interpreting statutory language, we may neither insert language which has been omitted nor ignore language which has been inserted. The language must be construed in the context of the statutory framework as a whole, keeping in mind the policies and purposes of the statute [citation], and where possible the language should be read so as to conform to the spirit of the enactment.” (Welch v. Welch (2022) 79 Cal.App.5th 283, 296.)

The Court agrees with Landlord. It is undisputed that the subject property consists of a residential unit and a commercial unit. (AR 16.) Because the property has only one residential unit, the Unit at issue is “alienable separate from the title to any other dwelling unit,” as set forth in section 1954.52(a)(3)(A). Indeed, there is no other dwelling unit in the property from which there could be any question or dispute over whether the Unit is separately alienable from any other dwelling unit. Because section 1954.52(a)(3)(A) applies to the Unit, Landlord may impose rents beyond those allowed under the RSO.

The City contends that section 1954.52(a)(3)(A) does not apply to the Unit because, due to the commercial unit at the property, the Unit is not separate from the title to any other unit on the property. (See NCR Properties, LLC v. City of Berkeley (2023) 89 Cal.App.5th 39, 47 [describing exemption under subdivision (a)(3)(A) as “complex,” but observing that it “generally includes single-family homes and condominiums, which are both separately alienable property interests”].) The City’s contention ignores the language of subdivision (a)(3)(A) of section 1954.52. Under subdivision (a)(3)(A), a local governmental entity cannot impose rent control if the dwelling or unit at issue “is alienable separate from the title to any other dwelling unit.” (Civ. Code § 1954.52(a)(3)(A), emphasis added.) The unit from which the dwelling or unit must be separately alienable must be a “dwelling unit,” not a dwelling or unit.

The City is correct that neither “dwelling” nor “unit” is defined in the Act. (Opp. at 6:8-9.) However, the Court construes the words “dwelling unit” in the context of the statute. (Wells v. One2One Learning Foundation (2006) 39 Cal.4th 1164, 1190.) Section 1954.52(a)(3)(A) sets forth an exemption to local rent control in favor of owners of “residential real property.” The Act defines “residential real property” as “any dwelling or unit that is intended for human habitation.” (Civ. Code § 1954.51(e).) Because subdivision (a)(3)(A) governs rental rates that can be imposed for units intended for human habitation, the Court interprets “dwelling unit” in the subdivision to mean a unit intended for human habitation.[4] It is undisputed that the Unit is the only habitable unit on the subject property. (AR 16.) The only other unit on the property is for commercial business. (AR 16.) As stated above, because there is no other dwelling unit on the property, the Unit is separately alienable from the title to any other dwelling unit.

The Court finds that the language of subdivision (a)(3)(A) is clear. Accordingly, the Court does not resort to the statute’s legislative history to construe the meaning of subdivision (a)(3)(A). (See Wells, 39 Cal.4th at 1190 [“If the words themselves are not ambiguous, we presume the Legislature meant what it said, and the statute’s plain meaning governs. On the other hand, if the language allows more than one reasonable construction, we may look to such aids as the legislative history of the measure….”].)[5]

The City contends that this case is similar to Owens v. City of Oakland Housing, Residential Rent and Relocation Board (2020) 49 Cal.App.5th 739. In Owens, the owner of a single-family home rented bedrooms in the residence to separate tenants. (Owens, 49 Cal.App.5th at 741-42.) The owner contended that the rented rooms were exempt from local rent control because all single-family homes are exempt under the Act. (Id. at 744.) The Court of Appeal disagreed, finding that the relevant question was “whether the ‘dwelling’ or ‘unit’ separately rented by [the tenant] and for which [the owner] claims the right to establish the amount of rent, was itself separately alienable from the title to any other dwelling or unit.” (Id. at 745.) Because the bedroom rented by the tenant was not separately titled and could not be separately alienated from the rest of the home, the Owens Court held that the Act did not apply to the units rented by the owner. (Id. at 746.)

Owens has no application here. The bedroom in Owens was not separately alienable because only the residence was separately alienable. Thus, the bedroom was not “alienable separate from the title to any other dwelling unit,” i.e., the other bedrooms contained in the residence. Here, by contrast, the Unit is the only dwelling unit at the property. Thus, the Unit is “alienable separate from the title to any other dwelling unit.”[6]

Lastly, the City contends that following the plain meaning of subdivision (a)(3)(A) as argued by Landlord would lead to absurd results. (Reply at 10:15-22.) Courts will not follow the plain meaning of the statute when the manifest purpose of the legislation would be frustrated as a whole or would lead to absurd results. (Owens, 49 Cal.App.5th at 744.) Here, the Act “generally prohibits public entities from applying rent control laws to certain categories of dwellings….” (Hirschfield, 82 Cal.App.5th at 663.) The City provides no explanation why exempting a residential unit that happens to be combined with a commercial unit would frustrate the Legislature’s purpose of setting forth the dwellings to be exempt from local rent control. Further, it is unclear how a combined residential/commercial property is so different from a single-family home or a condominium such that the statute’s explicit language should be disregarded. All three types of dwellings constitute dwelling units separately alienable from other dwelling units.

In short, other than contending that the Legislature intended the Act to apply just to single-family homes and condominiums—a contention not entirely clear from the Act or the legislative history (see fn. 5, supra)—the City does not set forth how application of subdivision (a)(3)(A) to the Unit would result in absurdity. Indeed, it may be perfectly reasonable (and certainly not absurd) to allow rent control for Landlords who are able to collect rent from multiple dwelling units in a single parcel but exempt from such economic restriction and potential hardship Landlords renting a single dwelling unit on their property.

For the foregoing reasons, the Court finds that the Unit is exempt from the rent control provisions of the City’s Rent Stabilization Ordinance.

“Laches, as a successful affirmative defense, requires a showing of the plaintiff's unreasonable delay in filing suit, together with either the plaintiff's acquiescence in the conduct about which it complains or prejudice resulting to the defendant because of the delay. The proponent of the laches defense bears the burden of establishing its application.” (Blaser v. State Teachers’ Retirement System (2022) 86 Cal.App.5th 507, 539.)

In June 2022, petitioner notified Tenant that the rent would increase by more than double. (AR 98-99 [HT 15:360-16:364].) The City argues that petitioner cannot seek rent in excess of the rent allowed under the RSO after Tenant has lived in the Unit for a decade. Petitioner, however, was not the landlord that registered the Unit with the City under the RSO. (See AR 45-53 [landlord Richard Lewis registered Unit with City].) The City does not establish that petitioner knew the Unit had been registered as a rent-controlled unit before it purchased the combined residential-commercial property. The City does not refer to anywhere in the record indicating when petitioner became aware of the argument that the the Unit was exempt from rent control under the RSO. Consequently, the City fails to show that Landlord acquiesced to the Unit’s status or registration as a rent-controlled unit.

“The [unclean hands] rule is settled in California that whenever a party who, as actor, seeks to set judicial machinery in motion and obtain some remedy, has violated conscience, good faith or other equitable principle in his prior conduct, then…the court will refuse to interfere on his behalf to acknowledge his right, or to afford him any remedy.” (Pond v. Insurance Co. of North America (1984) 151 Cal.App.3d 280, 289-90, quoting Moriarty v. Carlson (1960) 184 Cal.App.2d 51, 55, internal quotations omitted.)

The City argues that Landlord cannot seek an exemption from the RSO because it was aware that the Unit was subject to the RSO. However, in support of Landlord’s purported awareness, the City cites an email from Tenant to the Hearing Examiner “submit[ting] for consideration that the new and current owners were made fully aware that my unit was rent stabilized prior to entering into the arms length transaction to purchase the building with tenants that are occupying the space under RSO guidelines for over 10 years.” (AR 44.) Tenant did not provide any evidence for his assertion. The fact that Tenant enjoyed the benefits of the RSO for a decade does not render Landlord’s attempts to determine the applicability of the RSO during the administrative hearing and through the instant writ petition violative of conscience, good faith, or other equitable principles.

For the foregoing reasons, the City’s assertion that Landlord has unclean hands is unavailing.

The petition is GRANTED. Pursuant to Local Rule 3.231(n), petitioner shall prepare, serve, and ultimately file a proposed judgment and proposed writ of mandate.

[1] “Rental units,” “single-family residence,” and “condominium” are separately defined in the RSO. (WHMC § 17.08.010.)

[2] Staff of the Rent Stabilization Division also determined that the Hearing Examiner erred in calculating the maximum allowable rent and by not calculating the amount of the overpayment. (AR 21-22.) The Commission remanded the Hearing Examiner’s Decision for these reasons only. (AR 77-78.) In the instant writ petition, petitioner Landlord only challenges the ruling that the Unit is subject to the RSO. (Pet. ¶¶ 25, 26.)

[3] Landlord’s reply exceeds 10 pages, in violation of Rule of Court 3.1113(d) and Local Rule 3.231(i). Accordingly, the Court does not consider pages 14 through 16 of the reply.

[4] In the reply, petitioner refers to Civil Code section 1940(c), erroneously cited as section 1946(c), for a definition of “dwelling unit.” (Reply at 5, fn. 2.) Section 1940, however, is not part of the Act.

[5] Even if the Court were to look to legislative history, it is inconclusive. The City references an analysis of Assembly Bill 1164 (AB 1164), which states that the Act “exempts from rent control single-family residences and other similar units.” (City RJN Ex. A.) While it could be argued that the Unit is not a unit similar to a single-family residence because the Unit is attached to a commercial unit, it could also be argued that the Unit is very much similar to a single-family residence in that both comprise a single dwelling unit that cannot be transferred separately from any other dwelling unit. Likewise, the analysis of Senate Bill 1257 (SB 1257) states that the bill “would exempt from local rent controls any dwelling unit which could be sold or transferred separately from any other dwelling unit” (Landlord RJN Ex. 8)—language consistent with Landlord’s view. But the analysis of SB 1257 also described the exemption as covering “all single-family homes, condominiums, townhouses, or any subdivided interest in a community apartment project, stock cooperative, or limited-equity housing cooperative”—a list of examples that appears not to encompass the Unit. (The Court does not consider the analysis of Senate Bill 985 because it post-dates enactment of the Act.) In short, the legislative history is unhelpful, but it is certainly not inconsistent with the plain meaning of the statute as discussed above.

[6] The City also cites ABCO, LLC v. Eversley (2013) 213 Cal.App.4th 1092 for the assertion that the Unit must be detached for subdivision (a)(3)(A) to apply. (Opp. at 13:5-24.) However, ABCO is inapposite because it does not address the exemptions to local rent control ordinances under the Act. Rather, ABCO discussed exemptions contained within the local rent control ordinance. (Id. at 1099-1100.)