Synopsis of REAP lawsuits:

HRCLA initially brought three separate lawsuits challenging the REAP program on different grounds. The court then consolidated the three lawsuits into one. After the consolidated Petition was filed, the City filed a Demurrer. HRCLA then filed an Opposition to the Demurrer and there was a hearing on the matter on January 15, 2015. The court overruled the City’s demurrer and clearly stated that HRCLA has standing to sue and that there is no need to exhaust the administrative remedies, so the case is moving forward. The City then filed an answer to our consolidated Petition, which we are responding to now. We are in the process of propounding discovery on the City to get pertinent information on which to build our case.

The third of the consolidated Petitions is a class action, so the next step to proceed with that part of the case is to get the class certified. We have filed a Motion for Class Certification and are awaiting the City’s Opposition, which is sure to come. We will then filed a Response to their Opposition, and there will be a hearing on the matter on April 14, 2015.

The following is a description of each of the three lawsuits:

Santa Monica Properties

The first lawsuit alleges that the rent reductions set forth in Rent Adjustment Commission Regulations §§ 1200.5 and 1200.6 are unlawful under Santa Monica Properties v. Santa Monica Rent Control Board, 203 Cal.App.4th 739 (2012).

The law that came out of that case was that in order to have a rent decrease there must evidence presented that the rent became excessive because of a reduction in services or that the housing provider is realizing a higher return than before a reduction in services.

Our lawsuit alleges that the rent reduction schedule imposed under the Rent Adjustment Commission Regulations when a property is placed into REAP, allows the Department (LAHD) to reduce rent without any evidence that the housing provider has benefitted from excessive rent or an unjust return on the property, therefore such rent reductions are in violation of Santa Monica Properties. In other words, because the way the calculation of the amount the rent is reduced by is not reasonably proportional to the amount the housing provider saves by committing a particular violation, the determination made by the Department (LAHD) of how much of a rent reduction a particular unit should be subject to, is illegal under Santa Monica Properties.

 

Costa-Hawkins:

The second lawsuit alleges that LAMC 162.09(b), which imposes upon a housing provider a one year waiting period that must be observed before the housing provider can raise the rent on a unit that has been removed from REAP, violates Civil Code § 1954.53 of the Costa-Hawkins Rental Housing Act. Costa-Hawkins says that a housing provider has the right to establish the initial rental rate for a unit upon vacancy of a prior tenant. By forcing a housing provider to wait a year before raising the rent LAMC 162.09(b) violates the Costa-Hawkins law, which preempts the LAMC.

 

Another case has been brought that also addresses this issue, and there is a possible settlement in the works. We are awaiting the language of the City’s proposal to determine whether it will actually cure this violation before we dismiss our lawsuit.

 

Constitutional Claims:

The third lawsuit, which is being brought as a class action alleges that REAP violates both procedural and substantive due process and that the way REAP is implemented effects a temporary and permanent taking.

Procedural due process, which requires notice and an opportunity to be heard by a tribunal authorized to determine the question at hand before depriving a person of property, is violated because a building or unit can be thrown into REAP before there is even a hearing. Our lawsuit alleges that the manner in which a unit or building is placed in REAP violates procedural due process. This is because the sole basis for a building or unit’s placement into REAP is a referral of the property to the Department (LAHD), and a determination by them that the period for compliance has passed. There is no opportunity for a housing provider to be heard and defend themself before the building is placed into REAP, which leads to a deprivation of property.

A deprivation of property occurs because the Department automatically reduces the rent a housing provider would have otherwise collected by somewhere between 10% and 50%.

The housing provider is never able to recover the amount of the rent reduction, which our lawsuit alleges is a permanent taking. Theoretically, a housing provider should be able to recover any remaining rent paid by the tenant into the REAP escrow account, but this does not always happen as some housing providers end up losing their property altogether because they are not able to pay the mortgage, taxes, insurance and other expenses associated with the building, because they are being deprived of all rent at least temporarily.

Our lawsuit alleges that those who do manage to eventually get out of REAP and receive the money that was paid into the escrow account have still suffered a temporary taking of their property for the time the rent that should have been paid to them, but was instead paid into an escrow account, which they could not access.

Finally, we have a claim for violation substantive due process, which requires that Municipal Codes and Regulations be rationally related to a legitimate governmental purpose in order to be valid. Our lawsuit alleges that Rent Adjustment Commission Regulation § 1200.13 B, which gives the tenant discretion to pay rent directly to the housing provider or into an escrow account set up through REAP, violates substantive due process because it is not rationally related to REAP’s purpose of encouraging housing providers to maintain their properties.

PLEADINGS AND RULING FOR REAP LAWSUITS

 

 

Demurrer tentative ruling

Demurrer Tentativeruling SCEP BS141012 May 7 2013

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Santa Monica Violation

REAP Santa Monica violation REAP BS144425 Aug 5 2013

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Costa Hawkins violation

REAP Costa Hawkins violation Aug 5 2013 BS144426

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Inverse Condemnation

REAP Inverse Condemnation BS144427 Aug 5 2013

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Synopsis of SCEP lawsuits:

 

This is a class action lawsuit against the City of Los Angeles regarding the imposition of the Systematic Code Enforcement Fee (hereinafter referred to as “SCEP fee”), which is imposed on all residential rental properties with two or more dwellings.

The City of Los Angeles charges the housing provider $43.32 per unit annually for the SCEP fee. The purpose of the fee according to Los Angeles Municipal Code Section 161.352 (hereinafter “LAMC § 161.352”) is to finance the cost of inspection and enforcement by the Housing Department.

HRCLA’s lawsuit alleges that the SCEP fee is an illegal tax because it was not approved by the voters as required by California Constitution Article XIII § 2.

In November of 2010, voters passed Proposition 26 in order to close the loopholes that government agencies were using to get around the requirement that all new taxes had to be put up for a vote and approved by the voters. One of the ways government agencies were getting around the voter approval requirement for new taxes, was to just rename the tax and call it a fee, or a charge. Proposition 26 redefined tax to mean any levy, charge, or exaction of any kind imposed by a local government.

If a tax is a “general tax,” meaning any tax imposed for general governmental purposes, it must be approved by a majority of the voters. If the tax is a “special tax,” meaning any tax imposed for specific purposes, including a tax imposed for specific purposes, which is placed into a general fund, it must be approved by 2/3 of the voters.

There is an exception to requirement for voter approval under California Constitution Article XIII C § 1(e)(3), if the fee is for the reasonable costs to a local government agency for performing inspections. This lawsuit alleges that this exception does not apply because the amount of money the City collects through the imposition of the SCEP fee is in excess of what is reasonable to conduct the SCEP inspections.

Our position is that because the SCEP fee was never put in front of the voters, and no exception to this requirement applies, the fee is an illegal tax in violation of California Constitution Article XIII § 2.

The City filed a demurrer to the case that was overruled, which means the case moves forward.

This is a class action lawsuit, so it requires that the court certify it as such in order to be able to proceed on behalf of the class members. There are specific requirements outlined in Code of Civil Procedure § 382, which must be met in order for the class to be certified.

After the hearing on the Motion for Class Certification on July 1, 2014, the trial court denied certification.

We believe the court erred in its denial, and have since filed an appeal in the Second District Court of Appeals. Our opening brief has been filed and served. We are now awaiting a Response from the City. We believe we have a strong case for reversal of the trial court’s denial of class certification.

PLEADINGS FOR SCEP LAWSUITS

 

Opening Brief for the Court of Appeals

Housing Reform Coalition of Los Angeles et al. v. City of Los Angeles

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Excess SCEP fee refund

SCEP BS141012 excess fees refund Jan 10 2013

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