San Anselmo complex sues town over rent-control ordinance

Parkside Apartments alleges the rules deny it a "fair return" on its investment and also contain a flawed process for appeals.

The owners of the 70-residence Parkside Apartments in San Anselmo have sued the town to block its new rent-control ordinance.

“The way that the law is set up, it doesn’t give property owners a fair rate of return on their investment,” said Parkside’s attorney, Ellis Raskin.

According to the suit, state and federal courts have consistently held that rent-control laws violate due process when they deprive investors and property owners of a “fair return.”

In addition, Raskin said, a petition process included in the ordinance that is designed to remedy the problem “isn’t set up in a way to fairly or accurately correct the rent that property owners would be able to get, which would make the rent a fair return.”

San Anselmo’s rent-control ordinance, adopted following a 3-2 vote of the Town Council on April 9, limits annual increases to 5%, or 60% of the consumer price index, whichever is lower. It applies to properties with three or more dwellings on the same parcel, or contiguous parcels under common ownership. It also prohibits property owners from charging tenants for utilities in addition to rent.

“This essentially guarantees that rents will not keep pace with inflation,” the lawsuit says. “The ordinance purports to include an administrative remedy where housing providers can petition to adjust rents, but that administrative procedure also suffers from fundamental constitutional defects.”

“This petition process allows town decisionmakers to consider any range of ‘relevant factors’ when deciding whether to grant a petition, even if the petitioner has no notice of the factors that will be considered, and there are absolutely no objective benchmarks,” the suit says.

In addition, the filing asserts that the ordinance is fundamentally flawed because it fails to allow a fair return on capital improvements or for housing providers to recover the full cost of providing housing by passing along their utility costs.

The suit acknowledges that a group of San Anselmo residents raised enough signatures to force a referendum on the rent-control ordinance to be placed on the November ballot. In June, the Town Council also decided to allow voters to decide in November whether to approve a separate and equally controversial set of tenant protections.

Raskin said the suit was filed last month because under state law there is a 90-day deadline to challenge land use decisions. The next court hearing on the suit is scheduled for late August.

Paul Chignell, a former San Anselmo council member who helped lead the drive for referendum signatures, said, “We don’t like to see a small town like San Anselmo face a lawsuit with principles encompassed in the lawsuit that can hurt the town and cost it a heck of a lot of money.”

Chignell noted that the ordinance calls for the decision on petitions for higher rents to be ruled on by the planning director, with appeals going to the Planning Commission, not the Town Council, which approved the ordinance.

“They’ve washed their hands of any appeal from their constituents,” Chignell said.

Steve Burdo, one of the San Anselmo council members who voted for the ordinance, declined to comment on the lawsuit.

“Our attorneys tell me it would be best not to comment,” Burdo said.

Mayor Eileen Burke, however, wrote in an email, “The lawsuit doesn’t surprise me and I expect other apartment owners may join.”

Burke, who voted against the rent-control ordinance, wrote that the family-owned Parkside Apartments lack separate electrical meters for tenants, and under the rent-control ordinance would not be able to charge tenants for the electricity they use.

“If the San Anselmo extra rent control ordinance passes,” Burke wrote, “I wouldn’t be surprised to see Parkside converted to condos, leaving San Anselmo with even less rental units. I’m all for reasonable rent control, but the proposed ordinance goes way too far and will cause drastic unintended consequences.”

But Curt Ries, co-chair of the Marin County chapter of the Democratic Socialists of America, wrote in an email that the lawsuit is “a clear attempt to intimidate the town to drop its rent control law without legal substance.”

The organization has played an active role in promoting recent rent-control ordinances in Larkspur and Fairfax, in addition to San Anselmo.

“San Anselmo’s law guarantees landlords a fair rate of return via its petition process, whereby landlords can petition for rent increases above the legal cap to ensure they make a profit,” Ries wrote. “In fact, every time landlords have attempted to sue a California jurisdiction over its rent control law on the grounds that they make it impossible for landlords to receive a fair rate of return, they have lost.”

Pat Johnstone, who heads the Democratic Central Committee of Marin and is a San Anselmo landlord herself, said, “It just seems to me like it’s another kind of scare tactic to keep maybe other municipalities from not going forward with this kind of thing.”

Michael Burke, a Greenbrae real estate agent who has specialized in Marin apartment sales for the last 50 years, wrote in an email, “I am very supportive of the Parkside’s efforts to overturn San Anselmo’s extreme local rent control.”

Burke wrote that the rent ordinances in San Anselmo, Larkspur and Fairfax “limit rent increases to an amount that does not even handle the annual property tax increase of 2%.”

He added, however, that he is doubtful that the suit will succeed.

“We looked into doing this against Fairfax and determined that we could not win the suit,” Burke wrote. “The writers of the ordinance were smart enough to build in the necessary language to stop this from being challenged.”