How Berkeley’s Rent Ordinance Affected a Renovation Plan

Updated on December 18, 2023

In this blog post, we discuss how Berkeley’s Rent Ordinance affected a landlord’s plan to expand after renovation.

The case of NCR Properties, LLC v. City of Berkeley (2023) 89 Cal.App.5th 39, involves an interpretation of the City of Berkeley’s Rent Stabilization and Eviction for Good Cause Ordinance.

The case centers around a Landlord who purchased two single family homes that were in bad condition, renovated them, and converted them into triplexes which created a total of six units. The litigation concerned whether the converted triplexes were subject to Berkeley’s Rent Ordinance. The Landlord contended that the units in the triplexes were exempt from the Ordinance under the Costa-Hawkins Rental Housing Act which includes an exemption for residential units with a certificate of occupancy issued after February 1,1995.

The City of Berkeley’s Rent Stabilization Board argued that four of the six units were not exempt because, prior to Landlord’s purchase, two of the three units in each property had already been used for residential purposes. Therefore, Berkeley argued that Landlord’s renovations were not an expansion of the housing stock but instead were a conversion and should not qualify for an exemption.

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The Court of Appeals agreed with the City of Berkeley finding that Costa-Hawkins did not exempt the four units from rent control (due to new construction) given the units had been used for residential purposes before Landlord’s purchase. Two of the units that were found to be exempt from the Ordinance included an attic unit in one building and abasement unit in the other building.

The basement unit was exempt from the Ordinance as the Landlord had excavated space that was previously uninhabitable and the attic unit was exempt because the Landlord had created much of the habitable space by raising the roof. The court rejected Landlord’s interpretation of Costa-Hawkins and, instead, relied on Burien, LLC v.Wiley (2014) 230 Cal.App.4th 1039.

In reach its decision, the Court grave significant attention to the legislative history relevant to the rent stabilization ordinances and concluded that there was no support for the argument that a mere conversion of previous residential space to a different category of residential use would exempt the property from rent control.

The court held that this exemption from Costa-Hawkins applies only to certificates of occupancy issued to new residential units – not to converted residential units that were previously in service as a residential unit.

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Schorr Law’s Los Angeles real estate attorneys offer consultation and representation for matters such as this, along with many other real estate matters. See if you qualiffy for a free 30-minute consultation today by calling us directly at (310) 954-1877. You can also text us at (310) 706-2265, or send us a message here.

Links to Berkeley’s Rent Ordinance and Regulations, and state and local laws affecting rental properties.