In real estate parlance month-to-month leases are called periodic tenancies and leases for a fixed term are called estates for years. The right to occupy a property for life is a life estate. The just-cause eviction regulations that the Alameda City Council is considering would effectively convert periodic tenancies and estates for years into life estates, and perhaps estates that could be left to heirs as currently happens in New York City.
There are a few reasons why this could prove to be bad public policy. There are many instances where the property owner may not want to create a life estate on his property. If renting the property creates such an estate, he may well choose not to rent, thereby denying housing opportunity to the rental market. Instances when an owner wants to limit the length of a tenant’s occupancy might be when he is planning to upgrade the building but needs time to get plans and permits, frequently a multi-year process.
A few years ago, the city emptied city hall and did a thorough rework of the building. Many apartment buildings in Alameda are older than city hall. Or maybe a building needs to be torn down and rebuilt. A few years ago Alameda Municipal Power did just that with its headquarters on Grand. Sometimes it makes sense to change the use of a property. The city did this when they tore down the Lin-Oaks motel and built the new library. All of the tenants living at the motel were given notice to move. There is an old real estate adage that more buildings are torn down than fall down.
Frequently, real estate developers buy properties with an old building that is called a carrier. The rent collected carries the project while the developer prepares plans and secures permits. If these tenancies evolve into life estates, then it will chill what has been a win-win for the developer and the temporary tenant who gets affordable housing in a desirable area.
There are other reasons property owners may want to negotiate a shorter lease. The owner may be transferred out of area on a temporary assignment. The property may be part of an estate that is going through a protracted settlement. Perhaps the owner is changing their marital status and will not need the residence for a period of time, but plans eventually to reoccupy.
There are several reasons for interest in becoming a temporary tenant. A student may be planning to live in the city for only a year or two while they complete their education. A homeowner might be doing extensive work on their house and find it convenient to rent a temporary one to live in. A tenant could be a visiting professor or someone working on a short term assignment. It is common for someone new to an area to rent a residence while they search for one to buy, so that they do not have to buy in a rush. The inability to do a periodic estate or an estate for years would put an end to these temporary rentals as an owner could never be sure that rental would not turn into a life estate.
Hopefully I have shown the importance of shorter term rentals to the proper functioning of the marketplace. The other issue at hand is the giving of notice in a no-fault eviction. Thirty days notice isn’t civilized. Plans and permits to alter or demolish a building take well more than 30 days to secure. A much more reasonable notice would be six months. Appraisers have a concept that they call absorption. The thinking is that if a lot of property offered for sale all at once it will depress the price and take a longer period to sell. The same effect would hold true if a lot of demand was dumped on the market all at once. A longer time period would allow the market to absorb all of the tenants suddenly looking for housing.
I encourage everyone working on new “just cause” regulations to consider these nuances. New regulations, once they are put in place, have not been easy to walk back, nor have they been boon to the cities that have them.
— Ed Hirshberg