Difference between Ellis Act and Just Cause

The goal behind a Cash for Keys agreement is to avoid a lot of strings that neither side wants to deal with. However, not always do deals get done, at least not right away. Given time is of essence to most people, Owners often look to the allowable evictions to terminate leases, especially when there are no ‘at-fault’ reasons, meaning the tenant isn’t violating the lease, not causing a nuisance, and is paying their rent.

There are two pathways of what we call “No-Fault, Just Cause” evictions- the Ellis Act and the applicable Just Cause ordinance, whether there is a local ordinance or the state rules under AB 1482.

The Ellis Act is a permanent removal of a residential property from the rental market and is used if you want to keep the current structures or if you plan to demolish and redevelop. All units and buildings go completely offline, you can’t rent the property. The Ellis Act is bound to the property and filed with the LA County Recorder, meaning if you sell or transfer ownership the new owner is subject to the Ellis Act. The Ellis Act is a state law, however, some jurisdictions do have their own rules and process. The owner may return to the rental market, however there are certain rights tenants have to return to the property and retain their prior rent with applicable rent increases, depending on how soon you return to the rental market. There is also paperwork you file with the County and the local jurisdiction if they have rules for the Ellis Act. If the property is intended to be a residential rental income property then the Ellis Act is typically last resort. The newest caveat to Ellis Acts applies to LA City RSO properties that are being Ellis Act’d to demolish and redevelop. The relocation fees are substantially higher for low income tenants (~$80-108k) and the rights to return are very strong for tenants.

The remaining options for evictions are typically owner occupancy, family occupancy of an allowable family member (typically immediate family), substantial remodel (many jurisdictions have eliminated this option and LA City has a moratorium on this at the time of this article), government order (you are usually in very hot water by this point and even then very rare to get a government order requiring all occupants to permanently vacate), and condominium conversion (not very common, not very loved by local government, and a paperwork heavy).

With the Just Cause options there is not necessarily a permanent exit from the rental market, rather a temporary one, typically 1 to 3 years. Once that time has passed landlords are usually able to return to the rental market and seek market rent. However, not all landlords have a need to owner occupy, or any other just cause, thus they turn to Cash for Keys with the outlook of getting a return on the relocation money, remodeling of the unit, and then seeking market rent.

If you are looking to maximize your rental upside, want to sell the property for a higher return, or simply don’t want to be a landlord for a bit, Cash for Keys is a good option to explore. Sometimes it becomes the fall back when Ellis Act or Just Cause evictions are started and the tenants rather take more money given they likely don’t want to return once they move out anyways.

The information in this post is for general information purposes only. Nothing on this post should be taken as legal advice for any individual case or situation. This information is not intended to create, and receipt or viewing does not constitute, an attorney-client relationship.