A REAL ESTATE ATTORNEY’S OPINION ON BEING A LANDLORD IN SANTA MONICA

Today, we share the opinions of Gordon P. Gitlen, Attorney at Law…

GORDON’S INTRODUCTION: My particular specialty is real estate and business transaction. Been doing this for about 25 years. I service a tremendous amount of Santa Monica problems….which Santa Monica seems to reinvent – like Madonna – all the time…it’s a source of amusement and a tremendous source of business, because the City keeps changing their policies and making things so difficult. This basically is an anti-development, anti-business city. Yet people still flock to Santa Monica and the property values are still here, despite the politics.

HIS OPINION: The City passes new rules and regulations all the time, it’s like a floating game, you have to get a handle on the rules this week, and it’s difficult to keep up on.

HIS OBSERVATION: Santa Monica is operated by a City Council, but this City Council depends upon the City Attorney, the Planning Department, the Building and Safety Department. If that’s not depressing news; five people out of the seven on the City Council are directly related to renter’s rights; so they’re going to do whatever their agenda tells them to do. The other two are more or less along for the ride, although trying as best they can, to be an independent voice. You’re never going to be an independent voice when it two against five.

JODI SUMMERS: How difficult is it to be a landlord in Santa Monica?

GORDON GITLEN: It depends upon if you want to make money. There are so many rules and regulations in our town that are counter what happens in the state of California, and unless you know the rules and regulations, it’s going to cost you money.

JODI SUMMERS: What rights does a landlord have in Santa Monica?

GORDON GITLEN: Not as many as anyplace else in the United States. The landlord has the right to stay in business or go out of business. When you buy a property, you would think you have the right to owner occupy your property – you have to pay relocation assistance, and the rent control board will tell you exactly which unit you will take as opposed to the unit you want. You cannot just give a tenant a notice to leave, now its called “Just Cause for Eviction.” Just Cause is generally a violation of the Rent Control Law or a violation of the rental agreement. And you get to pay the Rent Control Board for the pleasure of being in business by  the registration fees. Sometimes you can pass it through, but if there’s nobody to past the cost through to, then you cannot.

JODI SUMMERS: What is the upside to being a landlord in Santa Monica?

GORDON GITLEN: There is no upside. You can buy a building in Santa Monica, and if you can manage it appropriately and wait for the real estate market to go up, you might make some money.  The problem is that the rent levels are controlled by the rent control board, and your rent levels are just not going to go up that high. Today, most of your tenants that are going to vacate probably have vacated, so you’ve already got vacancy decontrol. Now you’ve set your rent levels as high as you can make them when somebody moves in; now your rent levels are controlled. If we agree that the value of the apartment building is directly attributable to the income that the building generates, and that you cannot generate substantially more income because of rent control levels, ten you’re just not going to make that much more money compared to other areas where you get a higher rate of return off of your investment. But people still want to live in Santa Monica, so people still want to own in Santa Monica, and that’s the drawing card, even though the financial reward isn’t as great.

Gordon Gitlen’s law offices are located at the Gitlen Law Building