L.A.'s REAP: City Rent-Control Laws a License to Steal?

| by Denise A Justin

Controller Wendy Greuel says in 2009-10 the L. A. Housing Department collected $43.1 million in two funds under the City’s rent-control program.

Carol Knapp got her law degree and became a property-rights advocate for landlords subject to the City’s rent-control program, under which, she states, “they have become victims of R.E.A.P. at the hands of the Los Angeles Housing Department (LAHD).”

Knapp, a retired school psychologist, has never been in R.E.A.P. (Rent Escrow Account Program) herself, but her goal is to end what she calls a brutal program which targets Mom and Pop landlords. Knapp claims that R.E.A.P.’s purpose is not to provide safe, affordable housing but to allow the City to ‘legally’ swindle property from owners for the benefit of crony developers.”

She writes in a compelling article, “The 7 Deadly Sins of REAP”, “Although I have not yet sat for the bar, I am working under the license of civil rights attorney Lee Grant, Esq. to fulfill my 23-year desire to stop the LAHD from continuing to abuse us.”  (City Watch LA) http://citywatchla.com/index.php?option=com_content&task=view&id=4210&It...

The City of Los Angeles makes a lot of money from landlords through its Rent Stabilization Ordinance (RSO) and Systematic Code Enforcement Program (SCEP), enforced by LAHD, according to an audit of the Housing Department released by Controller Wendy Greuel on December 14, 2010:

“The SCEP fund was created in 1998, in order for LAHD to inspect the nearly 780,000 rental units in the City of Los Angeles every three years to ensure that they are in compliance with City laws .The RSO fund was created in 1979 in response to the passage of Proposition 13, to regulate the amount a landlord is allowed to increase the rent each year. In fiscal year 2009-10, the two funds collected $43.1 million.” http://controller.lacity.org/stellent/groups/electedofficials/@ctr_contributor/documents/contributor_web_content/lacityp_012861.pdf

Helping the “victims of REAP”

Encino attorney Lee Grant has practiced law in Los Angeles for 32 years. He and Knapp are currently fighting for the rights of four clients whose “crime” was owning rental property in the city of Los Angeles. Two are women; one is 94 years old and the other 85. (Landfield, et al v the City of Los Angeles)

The 94-year-old lost her property through foreclosure because the Los Angeles Housing Department  LAHD) put her well-kept three-unit building into its Rent Escrow Account Program (REAP) after they targeted it for citations (with which she complied) and then later added claims of  “further deficiencies.” 

Knapp explains, “The Los Angeles rent-control ordinance allows REAP to lower the rent up to 50% and then confiscates it, thereby preventing owners from paying their mortgages, repairs and other financial obligations.”  


Falling into REAP

How does a property owner get into R.E.A.P?  It’s set forth under Sec. 151.07, of the L.A. Municipal Code, entitled, AUTHORITY OF THE DEPARTMENT AND THE COMMISSION TO GRANT INDIVIDUAL RENT ADJUSTMENTS, and in interminably convoluted subsections of Sec. 162.   

REFERRAL TO REAP (Eff. 4/16/01) basically states that any City or County agency or any tenant may refer any building or residential unit  for inclusion in REAP  if: (1) The building or unit is the subject of one or more Orders; (2) The period allowed by the Order for compliance, including any extensions, has expired without compliance; and (3) The violation affects the health or safety of the occupants, or, if the unit is subject to the RSO, the violation results in a deprivation of housing services, or a habitability violation. http://www.amlegal.com/nxt/gateway.dll?f=templates&fn=default.htm&vid=am...

While it is incumbent on local government agencies to order compliance for violations of health/safety/building codes and take appropriate action, does the City have the right to literally take control of the property itself and divert any income derived from it into City accounts; thus, impeding the owner’s ability to pay obligations and accomplish what is required?  

Knapp and Grant claim the four plaintiffs/class representatives in this suit complied with all legitimate orders, but were put in REAP anyway for various additional alleged violations. These include code sections over which the LAHD has no authority, e.g. lack of building permits--for buildings predating current requirements and where no health/safety violations exist.  Three of the five plaintiffs were criminally prosecuted, despite timely compliance.

They also contend a major part of the problem for owners who fall into R.E.A.P. is that the city requires the inspection-ordered repairs be completed within 30 days but is haphazard about sending Orders to Comply and other notices. Thus, the time to comply is truncated or eliminated and the City often places properties in R.E.A.P. in violation of other due-process laws and its own internal policies, creating an indefensible situation for the property owner who did not receive timely notices or may not have received them at all.

In fact, the LAHD webpage entitled, “WHAT CAN AN OWNER EXPECT FROM BEING PLACED INTO REAP?” verifies some pretty scary stuff:

  • Tenants may pay their rents to LAHD
  • Rental income may be reduced up to 50%
  • No annual rent increases for 12 months after the property is removed from REAP
  • Eviction Restrictions
  • $50 Charge per unit per month while in REAP
  • $201.50 charge for each LAHD inspection
  • Landlords are required to pre-pay for two Annual SCEP Inspections ($338.00) when the property is removed from REAP.
  • Tenants may apply for their deposited rental funds for relocation or repairs.
  • Notice of REAP will be recorded against your property’s title.
  • The recording may restrict a refinance or sale of the property.   www.lahd.lacity.org

The “domino effect” of REAP—Unintended or Part of the Plan?

Carol Knapp explains another disturbing consequence of this plan, “REAP and its partner in crime, RRP (Rent Reduction Program), allow the city to reduce the rent by as much as 50% if the tenant agrees to pay the (reduced) rent to the City instead of to the owner, thus often providing an incentive for tenants to cause damage themselves.”

In a domino effect, the reduced income and the fact that the City has de facto taken over the property, destroys the owner’s ability to qualify for a loan which would fund the repairs. This was the case for Grants’ 94-year-old client. 

The REAL reason for REAP?

Grant states that he and his legal assistant, Carol Knapp, have accepted the case pro bono,  “…because otherwise these victims would have no way to protect their rights against the assault of the “landgrabbers” in the public and private sectors.” “The LAHD’s “modus operandi” in REAP cases is to financially cripple targeted housing providers so they often cannot adequately defend themselves….” (Landfield, et al v City of Los.Angeles)

He believes there is a definite reason why the City targets certain rental-property owners in low-income areas. The procedures as applied by REAP are anything but “fair,” alleges the complaint, “and are, in fact, used to harass and intimidate owners, particularly in geographic locations designated to receive government funds; e.g., Community Redevelopment Project Areas  and Business Improvement Districts.

Grant contends the goal of R.E.A.P.  is not at all to help the landlord save the money needed for the City-required repairs, “Too many result in bankruptcy or foreclosure. Often the properties are then sold to large developers—possibly friends, supporters of politicians—who  purchase the property and redevelop it with new apartment or condominium projects, often receiving special height or density exemptions and corporate welfare subsidies for ‘purchase and rehabilitation.”

Other “property grabs” by the City?

Ignoring or steamrolling property-owners’ rights appears to be the new standard operating practice in Los Angeles. If you think Grant and Knapp may be creating a conspiracy theory involving LAHD to defend irresponsible apartment owners, take a look at the viewpoint of someone not in the rental industry. 

 LA Neighborhoods United founder, Cary Brazeman, is currently organizing city property owners to defend against a different type of property takeover.  Brazeman bought four full-page ads in the Los Angeles Daily News, which warned of the proposed Community Plan Implementation Overlay (CIPO).

He states, " ... the Mayor's planning department, at their sole discretion, will be able to override existing zoning by allowing taller buildings, bigger buildings and different uses in neighborhoods across the city under the changes.”

He told the LA Weekly on October 12, 2010, “... A small group of local officials, lobbyists and developers has worked to subvert the zoning code for their own selfish interests."  http://blogs.laweekly.com/informer/2010/10/   daily_news_zoning_advertisemen.php

On December 9, Brazeman and LA. Neighbors United, also filed a lawsuit for an injunction against the City. http://www.laneighbors.org/PDF/WeSueBecauseWeLoveLA.pdf

Fighting City Hall in federal court

Knapp and Lee Grant’s first case was filed in the U. S. Central District Court March, ’09, but Los Angeles city attorneys convinced the federal judge that the four plaintiffs had to first go to state court, so they did. 

Superior Court Judge Richard O’Brien recently dismissed the case, thus allowing it to return to federal court. Carol Knapp believes his decision was made, “...not to thwart us, but to help us.    He did what I asked in the Prayer for Relief: send us back to federal court so we can proceed to trial.” 

However, there has been one really disturbing development.  The case was reassigned to federal court in Orange County.  Knapp suspects that the City had some influence in this, “To me this is BLATANT manipulation by the powers that be to change the legal outcome.  I want THIS to be publicized because it is outrageous. O.C. is too far away. It's a change of venue for NO REASON.”    www.fairhousingcoalition.com

Where’s the Fifth Amendment when we need it?

If you think, “This can’t happen in America!” take a look at the Los Angeles City Council agenda most any day and you’ll see the list of  properties being “removed” from REAP. There is no list of the hundreds NOT removed. (On December 17, 2010, properties are just being released which were “accepted” into REAP as early as 2000.) www.lacity.org 

Thus, the purported goal of City rent control laws, which is to provide rentals for the economically challenged, is increasingly not the end result.  Bill Hooey, who heads the apartment-owners’ group,  Fair Housing Coalition says, “The Housing Department’s tactics are destroying the older buildings that accommodate low-income renters and leaving unprecedented numbers of  homeless on the streets of Los Angeles.” www.fairhousingcoalition.com

The Fifth Amendment provides that no American shall be deprived of his/her property without due process of law; and private property shall not be taken for public use without just compensation.  Has the City of Los Angeles crossed the line with REAP? 

What’s really happening?  Are RSO, RRP, SCEP and REAP, administered by LAHD just acronyms for a benign effort to control rents and eliminate health/safety risks in “slum” apartment buildings? Or, could they really be, as asserted by Attorney Lee Grant and Carol Knapp, thinly disguised excuses to steal from the “little guy/gal” and fill the City coffers?