Bay-Area Mega-Landlord Barred From Clipping Tenants For Illegal Rent Hikes In Failed Attempt To Exploit "Small Landlord" Loophole Around Rent Limits

In East Palo Alto, California, Beyond Chron reports on the story of a local major residential landlord that has been barred by court order in the Oberle v. Page Mill Properties class action lawsuit from collecting or enforcing rent increases that do not comply with the limits of the East Palo Alto Rent Stabilization Ordinance.(1) Landlord Page Mill Properties, which reportedly controls over 1700 units, has been accused of attempting to dance around the local ordinance that restricts rental increases that can be imposed on residential tenants by exploiting a legal loophole intended for small landlords.

• After gobbling up more than half of the rent-controlled apartments in East Palo Alto, Page Mill Properties immediately began imposing huge rent increases and evicting tenants at unprecedented rates. The company has repeatedly sued the city over local laws protecting tenants and filed unsuccessful petitions to raise rents. Page Mill Properties has also invoked the controversial Ellis Act to evict outspoken tenant activists, prompting accusations that the evictions are retaliatory. The [...] litigation involves Page Mill's effort to exploit a "mom-and-pop" exemption from the local rent law. Under the exemption, owners of four or fewer units are not subject to the rent increase limitations of the [East Palo Alto Rent Stabilization Ordinance]. Page Mill created numerous companies, each to own four or fewer units, and then these companies imposed huge rent increases claiming to be exempt from the ordinance.(2)

For more, see Predatory Landlord Scheme Starts To Unravel in East Palo Alto (Court Grants Injunction Against Illegal Rent Increases).

In related stories, see:

• San Francisco Bay Area Indymedia: East Palo Alto Mega-Landlord Page Mill Shuts Down Leasing Offices,
• San Jose Mercury News: Wells Fargo to seek 3rd-party intervention in Page Mill dispute,
• San Jose Mercury News: Court-appointed receiver to run Page Mill's East Palo Alto units (A judge has ordered a Southern California-based company to take over operations at about 1,800 rental units in East Palo Alto until Wells Fargo Bank and the city's biggest landlord resolve a financial dispute.).

(1) Reportedly, on the same day as last week's court hearing, the San Jose Mercury News reported (see Page Mill could lose ownership of East Palo Alto properties) that Page Mill is facing financing problems that could lead to foreclosure. According to the Mercury News article, "ownership of more than 1,700 units in East Palo Alto is in question after the company failed to make a $50 million payment to Wells Fargo Bank last month." Page Mill is urging Wells Fargo to renegotiate the terms of the loan, but tenant advocates question why Wells Fargo should renegotiate with a property owner with Page Mill's track record, the story states. The article also notes maintenance problems at Page Mill buildings, with pools recently being shut down by city health officials (including one that is bright green with algae), raising further questions about why Page Mill should be allowed to continue managing the property.

(2) In granting the tenant/plaintiff's motion for a preliminary injunction, the Court rejected the landlord's argument that each of its corporate entities was to be considered separately. Applying the alter ego doctrine, the court disregarded the corporate forms set up by Page Mill in evaluating whether these entities could qualify for the exemption as owners of less than five units. The Court found that the tenant plaintiffs had shown such a "unity of interest" that the separate corporate personalities "do not in reality exist," and that the multiple entities had been used as conduits for a single enterprise. The court determined that recognizing the corporate entities would lead to an inequitable result.

For more on the alter ego doctrine, as applied in California, see:

• The "Alter-Ego" Theory aka "Piercing the Corporate Veil",
• Associated Vendors, Inc. v. Oakland Meat Packing Co. (1962) 210 Cal. App. 2d 825 [26 Cal. Rptr. 806],
• Automotiz del Golfo de California v. Resnick (1957) 47 Cal.2d 792 [306 P.2d 1],
• Las Palmas Associates v. Las Palmas Center Associates (1991) 235 Cal.App.3d 1220 [1 Cal.Rptr.2d 301],
• First Western Bank & Trust Co. v. Bookasta (1968) 267 Cal.App.2d 910 [73 Cal.Rptr. 657],
• Stark v. Coker (1942) 20 Cal.2d 839 [129 P.2d 390],
• Watson v. Commonwealth Ins. Co. (1936) 8 Cal.2d 61 [63 P.2d 295].