Certificate of Occupancy
Even though a unit does not have a certificate of occupancy, it is still covered under local rent control. The landlord cannot increase the rent more than the allowable amount, and the tenant cannot be evicted without good cause.
Under most local rent ordinances, a landlord can evict tenants to demolish a unit. For example, under the San Francisco Rent Ordinance, a demolition eviction requires a sixty day notice, payment of moving allowance, and demolition permits before the notice is served. More importantly, the landlord must be evicting in good faith. Bad faith would be any of the following: (1) not demolishing the unit to re-let it at a higher rent, (2) selling the building without demolishing the unit, (3) merging the unit with other units, or (4) retaliating against the tenant after repair requests. Similar demolition eviction clauses exist in Oakland and Berkeley.
Good Faith Demolition
Whether or not the landlord is acting in good faith, an evicted tenant may have a fraud cause of action against the landlord. A landlord who knowingly rents an illegal unit without disclosing it to the tenant is guilty of fraudulent misrepresentation. Where a tenant has lost a low-rent, rent-controlled unit because of this fraud, the measure of damages will be the cost to replace the unit times a number of years. One court upheld an award that allowed a tenant to re-coup rent for twenty years. If it can be proven that the landlord evicted to get the tenant out from under rent control, this amount is trebled.
The elements for the cause of action for fraud are (1) that landlord did not disclose the unit was illegal; (2) that the landlord knew that the unit was illegal; (3) the landlord intended the tenant to let the unit so did not disclose it was illegal; (4) that the tenant relied on the failure to disclose that the unit was illegal; and (5) that the tenants lost the low-rent, rent-controlled apartment. CACI 1900.