Pacific Legal Foundation (PLF) challenged Seattle’s new mandate forcing landlords to rent to the first qualified person who applies for a unit. By denying owners the freedom to choose among qualified applicants and to exercise nondiscriminatory discretion about who will live in their units, the “first in time” rule violates state constitutional protections for property rights, according to the lawsuit, filed in King County Superior Court.
PLF represents, free of charge, a number of small landlords whose ownership rights and potentially, rights of personal security, are undercut by the city’s denial of their freedom to make reasonable choices about tenants.
The “First in Time” Rule
A First-of-its-Kind Denial of Landlords’ Rights
Enacted by the Seattle City Council on August 9, 2016, the “first in time” rule took effect on January 1st. It amends Seattle’s Open Housing Ordinance to force landlords to rent to the “first prospective occupant meeting all the screening criteria necessary for the approval of the application.” (Council Bill 118755). The rule brands it an “unfair practice” for a landlord to choose among qualified tenants. Violators are subject to civil suit from would-be renters, as well as government financial penalties of as high as $55,000 for multiple alleged violations. Council Member Lisa Herbold said the rule is the first of its kind to be imposed by a U.S. city.
PLF’s challenge rests on Article 1, Section 16 of the Washington State Constitution which says, “[n]o private property shall be taken … for public or private use without just compensation.” The Washington Supreme Court has held that this protection includes the right to sell or lease property, on a nondiscriminatory basis, to a person of your choosing.
“By telling landlords, including mom-and-pop property owners, that they basically have no say in who can live in their rental units, Seattle is stripping them of a fundamental right,” said PLF attorney Ethan Blevins. “Owners should have the freedom to use their judgment and discretion to decide, on a nondiscriminatory basis, who would be the best and most responsible tenant. The city is robbing them of an important element of property ownership: control over who lives in our property. This amounts to a taking of private property rights and government can’t do that without reimbursing the property owner.
The Plaintiffs: Small Landowners
Victimized By City Strong-Arming
By renting or leasing out a residential unit, a small landlord is entering into a close business relationship with the tenant that can last for a number of years. Seattle is now denying landlords the ability to make reasonable choices as to whom they want to enter into contractual relationships with. The plaintiffs in this lawsuit are small-scale landlords directly harmed by being denied discretion over the individuals who may rent their property.
Moreover, as they point out, the oppressive rule will harm tenants by driving up rents, increasing evictions and even deterring people from becoming landlords and offering rental units.
MariLyn Yim: ‘This law hurts mom and pop landlords AND low-income tenants.’
Plaintiff MariLyn Yim and her husband own a duplex and a triplex in Seattle. With their three children, they live in one of the triplex units and rent out the other two. They could not afford to live in Seattle without this rental income. They have never denied tenancy to anyone based on membership in a protected class. They merely value the ability to carefully select tenants.
Indeed, they cannot afford losses from a tenancy gone bad. Moreover, for a family with children, selecting a tenant who will be their close neighbor requires careful discretion. The Yims treasure their ability to ensure compatibility and safety by choosing among eligible applicants.
“We are literally mom-and-pop property owners renting our home to make Seattle affordable for our family and our tenants, and the council’s actions hurt only us but the very people they keep saying they want to help,” said Mrs. Yim. “We aren’t corporate landlords sitting on large capital reserves or with hundreds of rentals to spread our risk. One bad tenant could take us years to recover from financially. The primary way we have to manage our risk is by carefully selecting tenants and collecting adequate deposits up front. The new city rule deprives us of that flexibility. With this added undue risk, we can no longer afford to charge below-market rents or give a break to good people who are just starting out or rebuilding from their own setbacks.
The council’s actions are bad for tenants and bad for the mom-and-pop landlords who make Seattle their home and fill an important niche in our rental market. Many prospective tenants will find they don’t have a chance to get an already scarce apartment in Seattle unless they are the first to see it and they meet steep criteria. This legislation will also increase evictions; with landlords no longer able to select the strongest applicant and it will reduce the number of rentals as small landlords decide it isn’t worth the risk and sell their properties.”
Kelly Lyles: ‘This law can put women landlords’ safety at risk.’
Plaintiff Kelly Lyles is a single woman who rents out a home she owns in West Seattle. She is an artist who relies primarily on rental income to afford living and working in Seattle.
She has never discriminated against any member of a protected class. Rather, nondiscriminatory discretion in selecting her tenants is vital to her ability to gain income as a small landlord. She cannot afford to miss a month’s worth of rent and she does not have the resources to pursue an unlawful detainer action. As a single woman who interacts frequently with her tenants, she also considers personal safety when choosing her tenants. Such considerations cannot be adequately addressed through general rental criteria alone.
“No business would be told they have to hire the first person to show up with a decent resume,” said Ms. Lyles. “This law would be ridiculous if it wasn’t so frightening! I inherited a small amount of money and used the food bank for several years in order to purchase my rental,” she recounts. “Now, as a female landlord, I’m very concerned about the ‘first in time’ mandate. Women are taught from childhood to ‘trust our gut’; I’m now denied that option. I am terrified of no longer having a choice over whom I entrust with the majority of my yearly income (and life savings), not to mention my personal safety. There are preexisting laws on the books protecting tenants from discrimination; this new one comes at too high a price: robbing landlords of protection from potentially dangerous situations.”
The Davis family: ‘This rule will end up costing tenants more, and excluding many good ones’.
Scott Davis and his wife own and manage a seven-unit complex in the Greenlake area of Seattle. Mr. Davis also owns and runs a small business, the Davis Sign Company. The rental property serves as an important supplement to the Davis family’s income.
“The city’s ‘first in time’ mandate puts an undue burden on small landlords who manage their property after-hours and on the weekends, and do not the capital to hire a management company or absorb the cost of an expensive eviction,: said Scott Davis. “We will be forced to make strict screening requirements to protect our investment, exposure and liability, since we are no longer able to use our best judgment and reasonable discretion in selecting a tenant. The result will be to exclude good tenants who are able to make a good impression.
“This legislation only rewards the fastest applicant and does nothing to protect the people it seeks to help,” he continued. “As a result of this new rule, we have substantially raised our rents across the board with the anticipation of being forced to hire a property management company and avoid the future ‘sting’ operations of the city and the convoluted rules that are being implemented.”
The Benis family: Their children’s education is at risk.
The Benis family owns and manages a six-unit apartment building, through CAN Apartments, LLC. The rental income is used for the three Benis children’s college fund. The Benis family values the discretion they have enjoyed in selecting tenants on a nondiscriminatory basis. Now, they are robbed of the discretion to select the best tenants, undermining the prospects for this investment which is essential for the children’s future education.
Founded in 1973, PLF litigates cases nationwide to vindicate the rights fundamental to a free society. With nine consecutive U.S. Supreme Court victories and counting, PLF fights on the front lines, ensuring individual liberty is secure. Donor-supported Pacific Legal Foundation (www.pacificlegal.org) is the leading watchdog organization that litigates for limited government, property rights, individual rights, and free enterprise, in courts nationwide. PLF represents all clients free of charge. For more information, visit www.pacificlegal.org, call (916) 419-7111 or write PLF at 930 G. Street, Sacramento, CA 95814. The case is Yim v. City of Seattle.