Landlords file suit over first-in-time renting ordinance

This morning a group of Seattle landlords sued the City of Seattle over the “first in time” tenant ordinance passed last August.

Here’s the summary of the ordinance I wrote when the bill passed. It does a number of things, but the provision being challenged in today’s lawsuit is the requirement that landlords offer an available unit to the first qualified renter who applies, rather than cherry-picking a tenant from among all the qualified ones. The ordinance is intended to prohibit quiet, hidden forms of housing discrimination.

The landlords are being represented by Pacific Legal Foundation, a national nonprofit legal organization that specializes in conservative issues such as property rights.

In the complaint it filed today, it asserted the legal theory that a landlord’s right to rent to whomever she or he wants is a “property interest” that naturally arises from ownership. Thus the first-in-time ordinance invokes the body of law around government “taking” property from private owners. Article I, Section 16 of the Washington State Constitution says:

Private property shall not be taken for private use, except for private ways of necessity, and for drains, flumes, or ditches on or across the lands of others for agricultural, domestic, or sanitary purposes.  No private property shall be taken or damaged for public or private use without just compensation having been first made, or paid into court for the owner, and no right-of-way shall be appropriated to the use of any corporation other than municipal until full compensation therefor be first made in money, or ascertained and paid into court for the owner, irrespective of any benefit from any improvement proposed by such corporation, which compensation shall be ascertained by a jury, unless a jury be waived, as in other civil cases in courts of record, in the manner prescribed by law. Whenever an attempt is made to take private property for a use alleged to be public, the question whether the contemplated use be really public shall be a judicial question, and determined as such, without regard to any legislative assertion that the use is public:  Provided, That the taking of private property by the state for land reclamation and settlement purposes is hereby declared to be for public use.

And Article I, Section 3, says:

 No person shall be deprived of life, liberty, or property, without due process of law.

Those two passages neatly frame the legal questions the lawsuit raises:

1. Is the right to rent a property to whomever one wants a “property interest” that is Constitutionally protected?
2. If so, does the first-in-time ordinance appropriate it for a public use or a private use, and
3. does it provide for due process of law?

Not surprisingly, the landlords assert that it is a property interest, that the ordinance takes that interest away for a purpose that is not a public use, and that it deprives the landlords of their due process rights.

This is pretty much guaranteed to take years to play out in court, with a fair chance that it will go all the way up to the state Supreme Court, as it is a very complicated area of law with conflicting rulings (even at the Supreme Court level). But here’s a quick preview of the issues.

First, there’s the question of whether renting to whomever you want is a property interest.  The landlords point to a particular case about whether the state could force the owner of a mobile home park to give the tenants first right of refusal on sale of the property, and they claim that the state Supreme Court “held that the right to sell or lease property to a person of your choosing is a protected property right.” Except that the ruling doesn’t say that; the case is entirely about first right of refusal for purchase, and  doesn’t say anything about renting. (for the purposes of this argument, the “first in time” ordinance effectively gives the first person to apply the “first right of refusal” to rent the unit) The dissent in the ruling is also very interesting, pointing out that there are other rulings from the Court that found just the opposite: that the right to sell to whomever you want is not a protected property interest, and that in fact governments regularly restrict property owners’ right to sell to whomever they want, for instance with tobacco, alcohol, and firearms.

Without clearly established case law that says renting to whomever you want is a protected property interest, the landlords will need to argue that point themselves, and that issue alone will likely go all the way up to the state Supreme Court. The test for whether the government’s restrictions on some particular use of a property  is equivalent to a “taking” of that property is well established in the very large body of law related to land use regulation, with the definitive case being this one that actually spells out the steps in the test: (from the ruling)

1. If the challenged regulation is merely an exercise of the police power to safeguard the public interest in health, safety, the environment, or fiscal integrity, it is not a taking… The regulation may be a taking, however, if it “goes beyond preventing a public harm [to] actually enhance a publicly owned right in property.”
2. A regulation effects a taking of private property if “it `does not substantially advance legitimate state interests, … or denies an owner economically viable use of his land.'”… The court should consider: “(1) the economic impact of the regulation on the property; (2) the extent of the regulation’s interference with investment-backed expectations; and (3) the character of the government action.”

The city will argue that it is acting in the public interest of eliminating housing discrimination against certain classes of tenants who landlords might otherwise wish to avoid, ensuring all residents have access to housing. As far as the economic impact on the property, the landlords’ complaint asserts that there are already such impacts. Those are issues of fact that will be hotly debated at trial.

If the court declares that it is in fact a “taking” of property, then the case dives into even murkier waters. Governments are allowed to “take” property for public use, but they need to provide for due process, and they need to adequately compensate the owner. So the court would need to establish what appropriate due process and compensation are for a “first in time” rule, and then the city would need to decide whether it wanted to meet those requirements. Except… in this case it is not “taking” the first right of refusal for its own (public) use; it’s transferring it from the landlord to a single private citizen, and the law (both state and federal) strictly forbids the government from taking property from one private party and giving it to another. So if the courts find that first right of refusal to rent is a property interest, the first-in-time ordinance, as written, is in deep trouble.

The landlords have asked the court for a declaration that the first-in-time rule violates the Washington State Constitution, and for a permanent injunction forbidding the city from enforcing the rule against all landlords in the city.. They haven’t (at least yet) asked for a preliminary injunction, and unless they do so this case will take its time dragging through the courts. I’ll keep tracking the case, and post updates as events unfold.