Sea Castle Apartments, Ltd. v. Santa Monica Rent Control Board

Plaintiff and cross-defendant Sea Castle Apartments, Ltd. (Sea Castle), and defendant and cross-complainant Santa Monica Rent Control Board (Board) each appeal from a judgment entered following an order granting Board’s motion for summary judgment. In the published portion of this opinion, we determine that, where the maximum allowable rental rates established by local ordinance have been preempted by the United States Department of Housing and Urban Development (HUD) on the basis the property involved is financed with a mortgage insured by HUD, the rates revert to those established by local ordinance upon extinguishment of the HUD-insured mortgage.

*1543 Background

This case involves a 178-unit residential apartment complex in Santa Monica, California, built around 1925 (the property). The property was rehabilitated in 1973, utilizing a loan insured by HUD. From 1976 through 1980, HUD managed the property as the mortgagee in possession.

In April 1979, the City of Santa Monica adopted city charter article XVIII (Rent Control Law), which established a comprehensive system of rent control. Under the provisions of Rent Control Law, all rents were rolled back to their…