The Ellis Act lets an LA landlord exit the rental business by withdrawing all units from the market. It is legal. It is mechanical. It is also, for most LA multifamily owners in 2026, prohibitively expensive at the scale the statute was written to govern. That economic reality — not the law itself — is what shapes most of the "should I Ellis" conversations I have.
A landlord invoking Ellis in LA City owes relocation assistance to each qualifying tenant. The amounts are tiered by tenant profile — length of tenancy, income level, age, disability status, presence of minor children. Current-year amounts run from roughly $10,000 per tenant on the low end to roughly $26,000 per tenant on the high end, with multi-tenant households receiving per-person payments that stack. For a twenty-unit building with average tenancy, the relocation obligation can run $300,000 to $500,000 before the first empty unit produces any new cash flow. Add the regulatory overhead: notices required before Ellis takes effect, a multi-year re-rental restriction on the building, public registration of the Ellis withdrawal, and specific rights if the property returns to the rental market within ten years. None of these are catastrophic individually. Collectively, they make Ellis a deliberate exit, not a casual one.
Conversion to owner use. The most common Ellis case is a landlord converting a building to a single-family residence or to multiple owner-occupied units (where zoning permits). The relocation payments are a capital cost against the conversion value, and the conversion produces something the rental building cannot.
Redevelopment. If the building sits on a lot that can be redeveloped for higher-and-better use — condos, a larger multifamily, mixed-use — Ellis is often the only path to vacant delivery, and the relocation cost is absorbed by the redevelopment budget.
Small buildings with few tenants. On a four-unit building with three long-tenured tenants, the relocation math is smaller in absolute terms and often pencils when the path to vacant delivery matters for the end use.
Larger buildings held primarily for cash flow. On a 20-to-50-unit building, the relocation obligation frequently dwarfs the incremental value created by vacant units relative to the occupied alternative. Sellers in this situation are generally better off selling with tenants in place to a buyer who is pricing the rent roll as-is.
Any building the owner intends to continue renting in the foreseeable future. The Ellis re-rental restriction makes this economically unworkable.
Situations where the building is being sold anyway. Doing Ellis before sale transfers the relocation cost to the seller with no corresponding increase in sale price. The buyer can often achieve the same end state through their own tenant strategy (buyouts, vacancy through natural turnover) without the seller-absorbed Ellis cost.
The alternative is straightforward: continue operating under rent control, accept the in-place-to-market gap, and either hold or sell to a buyer who prices the gap. The gap is real. It shows up in the sale price. And it continues to widen under the 2026 RSO rewrite. But the hold-through alternative has two things going for it: no upfront capital outlay, and preservation of liquidity. Ellis commits the owner to spending hundreds of thousands of dollars before any return. Holding through costs nothing in cash — just the opportunity cost of the in-place-to-market gap, which the owner was already absorbing.
Ellis is right when the use case after withdrawal (conversion, redevelopment, small-scale owner occupancy) produces value substantially exceeding the relocation cost. It is wrong when the owner is simply trying to "clear" a building to sell it — in that case, selling with tenants in place and pricing the gap honestly usually produces a better net outcome than paying for Ellis plus selling plus the re-rental restriction overhead. Most of the sellers who call me asking about Ellis are better served by the second path.
The math is building-specific. Generic Ellis-vs-hold comparisons miss the variables that actually matter — tenant profile, building size, submarket pricing on occupied vs. vacant delivery, redevelopment potential, and the seller's tax basis. A real analysis of the two paths requires the specific numbers for the specific building.
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Michael Sterman is Senior Managing Director Investments at Marcus & Millichap. This is informational, not legal advice — consult specialized counsel before initiating Ellis Act procedures.
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