How Legalized Extortion Is Killing the Rental Housing Market

By Daniel Yukelson, Chief Executive and Executive Director, Apartment Association of Greater Los Angeles

If you own a small rental property in California, you are a target – perhaps “the target.” That’s not necessarily because you’ve done anything wrong. It’s just because you exist, and in the minds of our legislators, you are made to suffer due to political expediency. There’s a perception out there that you have “deep pockets” and are part of the “haves” who are exploiting the “have nots” by gouging on rents and providing untenable housing services.

There’s a growing army of plaintiffs’ lawyers, a growing cottage industry if you will, that has figured out the many holes within California’s state and local patchwork of one-sided tenant protection laws, civil rights statutes, anti-harassment regulations, and accessibility codes, and attorneys have weaponized all these regulations for profit. But, the beauty of this whole scheme, from the plaintiff’s side, is that you don’t have to win in court to make the “big bucks.” All any plaintiff must do is stake their claim, make it expensive enough, and no matter how unfounded a claim against you might be, given the amount of time and money it takes defend yourself, rather than engage in a court battle, you’ll quickly settle the matter out of court because your only other option, proving the truth, is more costly and time consuming.

Very often, these very out-of-court settlements result in payments of tens of thousands of dollars for even the most unfounded of claims all to just make it go away. And that, my friends, is legalized extortion and it is happening nearly every day to thousands of property owners in California. Yes, the whole thing stinks to high heaven, and ultimately, these out-of-court settlements end up coming out of tenants’ pockets in the form of higher rent costs, and the situation is driving property owners out of the rental housing business which is adding to our state’s housing shortage woes. For those lucky few with insurance coverage, settlement of these claims very often is followed up with a cancellation notice.

That’s not justice. It’s a shakedown. And it’s happening all over Southern California, every single day.

A Growing Habitability Industrial Complex

Let’s start where most small landlords get hit hardest, because here, your own tenants become the plaintiffs. California’s “implied warranty of habitability” is a legitimate protection. Nobody wants tenants living in genuinely dangerous or unhealthy conditions. But the litigation structure built around it has turned ordinary maintenance disputes into lottery tickets, and there is now an entire ecosystem of contingency-fee tenant law firms that have figured out how to cash them in for sizable winnings.

Just look at what the plaintiff attorneys are advertising. The law firm, Tobener Ravenscroft, which calls itself the largest tenant law firm in California, claims a 99% success rate prosecuting claims against landlords, and states that it has recovered more than $100 million on behalf of tenants. The firm claims it has helped more than 20,000 tenants win disputes against landlords, property managers, and municipalities. One Bay Area firm, Greenstein & McDonald, says its settlements and verdicts just in tenant actions total more than $83 million, with single-unit habitability cases hitting $825,000 and one habitability and personal injury matter settling for $1,250,000. Another Los Angeles-based law firm boasts of a single tenant verdict over $1.3 million. These are publicly advertised numbers. The settled cases that nobody talks about, the ones with non-disclosure agreements, are presumably much larger in volume.

The fee structure is what makes the whole scheme run. Tenant attorneys typically work on contingency fees of 30%-40% of the settlement or award, paid only if the tenant wins, with no upfront costs. In many instances today, the issue for landlords is compounded further these days because many municipalities have instituted “right to counsel” programs providing tenants with free legal services – although paid for with your taxpayer money, these attorneys still collect their contingency fees! In other words, the tenant pays nothing to file and faces no recourse for having been untruthful. There’s only upside for tenants who make these claims. And their lawyer just gets their cut on the way out.

Not Guilty, But Settle and Be Extorted Anyway

Under California law, habitability cases are distinct because they involve seeking potential damages related to a living situation, as well as potential statutory or punitive damages and attorneys’ fees allowed by law. So, making these claims and forcing a quick settlement is like shooting fish in a barrel. And there’s the magic phrase: “Attorneys’ fees.” Plaintiff’s lawyers do not just take their 30% to 40% of whatever the tenant gets, but the defendant landlord also pays the plaintiff’s legal bills if the tenant prevails on certain claims. That asymmetry is what fuels the entire model.

Here’s the small landlord’s reality. You own a six-unit building. A tenant has a recurring leak. You respond, you call a plumber, there are delays because plumbers in Los Angeles are not waiting by the phone for you. The tenant’s contingency-fee attorney decides you are dragging your feet, sends a demand letter listing twelve alleged violations, and asks for $75,000 to make it go away. Your choice is to write the check settling the matter for $25,000 or spend $50,000 or more in legal fees fighting it, with no guarantee of recovering a dime even if you win. Most write the check. Sadly, the economics in these situations never care about the truth.

A lawyer can spend tens of thousands of dollars working up a case knowing the losing landlord will reimburse it. It’s often a risk not worth taking by landlords who are paying for legal representation and are facing off against tenants who do not have to pay legal fees to city provided, free attorneys or contingency fee attorneys, which forces landlords to settle, guilty or not. One law firm describes its workflow without much subtlety: “after filing, landlords typically agree to settle, especially upon realizing tenants have strong evidence and attorney representation. Translation: we send the demand, and your landlord writes the check.”

The Eviction Defense Trick

Here’s where these one-sided tenant protection regulations turn into a different weapon entirely. When a tenant stops paying rent and the landlord files an unlawful detainer lawsuit (a/k/a, an eviction) to recover possession of their unit, a claim of habitability is one of the most powerful affirmative defenses in the tenant’s playbook. And these claims of habitability when a tenant stops paying the rent happen frequently.

In an eviction for nonpayment of rent, the tenant can argue that no rent (or reduced rent) was due because the landlord breached the implied warranty of habitability. In California, the implied warranty of habitability is a legal doctrine requiring landlords to maintain residential rental properties in a safe, sanitary, and livable condition, regardless of any lease terms. Landlords must, therefore, meet requirements like weatherproofing, plumbing, heating, electricity, and structural integrity, and if violated, tenants have a right to repair and deduct, withhold rent, or vacate and cancel their lease.

Now, just think about what all that means in practice. Take a tenant who has not paid rent in three months or more. Maybe the tenant had a real complaint about a leak six months ago that the landlord addressed, but just not on the timeline the tenant wanted. And maybe there was a pest issue, or a repair that took two weeks instead of two days. Or perhaps, the tenant never reported a thing to the landlord until the tenant’s attorney responded to the landlord’s summons.

The complaint doesn’t have to win on the merits. It just must slow things down. Then, as the trial gets going, any tenant who asserts a habitability defense, requests a jury trial, files a demurrer, and asks for continuances to stretch the length of the trial and resulting in making free rent considerably longer. These tactics merely prolong cases by triggering additional hearings, requiring more discovery and inspections, which causes unlawful detainers in California to last sometimes up to six months or more, and once adjudicated, it can take anywhere from one to three months more to get a sheriff to lock out the tenant.

So now you, possibly a small landlord living out your retirement years, are running this calculation in your head. Your tenant owes you several months of rent. You have not seen a dollar since the start of the year. You file your unlawful detainer. The tenant files an answer claiming the unit was substandard. You now face another two to three months minimum before you have any realistic chance of regaining possession, during which more unpaid rent accrues, and your legal fees climb. And, to add insult to injury, your stress level goes through the roof!

Here’s the kicker…are you ready? Even if you win the eviction outright and get a money judgment for the back rent, good luck collecting it. The tenant who couldn’t pay rent for six months is not the tenant who can pay a judgment. You are out the rent, out the legal fees, out your time, and you still must turn over your unit, possibly spending a boatload of money to fix the extensive damage left by your dead-beat tenant, and then re-lease the unit.

Get it? Your tenant’s habitability claim doesn’t even need to be winnable. It just needs to exist on paper. The tenant gets months of additional free housing just for lying, while the landlord gets a stack of legal bills, and the system shrugs and calls it tenant protection. And, to top things off, there’s no recourse for your tenant’s unsubstantiated claim of habitability. At that point, thousands of dollars in the “hole,” you’re thinking you should have just paid the jerk off from the very beginning and been done with it before the bills piled up.

This habitability issue can only get worse for landlords. Recent legislation, in fact, just keeps adding inventory to the legal exposure warehouse. For example, California Assembly Bill 628, which was passed in 2024, requires that landlords provide a working stove and refrigerator in every residential rental unit. Any rental unit without these appliances does not meet the state’s legal standard for habitable housing. That matters enormously in an eviction context because habitability is a direct defense against a non-payment of rent claim. A broken stove now buys a non-paying tenant additional months in court. That is the policy.

And now coming to a theatre near you…recent regulations passed locally covering unincorporated areas of Los Angeles County and being considered in cities like Los Angeles and Santa Monica, among others, impose a maximum indoor air temperature requirement for all habitable rooms that is mandated at 82 degrees Fahrenheit. Not only are owners likely going to need to install costly air conditioning equipment to meet this new habitability standard, but in many cases, particularly for older properties, costly upgrades will be necessary to provide needed electrical services to power the air conditioning equipment. For the County of Los Angeles’ cooling mandate, teams of inspectors from the county’s health department will canvas your rental units and test indoor air temperatures. Then, tenants who then want to skip paying their rent merely need to open windows, roll up window coverings to let sunlight in, or just not set the air conditioning to the proper temperature or turn on the system at all.

Other Claims: The ADA and Harassment Rackets

But wait, there’s more…Habitability claims aren’t the only games in town. There’s also the parking lot, building access (ingress and egress) sides of the racket used to exploit and extort money from property owners. And then there’s also tenant harassment claims racking up the big bucks against landlords today.

California accounts for 42% of all litigation nationwide under the Americans with Disabilities Act (ADA). That’s 42% in just one state out of 50. That number alone should tell you something here in our so-called “golden” state is badly broken. The mechanism is straightforward. California’s Unruh Civil Rights Act layers on top of the federal ADA regulations and tacks on $4,000 in statutory damages per occurrence, under strict liability. It does not matter if you didn’t know the ramp was non-ADA compliant, and it does not matter if you fix it the very next day. A plaintiff need only to plead that he or she went to a property and encountered a barrier to claim $8,000 in statutory damages. If the plaintiff returned, statutory damages increase by $4,000 per visit.

Knowing the cost of defense will far exceed a quick settlement demand, serial plaintiffs and their lawyers have turned this into a production line. A small number of firms file thousands of lawsuits, using many of the same plaintiffs over and over. One serial plaintiff in a federal case had filed nearly 2,000 ADA lawsuits in federal and state courts. This is not advocacy. It is a business model. Unfortunately, the economics work like this…by the time you hire a defense attorney, your legal fees will instantly exceed $25,000. The plaintiff’s attorney knows this, so they will offer a $15,000 settlement to make the lawsuit go away. You, the property owner, pays the extortion fee, and then you still have to spend tens of thousands more to actually fix the concrete, or the next plaintiff will be at your door the following week.

Unfortunately for you, liability insurance does not cover ADA lawsuits. That money comes straight out of your pocket. And the rules are deliberately lopsided: if the plaintiff prevails, the owner likely has to pay the plaintiff’s attorney fees, but if the owner prevails, the plaintiff does not usually have to pay the owner’s attorney fees. There’s no downside to filing…that’s by design. California had tried to address this with state-level reforms. They didn’t work. After those reforms took effect, the lawsuits moved to federal court, where cases are now being filed en masse to get around the state reforms. Sacramento plugged one hole and the water found another.

One Los Angeles case involved a serial plaintiff who alleged visiting a parking lot on three separate occasions but was unable to park due to ADA violations, then sent weekly settlement demands that reached six figures on a small parking lot case with no building attached to it. Six figures. For a parking lot. In another matter, one plaintiff filed 1,800 ADA lawsuits against Southern California retailers, and store owners are completely fed up. These ADA lawsuits have long flourished in California, where the law enables payouts over various infractions. Advocates claim these laws are one of the few surefire ways to get businesses and property owners to make their locations accessible and abide by the ADA, but small businesses and property owners are forced into settling the claims. Those on the receiving end of these ADA claims say they’ve reached a breaking point under a barrage of lawsuits from a handful of plaintiffs — all represented by one firm.

Beyond habitability and ADA claims, the potential for extortion claims stacks up in other ways that turn modest disputes into existential threats. Under Los Angeles’ Tenant Anti-Harassment Ordinance, which was strengthened in December 2024 to include mandatory damages for the prevailing party, landlords face civil liability and even criminal misdemeanor exposure for vague conduct like “reducing housing services” or “withholding repairs.”

Habitability and ADA claims often get layered with harassment allegations to bring in a statutory penalty of $1,000 for each instance of harassment, treble damages on emotional distress and out-of-pocket losses, plus punitive damages and attorney fees. Stack those on a marginal claim and as a landlord, you’re staring at six-figure exposure before a single fact has been examined in court. Landlords may even face jail time. In the past several years, we have seen an explosion in tenant anti-harassment regulations which never offer any protections for the old lady landlord who is being harassed by her far more able-bodied, far stronger young tenant.

There’s a Real Cost Paid by Renters

Here’s what Sacramento or any local jurisdictions never seem to factor in when writing these laws: every dollar a small landlord bleeds in settlements, legal fees, and uncollectable rent has to come from somewhere. It comes from rent, eventually. A landlord who just paid out $14,000 to settle an ADA claim, $75,000 to make a habitability lawsuit disappear, or wrote off six months of unpaid rent on top of $25,000 in legal fees during an eviction lawsuit recalibrates their return requirements. As a result, the next time a unit turns over, rents go up to offset the risk and recover costs. Otherwise, the property gets sold to a larger operator with the scale to absorb the legal and regulatory environment. Either way, the tenant who was supposed to be protected ends up paying more.

These predatory lawsuits are driving up housing costs, discouraging investment in older properties, and punishing the very people trying to keep rental housing available and affordable. The mom-and-pop landlord with a small building doesn’t have an in-house legal team or a compliance consultant on retainer. When a demand letter lands, or a non-paying tenant fights the eviction, the choice for them is brutal – either pay up to settle or spend more to fight. Most end up paying. The rational ones who have been doing this long enough eventually ask themselves whether it’s worth staying in the business at all. And then they sell. That’s the exit ramp. And it has been packed with traffic for years.

Solution: Fix the Laws, Not Just the Ramps

The ADA is legitimate law. Habitability standards are legitimate. Nobody serious is arguing landlords should be free to leave buildings in dangerous disrepair or let accessibility violations slide. No one ever argues that landlord and tenant should not treat each other in a civil, professional manner. But there’s a profound difference between laws that protect people and laws that fund a litigation industry. California has built the latter and labeled it the former.

During 2026, California Assembly Member Josh Lowenthal (D, Long Beach) proposed two bills, Assembly Bills 2503 and 649, which would have given property owners time to cure alleged violations of habitability regulations and ADA claims. Unfortunately, these two proposed state bills never saw the light of day and have been shelved for now. We can only hope that Assembly Member Lowenthal will reconsider these bills during next year’s legislative session.

Real reform requires action at both the state and federal level. Mandatory fee-shifting so contingency-fee plaintiffs and bad-faith defendants bear some financial risk when they lose. Standing requirements that bar professional testers from manufacturing ADA claims. Damage structures that reflect actual harm rather than attorney enrichment. A right-to-cure that applies in federal court where the cases have migrated. Unlawful detainer procedures that don’t reward tenants for raising paper-thin habitability defenses to extend free rent.

Until that happens, small landlords in California will keep running the same calculation. Fight and spend a fortune proving your innocence or pay the shakedown and move on. And the lawyers will keep cashing the checks.

Daniel Yukelson is currently the Chief Executive and Executive Director of The Apartment Association of Greater Los Angeles (AAGLA). As Certified Public Accountant, Yukelson began his career at Ernst & Young, the global accounting firm, and since then had served in senior financial roles principally as Chief Financial Officer for various public, private and start-up companies. Prior to joining AAGLA, Yukelson served for 12 years as Chief Financial Officer for Premiere Radio Networks, now a subsidiary of I-Heart Media, and then 3 years as Chief Financial Officer for Oasis West Realty, the owner of the Beverly Hilton and Waldorf Astoria Beverly Hills where he was involved with the development and construction of the Waldorf. Yukelson also served for 6 years as a Planning Commissioner and for 3 years as a Public Works Commissioner for the City of Beverly Hills.