CFAH

Having been amended by Supervisors Chiu and Yee, the rather contentious and somewhat confusing condominium lottery bypass legislation is back in front of San Francisco’s Land Use and Economic Development Committee for discussion this afternoon.
The proposed legislation would establish a six-year bypass period during which qualifying TICs could convert for a fee; establish lifetime leases for tenants in converting non-owner occupied units; restrict future condominium lotteries to buildings with no more than four units; and suspend the annual condominium conversion lottery until at least 2024, possibly longer depending upon the number of units converted during the bypass and the number of affordable rental housing units built in San Francisco over the next decade.
The link to the full language of the amended legislation with key dates and details: Condominium Conversion Impact Fee Legislation.
As noted by a couple of plugged-in readers last week, the proposed legislation contains a provision that if any lawsuit is filed against the legislation, the bypass would be suspended and the annual lottery resumed until a final judgment is issued in favor of the City.
A total of 2,269 units across 700 TIC buildings entered the lottery in 2013. And if you’re rushing to try and beat the legislation, note that if you didn’t have an established TIC and the required number of owner occupiers in place by April 15, 2013, it’s likely too late.
Amended Condominium Conversion Impact Fee Legislation [sfbos.org]
A Contentious Condo Conversion Lottery Bypass Twist And Turn [SocketSite]
The Devilish Details For Bypassing SF’s Condo Conversion Lottery [SocketSite]
San Francisco’s Condominium Conversion Lottery Results 2013 [SocketSite]

Comments from Plugged-In Readers

  1. Posted by DCR

    Just need a clarification from plugged in readers. Looks like this affects only condo conversions for more than 2 units. Can anyone confirm what the process is for two unit TIC buildings (does it remain the same) or are they under the same legislation with no exemption from the lottery?

  2. Posted by Michael

    No impact on owner occupied two-unit buildings as far as I can tell. Two-unit buildings with a tenant in place would be affected by the legislation.

  3. Posted by lyqwyd

    I suspect there won’t be a lawsuit for at least the first few years if this goes through, as most TIC owners will benefit in the short run… then over time once new owners come in I could see a lawsuit happening since the early benefitters would have already been converted. At which point it goes back to the lottery, which since many units would have cleared the queue will be much quicker than waiting 16 years or more. IANAL so maybe I’m missing something obvious…

  4. Posted by dave

    The biggest issue I see is that its a forced taking by those who recently purchased or moved into their homes within the last 3 years. They would not be able to qualify for the condo lottery yet (need to TIC occupy for 3 years first) so they are basically screwed. No lottery for 10+ years and no chance to condo.
    I guarantee there will be a lawsuit filed imminently – If not by a tenancy group, by myself – to stall the conversion for the needed 2 years so others can convert + get a provision in to apply to others.
    [Editor’s Note: That’s not entirely correct, at least not with respect to TICs which were formed over the past three years. During years 3-6 of the proposed bypass program, buildings that did not qualify for the lottery in 2012 or 2013 but did have the required number of owner occupiers in place as of April 15, 2013 would be able to convert upon six years of owner occupancy.]

  5. Posted by rabbits

    Dave – it is unclear to me whether, during the 6 year bypass period, recently established TICs would be able to qualify for the bypass. For instance, if you established your TIC in 2011, and would qualify in 2014, would you be able to convert by paying the fee after you’ve established your 3 years in 2014? If that is the case then this could make sense. If not then this may be the likely candidate for a lawsuit.

  6. Posted by rabbits

    Thank you, editor. The nuances of this legislation are as clear as mud to the uninitiated.

  7. Posted by TJ

    Clearly the poison pill clause regarding any legal challenges has to go. If they want to change the conversion mechanics they should just do it. Legal action taken up re: the effects of that legislation can then be handled by the courts, why must the legislation itself have it’s own escape clause?
    The other interesting thing is: how on earth is the city going to handle the flood of conversion applications? The nexus study in the report estimates an uptake of about 1700 units if the legislation passes- that’s a boatload of conversions to process in a pretty short window. Likewise, the bandwidth of the law firms that service these kinds of processes is really going to get squeezed.

  8. Posted by dave

    I just purchased my building last year. In order to be eligible for the conversion process you need to be able to apply to the lottery. To apply for the lottery, you need to have 3 years of occupancy. As such, I cannot apply until 2015. By that time, This is already over and I cant even do the lottery. There was a amendment that would have protected people like me, but they tossed it. Thats why I am taking action if this passes without it. It shafts people who recently purchased/moved to SF.
    [Editor’s Note: Once again, assuming you already meet the requirement with respect to the number of owner occupiers (1 owner in a 3-4 unit building, 3 owners in a 5-6 unit building), you would be able to condo convert by way of the bypass after six years of owner occupancy as proposed versus simply qualifying for the lottery, with no guarantee of winning, after three.
    In fact, with an anticipated wait time of over a decade for new entrants into the existing lottery, under the bypass you would likely qualify for conversion at least five years, if not ten, earlier than without.]

  9. Posted by Jay

    I still don’t understand this communism. If all the occupants of a TIC are the owners, *WHO* *CARES* if they can convert to Condo or not? Why is it the government’s business anyways? Isn’t residency (as opposed to tenancy) better for the City anyways?!?

  10. Posted by lol

    Dave,
    I think the editor has addressed this in his comment on your 10:25AM post, hasn’t he?
    Also, you said “purchased my building”. We’re talking about TICs. Or did you plan to create the TIC from scratch? Or are you using the common expression that buyers use to boast their purchase. I know someone who claims she bought a “house”, when she only bought a full floor TIC. The other TIC owners put her back in her place, lol.

  11. Posted by lol

    The TIC system is an anomaly that was put in place to address a perceived threat to the rental culture in SF.
    If there’s any “communism” in all of this (I hate this term because it is usually used to kill any progress), it’s the prevention of free flow of assets for TIC owners, made to prevent a market-driven shift in the social composition of the City.
    Of course, TIC buyers knew this when they purchased. But this doesn’t make it less of a screwed-up system.

  12. Posted by conifer

    As usual San Francisco is arguing over something that would be taken for granted in more sophisticated cities. Even in Paris, with its leftist mayor and the French socialist president, such conversions would be simple.
    In the NY Times today, there is a long article on combining smaller units to create huge apartments at $50 to 85 million. The developers are simply meeting a demand by creating a supply.
    Here in San Francisco, this would be illegal, because it would constitute “dwelling unit mergers.”

  13. Posted by planning face plant

    I’m really surprised no one is freaking about the 2-unit exception being altered. It was always the most important exception in my mind because it mostly skews to individual buyers versus speculators and offered a real path to affordable ownership and would now be reduced.
    It seems like 2-unit people are being sold down river for this mind-bogglingly silly and over-complicated deal. Or to paraphrase LOL: “If there’s any “legislation” in all of this (I hate this term because it is usually used to describe adult behavior which this is not), it’s the addled law that results from the political communism of the City.” **LOL**

  14. Posted by dave

    Editor- I am well aware of the amendment that would have allowed me to do as you suggested. Its been removed from the most recent draft, hence my complaining. It WAS there before- its now gone with the last bargaining to get this passed.

  15. Posted by SocketSite

    I am well aware of the amendment that would have allowed me to do as you suggested. Its been removed from the most recent draft…
    Unless you’re referring to a more recent draft than the one dated 4/17/13 and to which we link above, as long as you meet the six year requirement by 4/15/2018 you’ll be able to bypass (see section 1396.4(b)(6)).
    If you are referring to a more recent draft, please pass it along (tips@socketsite.com).

  16. Posted by wc1

    Is Wiener still supporting this now that it’s been amended by Chiu and Yee?

  17. Posted by TJ

    It is interesting to note that there’s a provision in there, 1396.4(b)(7), which makes mention of units for which a TIC is formed by April 15, 2013 but then fails to note what’s to become of them under this situation. Perhaps that’s the scenario dave is mentioning, if by “last year” he means some time in 2012 after April 15th.
    One other interesting point of clarification is that the rules for the exemption (this draft prefers that word over “bypass) seem to be as follows:
    1396.3(g)(1), 1396.4*, and 1396.2(c).
    Note that this is slightly more restrictive than the previous “entered the 2012 or 13 lottery and did not win” restriction as it excludes any buildings that meet the requirements for entering the lottery, but _not_ the provisions of 1396.3(g)(1).

  18. Posted by hangemhi

    If you formed your TIC prior to April 15, 2013 in a 5 or 6 unit building – your building can’t be “continuous occupied” for 6 years by the end date of April 18th 2008…. right? Or any 5 to 6 unit building that has been in existence forever, but had multiple changes recently missing out on the 2012 and 2013 lotteries, and their most recent 3rd owner is on or after April 19th 2012 also will never, ever, be able to condo convert.
    If I’m reading this right – there’s your law suit. With the poison pill clause about the legislation being put on hold until or unless the city winning any lawsuits, this bill is dead on arrival.

  19. Posted by hangemhi

    To be clearer – any 5-6 unit building must have had 3 continuous owner-occupants on or before April 15th 2012…. 2012 with a 2 at the end. If not, your building will never, ever, condo covert.
    Not only are these buildings going to sue the City and stop this legislation, every TIC buyer of a unit in a 5 or 6 unit building that purchased on or after April 16th 2012 that gets effected by this is not only going to to stop the legislation, they’re going sue everyone who helped them with the purchase… Realtors, TIC attornies, etc.
    Good times

  20. Posted by Live Smart

    Call me jaded but I no longer care about what the legislation says, but I find that the law’s unintended consequences much more interesting and useful.

  21. Posted by BobTheBuilder

    Don’t worry folks, the City Attorney has the wording for all of this absolutely under control: he’ll get us a beautifully crafted piece of legislation that he’ll have no trouble spending $10-20M defending over the coming decades. Wiener, who remember spent years beavering away in the City Atty’s office on just such laws with unintended consequences, now know what it’s like to be on the receiving end of that gravy-train.

  22. Posted by newTICowner

    I am in a similar situation to Dave. Purchased a TIC unit in a 3 unit. All of us are owner-occupiers as of late last year and would be inclined to join the lawsuit camp. I see no logic in punishing buildings where the majority of units are owner-occupied for a minimum number of years, even if the building does not meet the bypass criteria now.

  23. Posted by Anon

    It is going to remove the 2 unit exemption? That in itself will trigger a flood if lawsuits. Why give so much away to the tenNt’s union? This is DOA.

  24. Posted by lyqwyd

    I think I understand now. It seems like there’s a gap for those who purchased after April 15, 2012 who would be unable to take advantage of the bypass, but then be delayed at least an additional 10 years before the lottery resumes who would certainly want to challenge this law. I didn’t get that at first.
    Yes, now I would expect immediate lawsuits if this law is passed. Yes, seems like it’s DOA unless I’m still missing something.

  25. Posted by TJ

    A couple things to note:
    This law does nothing to change the 2 unit exemption as far as I’m aware. I’m honestly curious where that rumor got started.
    The other thing to note is that this really won’t change the conversion horizon for people like newTICowner @9:45. Recent purchasers like that will have to wait 3 years until they can join the lottery for the first time and then likely face a decade+ of lottery participation given the current pipeline. What this legislation would do is clear out the inventory that would have converted ahead of them in one giant lump and then would resume with what would be a much smaller pipeline some years later. It removes the possibility that you hit the jackpot in the first couple years (not likely) but the overall conversion horizon is likely pushed out only a small ways for owners in that particular situation. If you’re going to sue anyone, sue whoever might have told you that conversion would happen any sooner than a decade or more from when you bought into your unit.
    The only people who have long-lasting implications due to this are people like dave above who purchased a 5/6 unit building after the deadline who would then be frozen-out after renewal. If this goes forward hopefully that could be addressed, and also the silly poison pill clause removed.

  26. Posted by anon2

    The tenants are being sold a bill of goods, this doesn’t touch the existing 2-unit bypass. That’s where the rent controlled units are being lost. DPW’s project tracking system shows 4686 units in 2 unit conversions vs a total of 333 units in 5/6 units conversion projects.
    The 2 unit bypass encourages speculation and evictions by requiring only a 1 year owner occupancy waiting period. Put a family member on title as second occupant, wait a year & you’re good to go. Yet, Gullickson & crewe have convinced these folks that banning 5/6 units & a 10 year moratorium will “cool things down”. Shame on them. It’s not going to change much.
    Meanwhile Chiu & company tout this as a brilliant compromise – but it’s full of holes, weirdly complicated and appears hastily written, barely proof-read.
    Even though it might help some TIC owners, Farrell & Wiener no longer can support it. They both say they “might” with a few modifications, yet don’t bother to say publicly what those modifications might be? What’s their agenda?
    Then there’s PlanC. Their analysis of the amendments was wrong & they’ve been strangely silent since the amendments were proposed. The SPOSF who were all about helping TIC owners, no longer support this either. We’re better off with the lottery they now say. Same lottery that was strangling us a few months ago.
    TIC owners and tenant have a lot in common. We’re both juggling balls the various political factions are playing with for their own amusement. It’s hard to watch this sideshow, but I can’t turn away either because it’s my future.

  27. Posted by lyqwyd

    I think the backlog will grow quite quickly during the 10 year hiatus as you will have 10+ years of people who were unable to convert, or participate in a lottery all suddenly able to participate in the lottery.
    The delay for somebody who bought into a 3-4 unit property on April 16th, 2012 or later would be: 6 years of bypass, plus 10 years (or more depending on the number of people able to take the bypass), plus whatever the delay is once the lottery resumes. So a minimum of 16 years (and likely longer) from when the adoption of the legislation to even be eligible for conversion, which is way worse than today.
    As you point out 5-6 unit TIC owners who bought or qualified in the last year for the lottery under the old rules would never be able to convert.
    The poison pill definitely has to go, but I think it’s screwing anybody who bought in the last year or so as well, which should be fixed. The date for qualification should be at least a few months after the adoption of the law.

  28. Posted by TJ

    @lyqwyd:
    “6 years of bypass, plus 10 years…”
    It doesn’t work that way, but unfortunately somebody misread the legislation and gave that impression and it’s gotten carried forward in the dialogue. The 10 year suspension of the lottery itself includes the 6 years that the exception will take place during.
    That said, I agree with what you said about what would need to be fixed with the legislation to make it work. It doesn’t seem to make sense to leave anyone out in the rain.

  29. Posted by lyqwyd

    Ah, that’s very different then… another misunderstanding on my part. Thanks for clarifying!

  30. Posted by daveo

    please clarify for me if anyone has figured this out:
    1) where does it say the current 2 unit automatic bypass is negated by the new legislation?
    2)If i own and occupy a 2 unit building that has been in the lottery several times but i do not have a TIC agreement in place (having one was not a requirement for the lottery)does that mean I will not be eligible for the new bypass?

  31. Posted by dave

    I bought my building before April 15th, 2012. However, it is not a ‘TIC’. It is a 3 unit building with myself occupying one unit and 2 other rental tenants in the others. Under the current legislation, after 3 years of owner occupying it, I could enter the condo lottery so long as a tenant could write a “intent to purchase” letter, which is not binding.
    What I am confused about is, Am I or am I not going to be able to convert under this legislation? I have Owned this building from before April 15th 2012, but My understanding is that I have to live in the building for 3 years before I can (could have) enter the lottery. So, Will I or will I not be able to condo convert?

  32. Posted by anon2

    @dave: I think you’d be able to “bypass” after after you’d lived there 6 years as long as you don’t evict anyone in the meantime. Still have to get the letter of intent & your tenants get lifetime leases.
    If that didn’t work out for you then you’d have to wait for the lottery to resume but you’d have to have another owner occupant who’d lived there long enough.

  33. Posted by 49yo hipster

    ^ the “letters of intent” are generated by the owner. You simply need to “offer” the other two units for sale to your tenants at whatever price you want; they have first right of refusal and that needs to be documented. So unless your tenants are serious about a purchase, and you really want to sell, it’s just a formality, as they would stay as renters at current rent anyways. At least thsts my understanding.
    ———
    So, what was the upshot of the last land use meeting about this crazy legislation? If the original authors don’t support the amendments, is this DOA?

  34. Posted by Liz

    Section 6 of the legislation says that the expedited conversion program set forth in Section 1396.4 is suspended if there is litigation (and litigation is a GIVEN); however, in the event of litigation (again, a GIVEN), the legislation does not say that its suspension of the lottery, described in Section 1396.5, is also then revoked. That means TIC owners will end up with no bypass AND no lottery — a real disaster for TIC owners — if this legislation is passed.

  35. Posted by Michael

    ^Not true. Section 6: “During any such suspension…the provisions of Section 1396 in effect on April 15, 2015 shall be operative.” Only the bypass program would be suspended.

  36. Posted by Sweet Lou

    I am trying to determine where I fit into the new rules and appreciate some guidance:
    3 unit
    Existing TIC agreement
    Been in condo lottery past couple years
    The previous owners occupied more than 5 years prior to 4/15/13
    All 3 units sold May’13 (we are all new to the building this month)
    Does this fit into the situation where you were in the lottery in 2012 or 2013 and occupied at least 5 years prior to 4/15/13, even though all previous owners sold this month?
    Appreciate any insight.

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