As promised, the language of Senator Mark Leno’s bill to curb speculative Ellis Act evictions in San Francisco has been amended. And while the amendment might not be enough to get the bill passed into law, it would create a key exception for individuals if it does.
Drafted “to ensure that real estate speculators in San Francisco do not buy rent-controlled property and empty it of long-term tenants,” Senate Bill 1439 would require a landlord to own a building for at least five years before invoking the Ellis Act to clear the building of tenants and would prohibit any attempt to circumvent the intent of the law.
With the Senate having initially rejected the legislation and time running out, Senator Leno promised to amend Senate Bill 1439 to include exclusions for “mom-and-pop” landlords and the bill was passed without a vote to spare.
The new language which has just been added to the bill:
“The five-year ownership requirement…shall not apply to an owner of accommodations who is a natural person, who owns no more than two properties, and who owns no more than a total of four residential units.”
If the amended bill is passed by the State Assembly, the bill would return to the Senate for another vote as well.
Keep in mind that the bill would still prohibit a person who invokes the Ellis Act from invoking it again on any property acquired within ten years of filing their initial notice of intent to evict.
There is a building I am looking at – it is only a profitable purchase if I can Ellis it. This amendment would prevent me from doing so. Therefore, this legislation has caused the pool of potential purchasers to shrink and the price will likely fall, which sure sounds like a taking to me. How will people that are burdened with worthless rent controlled properties ever realize value?
Not a taking. The law is well-settled on things like this.
“How will people that are burdened with worthless rent controlled properties ever realize value?”
Well, if it were, in fact, “worthless, meaning having no value at all, that would be a concern. But, of course, rent controlled properties are not worthless but quite valuable.
As amended, this looks like it will have a minimal impact. I’ll bet the number of annual Ellis’ed units that would now be barred is tiny. I’m still against it for reasons that have been hashed out repeatedly here, but this now won’t stop anyone who wants to buy a place, Ellis it, and then live in it. And I’m still betting it never becomes law.
2 properties and 4 units max is a joke. The most tight ass definition possible. I can’t imagine this idiocy passing.
If this passes, it may make that property worth less than if you could Ellis it within 5 years, but it wouldn’t make it worthless.
The market will factor in the 5 year cool-off period. Big outfits who do this for a living will simply manage the flow accordingly.
This would also eliminate the Ellis of 4+ unit buildings until a sole owner vests for 5 years – assuming a buyer also owns his own home. I see no exceptions for families or partnerships.
Just hold other properties in an LLC or other entity, and get around the limit…
And invite liability by holding title to the building you want to improve in your own name. Trip and fall anyone?
You leave yourself open to a lawsuit by attempting to circumvent the intent of the law. I’m sure [Removed by Editor] tenant lawyers would be all over that.
How does this stop a long term owner from legitimately Ellis’ing their building and then putting it on the market cleared of tenants? As long as they did not coordinate their efforts with buyers/investors prior to marketing the building they are acting in accordance with this law, no?
Yes, I think that’s the logical outcome.
But I can be sure that in less than a year another populist Supe will come up with a rule that says “you can’t sell within 5 years of an Ellis”.
I can see it coming from a mile away…
I agree with san FronziScheme.
Previously I predicted this would fuel a class of buyers who had a tenant clearing team would work with the current owner to “prep” the building so it could be delivered empty. Then someone pointed out that this sort of cooperation violated the law.
Now I think that this same scheme will come about but instead the tenant clearing service will be referred by the seller’s agent much as they refer stagers.
“Got an undesirable tenant situation? Better call 1800-Zap-a-tenant!”. If it were Las Vegas you’d see cheesy billboards just like they do with DUI, mortgage mods, personal injury.
Seriously, I hope no shady types pick on on that business.
What’s the difference between using this “clearing team” or simply working with a real estate attorney to evict your tenants?
I was thinking that a clearing team would be a turnkey operation. Owner signs a contract, team clears the building, owner pays the clearing company. Maybe a lawyer would also provide the boots on the ground to make it happen as well though I’d expect most attorneys to stick to their core competence.
A quick update on an “eviction” that made the news last year.
A tenant who had been resisting an Ellis eviction and who had the usual activists show up at his doorstep last fall has gotten a buyout from the owner.
And he is now living in… Desert Hot Springs.
No big splash on the SFBG or the Comical. No activists waving pitchforks against greedy capitalists. I am shocked, lol.
SF owners are not the only ones to cash out and move to the desert. Tenants using the very generous rent control laws are also doing it!
But that’s not all.
Now the owners have decided to “cut their losses” by selling the building with an asking price more than double what they paid for it 2 years ago.
Per the listing: “3 Units all vacant.”
Tenansectomy complete!
What a slap in the face to Eviction Free idiots! Mykaels vowed to fight forever…. despite his claims that it was about principle and disabled seniors stating in their homes, it was all about the Benjamins
I am not going to comment on the person (please note I didn’t quote the name, I think he still deserves his privacy). Everyone is allowed to have his own motives, and as they say the first one to throw the stone… But I agree with you that you can’t claim the moral high ground anymore. There are ways to stay in the Bay Area with buy-out money. Not SF, but close enough.
The message this sends is pretty clear though. People will make a big fuss, get VERY personal (picketing in from the 3 partners’ private homes. Then this happens. If this is only business, then why get so personal?
Restrictions on renting in SF are a TAKING of private property. Rules to make it hard to free yourself are a SHAKEDOWN.
End rent control now!
I am very grateful for the generous rent-control laws, and I am building owner who rents out property in San Francisco. It is civil, and conscientious. Greed holds no place in virtue.
Have you considered the elderly who owns a bldg with squatters paying very low rents, whereby the owner cannot maintain the bldg properly and/or is at risk of loosing it? We can’t all be limousine liberals like yourself. Please, pull your head out of your behind and recognize that there are other people with different situations than yours. Thanks, and have a great day!
Of course there are exceptions, even very relevant circumstances like the one you mention, but what is the alternative? Running out anyone who doesn’t make an upper-middle-class wage? I like how so many people on this comment list are poo-pooing these determinations by presenting the exceptions. Laws aren’t perfect, and don’t fix everything. OUR WORKING CLASS IS DISAPPEARING, FOLKS! That is a bigger problem than what you all are complaining about.
LOL. Yeah you’re still making a buck and can afford to be “civil and conscientious” for whatever that means. Then in 10 years your building costs you more than it brings. Your kids want to go to college but you have to write this virtual check every month to the tenant. You own the building but the tenant owns you.
This is everything but a recipe for civility.
I’ve owned my building for 18 years. I’m not rich, but I am very comfortable, despite the fact that over the years I have had less returns for my rental units. But you know what, I’m still comfortable, and that is enough to live well. I know there are others out there who are not faring as well as I, but something has to be done. We are losing our working class in the city. What else do you suggest we do? I’m sure there is a better solution, but I can’t think of it.
The better solution is for the government to shoulder this burden so that everyone “pays” for rent control, rather than assigning the burden of affordable housing on one class of people (rental property owners). It’s easy for our elected officials to give lip service to something when they don’t have to pay for it.
Yes, why having only one class of the population provide affordable housing?
Rent control is unjust on many levels:
1 – It is supported by one specific class of people, whatever their level of wealth or income. his class of people being a minority, it can be milked without any political consequence. Want to tax everyone to give a family cheap housing? You’ll get 75% NOs and then you’ll be booted out of office.
2 – Landlords of post-1979 buildings are in luck, when pre-1979 landlords are not. Why the difference? Someone who built a new building in 1978 should ave the same rights and duties than someone who built it in 1980.
3 – Recipients of the subsidy do not have to NEED the subsidy. Your 90-y-old granny making $1200 in SS does deserve subsidized housing, but an attorney making his $40K does not, and both can be in rent controlled apartments paying the same meager rent, because rent control is blind.
4 – The working class on the sidelines cannot move to SF. Miah says we are losing our working class, but with rent control as the only sizable affordable housing tool it is inevitable. If we had an expanded social housing program through a publicly subsidized system, the kids of working class San Franciscans could have a chance at making a life here when they start a family, instead of moving to the EB.
Mykaels put his info out there so he has purposefully availed himself of publicity. By the way, who was the loser here? The longtime elderly owner of the property who gave Mykaels break after break…. only to be screwed in the end by Mykaels. Mykaels got the lion’s share of the equity both on buyout and during his years of subsidization.
Any idea how much loot the tenant extracted from the owner? Wonder if he brought his desert retreat with the proceeds? (But hopefully owner slapped him with a 1098 so at least he has to pay the IRS.)
I am not sure he could get away with a huge payment. After all, the Ellis was initiated and went to court which flags the building on the rental board, imho, and this messes up resale value (someone corrects me if that is not the case). The tenant knew he would ultimately lose after his win on a technicality, therefore better cash out whatever he could get.
From the owners prospective, if the building is stained by Ellis as I suspect, then the resale value has already taken a hit. You just throw money at the future loser to get it over with. Now if they manage to get their asking price it will be a decent return. But there was way too much drama for that money, at least for me.
On a cash on cash basis – that property was a home run. If you read the MLS notes and the recorded documents, you can deduce the owner carryback amount. The only variable was the payout and as long as it was less than $250k, it was still a home run (assuming the sales price is eve close).
With all the grief they got, I wish them the best outcome. They should start the TIC paper work and market the units individually, imho. When all purchasers are lined up they can make the whole deal happen.
The elderly owner sold to 3 partners. He or a proxy working for him could have bought out the tenants, especially since they all probably had a long time relationship with him. But he probably decided against it. His loss. It’s business.
I went to the open house and the entitled Mr. Mykaels was salting the old man’s game by passing out flyers to every person that walked the property. Mykaels made it clear that he wanted a ridiculous sum of $$$$. He played Eviction Free Summer like the stinky stupid hippies they are.
Yes, but as a landlord you know that it’s very hard to sell a place with tenants in place. Every place I owned that I have sold in Paris was always free of tenants. Just like a fresh coat of paint and updated appliances, this is just something you have to do.
This will end up going back to court and be overturned as a “takings”. Leno is forcing SF owners into servitude. The whole purpose and intent of the “Ellis Act” was to allow “all” property owner to go out of the rental business. It’s a statewide law. It effects “all” properties across the state equally.
Now, if this passes there will be two classes of property owners.Those protected under state law and those subject to local conditions. I’m betting it hits to courts within hours of being passed….if it gets passed.
Already went to court long ago, and the landlords lost. Landlords have no right to “exit the business” and the rent controlled tenant can stay there forever, under the constitution.
This is what spawned the Ellis Act. So they can certainly dial back, or repeal altogether, the Ellis Act without any fear of any legal issues in court.
Not sure about that. My recollection from a [long] ago property law class is that the Supreme Court ruled that landlords do have a right to exit the business and the Ellis Act is California’s regulatory scheme to comply with that ruling. No one can be forced to be a landlord. I think a five year ownership requirement is right on the line of what would pass constitutional muster. But I could easily see a court striking it down. As others have mentioned current landlords will just Ellis before they sell and the 5 years restriction will get priced into the transaction.
The original owner sold in 2012 at a discount, thats for sure. I recall the building was lingering on the market for almost a year, both because of the tenant situation and the advanced state of disrepair. I also considered getting in with a partner to do a tenansectomy, but decided against it since I lived a bit too close from this property…
… i did the same thing. i walked into the open house intending to write and offer, took one look at the guy upstairs and decided it wasn’t worth it. can’t imagine how many people did the same thing.
REFORM RENT CONTROL OR END IT.
This law is a complete taking of private property.
Tenants are taking way more advantage of private citizens than the other way round.
Mom + pop landlords are getting screwed every month here.
New comers are being forced to pay $3-4kmth for a 2 bed place because so few landlord will take on the risk. SF is heading in the wrong direction yet again.
Loosen the rental rules and see more of the tens of thousands of vacant units become available.
These amendments are a joke!!!
You willing to end Prop 13 as well?
Not same thing! Owners make a commitment to neighborhoods and often improve them. RC renters mostly milk their landlords and don’t do squat to invest in the neighborhood.
Wow! Cities with lots of renters must be total dumps!
You’re not very familiar with the City are you? EVERY building that I have seen with long term tenants was in a state of disrepair.
It has been 30+ years since rent control became law. Landlords were still collecting enough for 10 years to keep up with the costs. But every year that passes virtually every rent controlled building in rental deficit is going one year behind in upkeep. Wait another 5 or 10 years then start seeing real problems spreading across the City.
The way these fools are carrying on, you’d think that, right? SF and NYC have two of the strictest rent control laws in the nation. Yeah, real dumps. 😛
Miah, you do not get out much apparently. Or I should say, you do not enter other buildings very often.
Allow me to rephrase for you: “Wow! Cities with lots of renters must be total dumps!”
And indeed they are. Look around SF and Manhattan, you see plenty of derelict bldgs along some nicely kept bldgs. Why would that be?
I guess spending money on goods and services in the local neighborhood doesn’t count as “investing”.
Amen
No it doesn’t. Everyone eats, buys clothing, furniture, helps his local business. Not everyone buys a place and makes it better using his capital and sweat. A landlord should be encouraged, because decent housing is an essential part of a stable and thriving economy. Tenants eat food and breathe air just like anyone else. And they live in someone else’s property.
Also, a tenant is not going to hire people to paint his rental. He will not create any new housing neither. I could go on and on.
Prop 13 can go as far as I am concerned.
Rent control would cost me since I collect market rate and rates would go down. I also would lose if Prop 13 were to go as well. But enough with the idiotic rules that do more harm than good.
Prop 13 helps stabilize neighborhoods by not forcing certain owners to sell. It’s actually a benefit to renters as well, as they benefit from a nicer neighborhood. Ya’all should be pleased!
“Stabilize” neighborhoods? No. It allows moochers who have no business continuing to own in an area that has clearly outstripped their economic usefulness. This creates a situation where new entrants have to subsidize those of far lesser means. Not good at all.
Dead in the Assembly Committee.
Not dead and cremated yet, but pretty darn close.