The proposed law to regulate and restrict the buyouts of tenants from rent-controlled apartments in San Francisco has been passed by the Board of Supervisors in a vote of 7 to 4 with Supervisors Breed, Farrell, Tang and Wiener opposing.

If you’re either a tenant or landlord in San Francisco, there are seven key things you should know.

And assuming the law survives a perfunctory second vote next week, the new law will become operative 120 days after the Mayor either signs the ordinance or 10 days pass without it being vetoed.

57 thoughts on “Supervisors Pass Law To Regulate Tenant Buyouts In San Francisco”
  1. When does this go into effect?

    [Editor’s Note: Assuming the law survives a perfunctory second vote by the Board next week, the new law will become operative 120 days after the Mayor either signs the ordinance or 10 days pass without a veto.]

  2. I predict that this too will be struck down.
    Some on our Board of Supervisors are intent on stripping property owners of all of their rights.

    Not everyone gets to live where they want to live. There are many places in the world where I could not afford to live. It is not a god-given right to live wherever you want to live.

    Property owners are not social service agencies. They pay taxes that allows the government, in part, to provide social services. For eample, when a house in Noe Valley, say,sells for $8 million, that provides on going property taxes of greater than $80,000 per year that allow for the reconstruction of Dolores Park for the public good. I get that there is a balance here, but if a clear minded tenants and a clear minded landlords reach an agreement to vacate a building that the landlord owns, why should there be a penalty. If a clear minded tenant and a clear minded landlord enter into a lawful lease, the landlord ought to be able to enfore that lease.

    1. Exactly. One of the key statements by Judge Breyer in the case was this: ” there is no inherent RIGHT to live in San Francisco…”.

      Like you said, not everyone can afford to live here. If a person can’t afford it here, there are plenty of other places to live. That’s reality. Government needs to keep out of this business of ENCOURAGING and SUPPORTING anyone who just wants to live here.

      1. There is no inherent right to live period. Regardless, people have the right to live anywhere they like. It’s called equality.

  3. “Require notice prior to any negotiation: The proposed ordinance would require landlords to provide tenants with written notice of the tenants’ rights and file a form with the Rent Board indicating which rental unit may be the subject of the buyout negotiations prior to commencing buyout negotiations for a rental unit. The Rent Board would make this information publicly available, except for information regarding the identity of the tenants.”

    The right of free speech by all should be unqualified. If I must give notice to my intended recipient before I can speak, my speech is no longer free. Notice that the requirement of notice is based upon the message I intend to convey. If government is allowed to act unchecked in this regard then they can censor other messages that they don’t like in a similar manner. Perhaps Comrade Kim will soon require 30 days prior notice if you want to place a sign opposing her legislation in your window. These supervisors are out of control and have no respect for the constitution.

  4. This is kind of a pain in the rear, but I don’t think this regulation is such a big deal.

    Without the direct private party to private party required monetary payment I think it’s easier to see as one more bureaucratic hoop to jump through in a circus of bureaucracy. One just needs to know the process very well or hire the right legal help to ensure I’s are dotted and T’s crossed.

    It also creates a process for ‘outing’ ‘serial buyers-out’ since you know, people who pay tenants lump sums must be bad people.

    It’s not clear to me why this would get overturned. Plenty of real estate transactions are regulated. This is really just about information.

    It also comes back to the idea that rent controlled tenants ought to have an obligation to report, as a manner of showing in aggregate for future policy decisions whether people of means are taking advantage of the private subsidies given in rent control.

    1. Oddly nothing you say actually supports the law. It is just a burden on landlords and posturing for for politicians. Obviously laws like this are a lot easier than actually looking at the effects of rent control and seeing who benefits and whether we think they should benefit.

      1. I agree totally. I don’t support the law. I don’t support a lot of laws that I/you/we have to follow, but I know they won’t be overturned.

        You can shout at the wind or adjust your sails.

        1. So right you are ” You can shout at the wind or adjust your sails.”

          If I owned a 2-4 unit rent controlled building in the city today, I would file for an Ellis Act eviction like yesterday. Those who do not heed this warning are destine to surrender their property over to communist control forever. You might as well just turn your building over to your tenants and walk away from their property. Bankruptcy would be a better option than subsidizing your tenants for life.

          1. I think you are right. I also think our housing crisis will get worse before it gets better. We will have to (and are likely to) see a 4 or 5-fold increase in Ellis actions (note that we are starting from a very small base number) before enough voting people begin to recognize the counter-productivity of the measures adopted by city officials. Peak rental pricing in 2016?

            The more the market rents top controlled ones, the higher the incentive for an Ellis action, the sooner there is a broader market policy reckoning.

  5. Come to think of it, there’s an apt precedent in the wave of ‘affirmative consent’ rules sweeping college campuses. Like whether two people are about to take off their pants or exchange money for possession of an apartment, there should be some formal notice.

    I know, I know. I’m trying to laugh, but inside I’m crying.

    1. That makes sense.

      In dollars and cents, what do we think the “future condo conversion” value is for a building at present? Even if the current condo conversion ban is overruled and the system reverts to the wait-your-turn lottery system, you are discounting back 7-8 years a (15%?) bump in value compared with a TIC unit, right?

      I can see that that rule would be grounds for overturning the buyout rule, but practically, how much more would the market pay for a unit with potential condo convertibility under the old system? 5% more?

    2. Isn’t that already the law? It’s my understanding that the main benefit of having an unregistered tenant buyout is so a landlord can avoid blemishes like ellis acting a disabled tenant to put a damper on condo conversion plans.

      Maybe this is naive but I think having this information out there will be massively useful to both landlords and tenants. Tenants will know their rights and landlords will know what they’re getting into when they decide to offer a buy out in the first place. It will be easy to see what people are getting paid and for what so no one gets ripped off. Fear/Mistrust damper tenant/landlord relationships as it is.

  6. “This is kind of a pain in the rear, but I don’t think this regulation is such a big deal.” Really?

    This is just another short-sighted piece of legislation that will INCREASE use of ELLIS. If the buyout is now a eviction, why bother w/a buyout? Owners will go straight to Ellis as the only incentive to a buyout is the POSSIBILITY of regaining possession earlier (than if an Ellis was used). Other than that, its all upside to Ellis vs. buyout.

    1. I agree with you Jimmy, it makes an Ellis proceeding more attractive.

      But other than the condo-conversion elimination, I am not sure what is here that a court could overrule. It’s a stupid law, but unconstitutional?

    2. If one were to do an Ellis, aren’t the payments to tenants restricted to certain amounts? It would seem that this ordinance would then actually limit the money that a tenant could use for relocation.

  7. Does anyone know if the Mayor will veto this? How many votes do the BoS need to overturn a veto? I think that the number is 8.

  8. actually, one of the wonderful things about san francisco, until recently, had been the anyone who wanted to live here, could.

    1. And of course, you’re missing the real issue here with your statement: Just because a person WANTS to live here does not give them the inherent RIGHT to live here if they cannot afford it.

      And the serious problem has been, for some time, that many people really do believe they have a right to live in this city, regardless of their income or job situation. They just feel the government SHOULD step in to subsidize their choice.

      1. It’s not unreasonable to expect a city to PLAN in such a way that it doesn’t become a boutique, especially a city that keeps saying it wants to remain “diverse”. That doesn’t create or imply a right, it just highlights how utterly irresponsible the Board is.

        1. The word “boutique” is yours not mine. I would never use that word. It doesn’t apply to cities, only to small retail outlets.

          How does “boutique” apply to San Francisco, except, perhaps that you are concerned The City become what? Something cute, charming, adorable?

          Our city should be working toward safety, cleanliness, superb public transit, lots of trees, honest politicians and let the market decide the housing issue.

    2. “Anyone who wanted to live here, could”. Oh, really? All those 3rd world people who make $500/year per capita could move to SF?

      Get real.

          1. It’s not the City’s place to help you out.

            It’s the duty of every homeowner on Outer Broadway to let you move into their home.

            If too many people want to move into their home, then the homeowner should have to vacate to create more room. It’s their own fault for buying a home in SF.

            “They knew what they were getting into by buying here – what’s the beef?”

    3. Not everyone could live in Detroit in 1925 during the auto gold rush, but today, everyone can. Maybe it will reverse one day, and SF will be uncool and cheap. Who knows?

      Are you saying that every opportunity you had at one point should be kept on the counter for you to grab? I want to buy Tesla at 30. I want to buy Apple at 1.70. I want to buy my mansion on PH for 400K. I want the coke bottle to be 5c. Things change.

  9. Does anyone know how enforcement of item 7 would actually work in practice? If you are engaging in a buyout with a tenant (vs. eviction), wouldn’t the tenant be waiving his/her “disability” for presumably more money than they would have received otherwise if they were evicted and paid the mandatory relocation expenses? Wouldn’t you still be able to condo convert then since the tenant is no longer reporting their “disability”? What am I missing? Thanks. “7. Prohibit condominium conversions for units emptied by way of a buyout: The proposed ordinance would prohibit condominium conversions in buildings where a senior, disabled, or catastrophically ill tenant has vacated a unit under a buyout agreement after October 2014.”

  10. This will get overturned because it violates the free speech and due process clauses of the constitution. But beyond that even if it did stand this makes the Ellis more attractive.

  11. I keep thinking of that essurance commercial that says “that’s not how this works, that’s not how any of this works”. The BoS keeps running around trying to plug holes, when if we removed many of the lays of well-meaning regulation with volumes of unintended consequences, that market would likely behave pretty rationally.

  12. I’m wondering how this would apply if a tenant approaches a landlord about a buy-out? From reading the regulation, I would assume the landlord would have to just remain silent since any discourse could be seen as “negotiation” and thereby subject to the penalties.

    This just seems a very odd regulation.

  13. The prior notice aspect of this law seems like a boon for tenant advocate attorneys. Instead of expending effort prospecting for potential clients they get access to a complete up-to-date list of tenants who could benefit from a professional negotiating partner.

  14. From my quick reading of the ordinance, it looks like two-unit, tenant-occupied buildings can still be bought & converted (assuming no protected tenant). The buyer would have to negotiate a buy-out with one tenant, and OMI the other. This will surely dampen the market for two unit buildings, but we can expect to see a lot of OMI fraud going forward. I don’t know whether there’s a provision anywhere in the municipal code for fee-shifting and third-party enforcement with respect to OMI violations.

  15. I’ve been operating under the assumption that the local government can do pretty much what they want with respect to preventing condo conversions. The property owner has to request an affirmative change with the creation of new legal parcels seems to be a different kind of request than simply going out of business, like an Ellis Act proceeding.

    At the same time, the city would have a very hard time restricting TIC ownership as there is no change of use or zoning or parcels if a parcel is collectively owned by many people instead of a single entity.

    So, if a buyer or owner is looking for a condo conversion as a money-maker, he shouldn’t get his hopes up. They will find some way to stop you.

    Instead, the TIC solution is one that will become much more widespread and normal. The premium for condos over TIC’s will narrow over time, not so much with condos dropping as with TIC’s approaching the same valuations as they become more common and lending for the same does too.

  16. Seems pretty clear that the notice and rescission periods are designed to allow lawyers and tenant advocates to learn of the opportunity so that they can enter the fight on behalf of tenants and against the landlords. End result is just going to be more Ellis Act, I’d think. Then of course, the BOS will be able to focus on compensation for tenants evicted by Ellis Act. Once it is all regulated, then it can be more easily taxed.

    1. That’s a pretty good point. If a buy-out attempt is documented a tenant lawyer could come and say: buyer attempted to buy out but felt insulted by the number asked and is retaliating through an Ellis. A perceived retaliation could be treated differently from a simple “I am out of the landlord business” in court.

      I think this means that landlords will have to stay away from buyouts altogether.

  17. The city is roughly composed of two-thirds renters, one-third homeowners. Their are more voters that are rents then owners. We can never accommodate enough for sale units to change that ratio….so unless the courts undo this, don’t look to things to change much at all.

  18. Has everyone forgotten about the First Amendment? This is a restriction on free speech and will be struck down hard!

  19. #3 is a killer. 45 day period? I can see every negotiated deal being rescinding on day 44 by the tenant as a negotiation tactic. The owner will be making their plans for selling, and when the tenant rescinds at the last minute and demands a little more money, they owner, if he/she needs to move forward, will have to cave.

    And then 44 days after the new deal is reached, the tenant will rescind again, and demand a little more. Rinse, repeat….

  20. They can’t confiscate anymore of property so they go after your other civil liberties when you don’t play along.

  21. Have not heard any action to lobby the mayor to veto this. I am not surprised at property owner’s inaction on property rights issues. Is this the reason Campos and his communist comrades are controlling the city?

  22. Anyone know if the BOS voted on this again?

    Does the mayor plan to sign, veto or do nothing on this?

    Any updated info is appreciated. Thx.

  23. I am starting to suspect there is racketeering between the BOS which puts forth illegal ordinances and the City Attorney’s office. Does the City Attorney’s office do anything else noteworthy?

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