CFAH

1049 Market Street

Illegally converted to “live-work” spaces over a decade ago, back when Mid-Market was a lot less desirable, San Francisco’s Department of Building Inspection issued a notice to the owners of the seven-story Sterling Building at 1049 Market Street to either legalize the units or clear the building of residential tenants in 2013, at which point eviction notices were prepared and served.

While the City subsequently issued a permit for the conversion of 1049 Market Street from its non-compliant residential use back to office space, the permit was suspended “to enable the City to obtain additional details about the building’s historic and current occupancies” and a high profile and highly politicized (gentrification, displacement, etc.) battle with the tenants was waged.

Early last year, the owners of the building dropped their appeal of the permit’s suspension, at which point an advocate from the Housing Rights Committee claimed victory from the steps of City Hall and vowed the tenants, who each pay around $700 for loft-style units with kitchenettes and shared bathrooms, would “never, never, never” be evicted.

Two months ago, a request to release the suspension of the building permit and allow the demolition of the live-work spaces to proceed was quietly issued. And this afternoon, San Francisco’s Board of Appeals is slated to hear the case of seventeen (17) tenants who have appealed the move.

The building’s former owners had filed a permit to legalize the building for residential use in 2011 but never commenced the conversion. The building’s new owners have run the numbers and believe it makes more economic sense to convert the Mid-Market building back to office use.

Comments from Plugged-In Readers

  1. Posted by logankelley

    if the units were rented out illegally, isn’t the landlord forced to pay back all accrued rent?

    • Posted by SFR

      That would be the case under standard contract law. The tenants would need legal representation to seek damages. I think they can recover 3x what they paid under California law. This is also the case for an in-law unit hence the risky nature of renting such a unit.

      • Posted by Bib B

        I don’t think that is correct. I just moved out of an illegal unit and consulted several attorneys about this. The landlord isn’t entitled to unpaid back rent on an illegal unit (Gruzen v. Henry, Espinoza vs. Calva), however they can get possession of the illegal unit.

        • Posted by SFR

          The key factor is if your landlord is ‘professional’ or not. If they are just a mom and pop renting out a few units then contract law is likely not to apply. If they are a large operation owning many buildings then they could be held liable as per my previous comment. Agreed that contract law would not apply in every or even in a majority of these types of cases.

  2. Posted by ElitistPig

    When did tenants gain ownership rights over buildings? Something is seriously wrong when moving into a building gives someone indefinite sway over the building owner’s rights. I agree that the tenants should probably be compensated by the previous owner for the illegal living situation, but if the new owner wants to legally convert the building into office space they shouldn’t have the power to block it.

    • Posted by SFR

      They knew what they were buying or should have

      • Posted by San FronziScheme

        Someone always says truism, and yet this doesn’t still make it right.

        For every renter there has to be a landlord, and there will always be a landlord, by principle. Someone has to maintain the place in a clean and safe order, but this attitude is similar to people who will throw their trash on the sidewalk thinking “someone is paid to clean up after me”.

        This is such a messed up way of thinking: ordering someone to provide you with cheap housing against his will.

        At some point the landlord population will be split into 2 categories: sharks and landlords who will sell to sharks. And a shark’s gotta eat…

        • Posted by Hitman

          I used to be a landlord, now I am just hungry for blood. I was not born this way, I was created by the San Francisco Rent Control Ordinance and now they have to deal with me. Bring on the Campos’ and McElroys of the world because they have no chance. Ironically, the only way to get rid of us at this point is to return to normalcy and abandon their communist ideals. As long as they remain rigid in their quest to destroy the concept of private property, the average Joe will continue to be collateral damage in this war.

          Make no mistake. I consider this to be war.

    • Posted by JR "Bob" Dobbs

      “When did tenants gain ownership rights over buildings?”

      Well, when the owner rents it to a tenant . . . That’s been the law for about 1000 years.

      • Posted by Hola

        I don’t think you understand what ownership rights are.

        • Posted by JR "Bob" Dobbs

          I understand them perfectly well. It was ElitistPig who misunderstands the concepts. A more complete excerpt of his inquiry: “When did tenants gain ownership rights over buildings? Something is seriously wrong when moving into a building gives someone indefinite sway over the building owner’s rights.”

          The law is clear on this and has been literally for centuries. The owner/landlord has a fee title to the property. He can sell it. But upon allowing a tenant, the owner’s interest is subject to the tenant’s possessory interest In the property. And that possessory interest is exclusive. The landlord retains a future reversionary interest but no present possessory interest. It is only upon termination of the tenancy that the rights to use and possession revert back to the landlord/owner.

          And there does not even need to be a lease. The civil code provides that “Occupancy for any period confers a title sufficient against all” with narrow exceptions such as any easements.

          So yes, a tenant has “ownership” rights in the form of a title to possess (but not a fee title) and thus he certainly has all sorts of “sway” over the fee owner’s rights, including the exclusive right to possess and use the property. The owner-landlord has no right of use or possession. The renters here are simply exercising that exclusive right under the law. One can crab about the wisdom of rent control, which extends the terms of the lease indefinitely, but that only changes the duration of the respective interests not their nature. Anyone buying a building with tenants buys it subject to those tenants’ exclusive possessory interest. This owner took that risk and has to live with it.

          • Posted by San FronziScheme

            Well, a landlord has the right to terminate a lease without cause almost anywhere in the US, provided he gives the proper notice, and this clause enables the landlord to retain full ownership privileges when he decides to do so. For instance he can decide to sell it without any tenants, or rent it to a friend he wants to help, or whatever the heck he wants, since it’s his property. And this action will not diminish his future rights or his property’s value.

            But in SF, once you let a tenant in, the tenant will have the say on WHEN the owner will be able to do what he wants with his property. And if these views conflict, the landlord will have to either pay off the tenant or use the Poison Pill aka Ellis Eviction.

            In that respect, some of the property rights of the owner have been forfeited, most of the time against his will, since tenants have more votes than landlords.

            A voter sanctioned taking of property. Only in SF.

          • Posted by JR "Bob" Dobbs

            Not a “taking” – the courts have consistently so held. Just because one thinks a property right restriction is unfair does not make it a taking. I have a friend with a place on “the wiggle” who claimed that was a taking because it made it harder for her to back her car out of her driveway.

            I was just pointing out that a tenant does indeed have “ownership” rights, notably an exclusive right of possession that is superior even to that of the fee title holder, and that has been true for centuries.

            I agree with you that RC is not a good law on balance, although the arguments are valid and quite compelling that RC is a necessary counter-weight to the extreme owner/landlord-favorable laws out there, including Prop 13 and planning etc. rules that severely constrain new housing to the benefit of existing owners. Just repealing RC with no other changes would skew things way too far in favor of landlords imho. I am neither a landlord nor tenant, but I have open eyes and can see that both landlords and tenants have valid interests that must be considered. Yeah, Ayn Rand would hate me, and I’m proud of that

          • Posted by San FronziScheme

            You lose value AND you lose most of the right of using your property. It’s a transfer of usufruct and a financial loss.

            About the relationship between tenants and landlords, well the City has painted itself into a corner by making SF a city of renters. Were SF at 65% of owners like the rest of the US, tenants would have more option to bail out and landlords would not have so much power. But since the affordable units are in apartments that you can’t easily convert to condo ownership. Therefore many tenants are condemned to stay tenants all their lives if they choose to stay in the city, and this would happen whether we have rent control or not because of pure math.

            The City should allow the unrestricted conversion of all apartment units into condos. First time buyers would often be the original renters, and this would ensure the “stability” that rent control failed to really create. Many units would go back into the rental market after one of 2 decades, mechanically, and the homeownership rate would grow 60+%.

            Also, prop 13 is a relic that has to go. We agree on that.

  3. Posted by Stop Driving

    Defy the law for cheap housing and then rely on the law to prevent eviction? Sorry, it doesn’t work that way. If you want the protection of the law, you need to comply with the law. It’s that simple.

  4. Posted by BayviewSF

    City can be sued by the owner for all these delays. These tenants put city into the risk of lawsuit. Is it worth it for the city to incur a huge legal bill, city payroll and potential liability to the building owners?

    It might cost less money for the city to give city’s free public housing to these tenants and make them happy.

    • Posted by San FronziScheme

      The City doesn’t care about the money it spends. It’s money that falls from the sky.

  5. Posted by sassyboyfrisco

    UNSAFE! Hot plates, space heaters, artist chemicals, insufficient ventilation, limited windows, etc.
    SF City should be sued for millions for knowingly allowing people to live non residential buildings creating a potential UNSAFE situation. As for these tenants, let them eat cake in Oakland or elsewhere outside of SF!

    • Posted by SFCitizen

      If you are implying that this building will burn, I have to agree. I just hope everyone gets out ok.

  6. Posted by redseca2

    I remember when I first moved to San Francisco in these 1979, these not to code, slightly illegal, slightly under the table rentals were very common. I am talking about the several decades when landlords had no hope of renting various commercial and warehouse spaces to legitimate businesses throughout SOMA (before it was called that), the Bayshore, and points in between.

    Actually renting to artists was the best option in many cases. After that the best you could hope for would be punk band rehearsal space, illegal party venue or perhaps a gay sex club.

    I had some good “Artist” friends who rented a Bayshore 10,000 square foot warehouse floor for .07 cents a square foot. That is 10,000 square feet for $700.00, and the landlord was glad to get it. They were definitely all in the grunge mold of the time, but they were also full time students at the SF Art Institute from well to do families and i am still in contact with a couple who went onto very successful careers locally in their fields.

    • Posted by Amewsed

      I remember those days too even though I was just a child back then. Weren’t those gay sex clubs hot tub places in the Castro? Sold my school raffle tickets on the corner of Castro and Market St. and made a lot of sales back then to gay men, burly guys on Harleys, and a few elderly folks. Never felt unsafe.

  7. Posted by Schaetzer

    This was illegally converted from office to residential use more like 20-25 years ago. It didn’t happen in the last decade. A starving-artist friend moved into one of the windowless units in 1996.

    This property is an interesting case. I don’t think the landlord has clean hands in this instance and I have absolutely no sympathy for the problems he has encountered. I understand that he managed the building for some time before buying it on the cheap in 2012. He knew the situation as far as the illegal residential use. You can do the math… He paid $1.72m for a 56,800 square foot building on an 8,250 square foot Mid-Market lot. That’s $30 psf for the building and $208 psf for the lot. This was when Mid-Market sites were going for $500-$600 psf and up. For example, the building next door sits on a lot exactly the same size. It sold for $4.5m in 2013 for construction of a hotel.

    The owner got the property cheap for a reason. If nothing else, the city should sock it to him for the long-term illegal rental operation.

    BTW In a past life I was a broker and I remember showing this building to a prospective commercial tenant. The office floors then were basically unfinished loft space, although the floors are pretty fully built out for office use now. That would have been in the mid-1980s. I believe that was about three market cycles ago. Back then, you could tell when the market was going to turn down because all the marginal “investors” starting flocking to Mid-Market, which was always the next “big thing.” Who knows, it just may be this time around. On the other hand…

  8. Posted by chuco35

    What defiance fit cheap housing? A tenant is supposed to know the city’s housing laws? She responded to an ad and liked the place. It’s the landlord who defied the laws, for greed, and who should bear the costs.

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