SF: Understanding the TIC, Part 4

San Francisco is a very hard place to buy a home in, and as a result, the vast majority of residents are renters, not owners. Not surprisingly then, SF is very friendly to and protective of tenants’ rights. These rights can make condo-conversion a little sticky, and and TIC owner who plans to convert to condo must understand the laws to ensure he/she can in fact covert at all.

Part 4 of “Understanding the TIC” offers a brief overview of the city’s latest laws, made easy to digest by local expert, attorney Andy Sirkin on his site.

Have condominium conversion rules changed?

In May 2005, the San Francisco Board of Supervisors passed a law linking a building’s eviction history to its ability to be converted to condominiums. Under the law (discussed more fully below), buildings from which tenants were evicted after May 5, 2005 may be prohibited from from converting to condominiums.

In December 2005, Mayor Gavin Newsom signed a law introduced by Supervisor Bevan Dufty which dramatically increased condo lottery odds for buildings that have lost the lottery many times, while decreasing odds for new entrants. Originally, the law applied only to the 2006 lottery, but it was recently renewed for 2007 and 2008. Unless it is renewed for years after 2008, the new system (discussed more fully below) will expire, which means that prospective converters should not rely on the new system staying in place beyond the 2008 lottery.

This article summarizes the rules we understand to be in effect on the publication date. Buyers and owners should check with the authors for recent developments before making commitments based on information in this article. Owners who qualify for conversion under current rules should file applications immediately.

Can eviction history disqualify buildings from being converted to condominiums?
A new law passed in May 2005 will prevent certain buildings from qualifying for conversion based on past tenant evictions. The main points of the proposed law are: (1) A building from which one elderly (60) tenant in occupancy 10 years or more, or one disabled tenant, has been evicted since 5/1/05 for any reason unrelated to the tenant’s behavior, can never be converted to condominiums; and (2) A building from which two or more tenants (regardless of age or disability) have been evicted from separate units for any reason unrelated to the tenants’ behavior since 5/1/05 can be converted to condominiums only after 10 years of owner-occupancy. These restrictions will not apply to a building if each unit was occupied by a separate owner on 4/4/06. The conversion restrictions apply without regard to whether the current owner initiated or otherwise participated in the evictions. “Eviction” is defined to mean the issuance of a notice terminating tenancy even if the tenant later leaves without further legal action (or in exchange for a “tenant buyout”), but if a property owner issues then withdraws the eviction notice prior to its expiration and the tenant receiving the notice remains in tenancy for at least 120 days following the expiration of the notice, the action would not deemed to be an “eviction.”

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If and when your partnership wins the lottery, note that still more restrictions are in place:

What are the “tenant intent to purchase” requirements?
Lottery winners must submit “tenant intent to purchase” forms signed by residents of at least 40% of the units. These forms state that the signer intends to buy his/her unit as a condominium, but may later decide not to buy. The signers may be renters or owner-occupants. Under this system, only 3-4 unit buildings with a solitary owner-occupant need renter cooperation to satisfy the requirement.

What are the “tenant rights” rules?
All renters (including those who do not sign a “tenant intent to purchase” form) get an opportunity to purchase after conversion at a price established by the owner, all non-purchasing renters get one-year rent-controlled leases, and all disabled and senior (over 62) renters get lifetime rent-controlled leases. At the conclusion of a lease period, renters may be evicted in connection with the sale of a unit. All tenants must be notified of their rights before a lottery conversion application is filed.