With San Francisco real estate prices skyrocketing, landlords in the city are doing everything they can to get longtime tenants out of their rent-controlled apartments. Because evictions are a time consuming affair—and in many cases, there are simply no convenient legal grounds to force a tenant to leave—many landlords have turned to tenant buyouts. In a buyout agreement, the landlord gives the tenant a lump-sum payment in exchange for vacating the unit. This allows the landlord to sell or re-rent the unit for a higher price. Buyout offers often come with the implicit threat that the tenant will be evicted if she does not accept a buyout.
Know Your Rights as a Tenant in San Francisco
But are buyouts good for tenants? Unlike evictions, where tenants enjoy certain legal protections under California and San Francisco law, tenant buyouts have traditionally been largely unregulated. That changed last year when the San Francisco Board of Supervisors adopted an amendment to the city’s Rent Ordinance. Known as Section 37.9E, the new law is designed to “increase the fairness of buyout negotiations” by requiring landlords to give tenants certain notices before proposing a buyout.
Among other things, Section 37.9E requires notice that:
- The tenant has the right not to enter into a buyout agreement if she chooses;
- The tenant has the right to consult with a San Francisco tenant lawyer or a tenants’ rights organization before negotiating any buyout agreement;
- The tenant has the right to back out of any buyout agreement within 45 days;
- The tenant has the right to visit the San Francisco Rent Board to learn about “other buyout agreements in the tenant’s neighborhood”; and
- The tenant has the right to know the names of anyone representing the landlord in buyout negotiations.
A tenant has the right to sue any landlord who fails to comply with these requirements.
Additionally, the new buyout legislation allows for restrictions to be placed on properties in which tenants have accepted buyouts. There may be limits on condo conversion and the ability to receive permits for mergers and alterations. This portion of the new law was intended to discourage buyouts and to preserve the City’s rent-controlled housing stock.
Buyouts Are Not Always Beneficial to Tenants
You should always work with an experienced San Francisco tenant lawyer before discussing any buyout agreement with your landlord. While a tenant buyout may seem like a good deal at first glance, there are a number of legal and financial implications to consider. For one thing, a buyout may be considered taxable income. However, a tenant may be able to reduce the tax liability if the payment can be partially characterized as a return of rent that should not have been paid. Additionally, a lump-sum payment could affect your continuing eligibility for certain public benefits, such as the CalFresh Program and MediCal.
The costs of relocating can be substantial. This includes not just the time and expense of moving, but also paying significantly higher rent for a new apartment. Before you accept a buyout, you should consider how far the buyout money will go towards your new rent. Often, even a large buyout will only allow a tenant to afford increased rents at a new apartment for a few years. If you think your landlord does not have a credible threat to evict you, it may be better to stay in your apartment than accept a buyout.
Tenants Who Are Represented by Attorneys Often Get Better Buyouts Results
If you have been offered a tenant buyout, your first call should be to a qualified San Francisco tenant attorney who deals with these issues every day. The attorneys at Elke & Merchant LLP represent tenants exclusively—never landlords—so there is no question whose side they are on. Contact us today at (415) 294-4111 if you need to speak with a lawyer right away.