A rent-controlled apartment is an asset that is often worth thousands of dollars a month, especially now that the Bay Area officially has the highest rents in the country (San Francisco is first; Oakland and San Jose are tied at fourth). As rents continue to skyrocket, more and more landlords are offering financial incentives to try to entice long-time renters to leave so the landlord can cash in on the market. Bringing an experienced tenant rights lawyer in San Francisco into these contract negotiations can help you get the most value.
So How Much Value Are We Talking?
Before we get to the dollars and cents, let’s consider what is on the table when you negotiate a buyout agreement. Here is the landlord’s perspective: the landlord is getting the right to start leasing your apartment at market rate, and that difference could easily be tens of thousands of dollars a year. You, on the other hand, will have to vacate a home where you may have lived for decades, and possibly pay tens of thousands of dollars a year in higher rents.
Now every negotiation is different, and there are a lot of individual factors that can come into play. But just to give you an idea of what you might expect, here is a baseline to help determine a good starting point for further negotiations.
There are basically two ways to determine the financial value of a buyout:
- Hard Way: Compare the difference between the rent-controlled apartment and market rates in your neighborhood. But to construct a workable cash-flow model, a number of assumptions have to be built into the calculation.
- Easy Way: Compare the difference between the sales price of a vacant building and one with a rent-controlled tenant. The actual gap varies, but it is generally understood that there is a 10% to 20% premium for vacant buildings.
Based on the easier method, a group of economists have calculated that a fair starting point for negotiations is $122 per square foot.
Rely on Experienced Attorneys
It is important to have an attorney on your side, because the landlord almost always will have a cadre of lawyers whose only goal is to deliver maximum value to their client by any legal means possible. If you are not represented by your own lawyer, those odds are hopelessly uneven and you will most likely lose thousands of dollars.
The city of San Francisco apparently agrees with this advice. Last year, the San Francisco Rent Board added tenant protections during buyout negotiations to the Rent Ordinance in Section 37.9E. Now, before any negotiations even start, landlords must inform tenants of their rights. You have the right to:
- Refuse to enter into a buyout agreement, or even talk with the landlord about a potential buyout.
- Rescind the agreement for up to 45 days after it has been executed.
- Enlist the assistance of a qualified San Francisco tenant rights lawyer.
Of course, landlords have complained vociferously about these requirements. In court, they argued that the law’s rigid filing and notice requirements run counter to the First Amendment. The court rejected these arguments. The landlords’ real concern is that these rules limit their ability to strong-arm tenants into making quick buyout agreements that are substantially below market rates, especially once a tenant rights lawyer is involved on your side. This is the very type of abuse that the Rent Board sought to end.
We Can Help!
At Elke & Merchant LLP, we represent Bay Area tenants during buyout negotiations. Contact an experienced San Francisco tenant lawyer today for a confidential consultation, and start seeing results tomorrow.