San Francisco Tenant Buyout- a new ordinance

A San Francico Tenant Buyout just got a little more complicated for San Francisco landlords. It seems that the city is trying to control free speech between two parties getting together to discuss financial compensation in an effort to terminate a lease. Remember, in San Francisco landlords and tenants have to navigate the complicated eviction and rent control laws.

Effective March 7, 2015 a new provision has been added to Rent Ordinance Section 37.9E regulating “buyout agreements” between landlords and tenants. Buyouts are known as an agreement between landlord and tenant where a landlord pays tenants money or other consideration to vacate their rent-controlled rental units. Please note that an agreement to settle a pending unlawful detainer action does not constitute a “buyout agreement” for purposes of Section 37.9E.

This new amendment just makes it harder for two parties to talk openly about the ill-fated rent control laws in San Francisco. Here’s a primer for what Landlords must prepare for in order to navigate San Francisco tenant buyout:

1. Require notice prior to any negotiation: Landlords must 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.

2. Require written agreements: All buyout agreements to be in writing and to include certain provisions regarding the tenants’ rights.

3. Provide a 45 day rescission period for tenants: Tenants would have the ability to rescind a buyout agreement for up to 45 days after its execution by all parties.

4. Requite buyout agreements to filed with the city and made public : Landlords must file copies of buyout agreements with the Rent Board and pay a filing fee. The Rent Board would create a searchable, publicly available database regarding buyout agreements.

5. Require an annual reporting of all buyouts: The Rent Board will now provide an annual report to the Board of Supervisors regarding tenant buyouts.

6. Allow for monetary and civil penalties for failing to comply: Allow tenants to bring an action in San Francisco Superior Court seeking monetary damages and civil penalties from landlords who did not provide the pre-negotiation disclosure or include in the buyout agreement the provisions regarding the tenants’ rights. The proposed ordinance would authorize nonprofit tenants’ rights organizations to bring an action in San Francisco Superior Court against landlords who failed to file buyout agreements with the Rent Board.

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. The proposed ordinance would also prohibit condominium conversions in buildings where two or more tenants who are not senior, disabled, or catastrophically ill have vacated units under buyout agreements, if the agreements were entered after October 2014 and within the ten years prior to the condominium conversion application.