Red Bridge Group

SF Housing Groups Challenge Buyout Ordinance in California Supreme Court

A number of housing industry non-profits and organizations filed suit today against the City and County of San Francisco in California Superior Court, challenging the Buyout Agreement ordinance, recently passed by San Francisco’s Board of Supervisors, as unconstitutional.

To learn more about the specifics of the buyout ordinance, please see yesterdays blog post: “San Francisco has adopted a new ordinance regulating Buyout Agreements”

The legislation, sponsored by Supervisors Campos, Avalos, Kim and Mar, was passed by the full Board of Supervisors in late October and becomes effective Saturday, March 7, 2015. The law is being challenged by plaintiffs the San Francisco Apartment Association, the Small Property Owners of San Francisco Institute, the San Francisco Association of Realtors, the Coalition for Better Housing and Norm Larson, a small property owner in San Francisco.

“It is important to note that in the 2004 San Francisco Superior Court case Baba v. Board of Supervisors in San Francisco, the courts found that certain aspects of the Rent Ordinance that regulated communication between landlords and tenants were unconstitutional, and that restrictions on the regulation of speech between property owners and tenants was unlawful. We believe the Court will also overturn the unlawful aspects of this ordinance” said Janan New, Executive Director of the San Francisco Apartment Association.

“In attempting to regulate an agreement between two private parties, the legislation likely violates the First Amendment right to free speech. It provides restrictions, and seeks to punish property owners for exercising a right that every individual has: to enter into a mutually acceptable contract with another person. Additionally, the ordinance conveys a set of rights to one group of people, San Francisco tenants, and denies those same rights to another group, San Francisco property owners,” stated Walt Baczkowski, CEO of the San Francisco Association of Realtors.

“In addition to opening up the City to liability, this legislation presents a procedural quagmire that is nearly impossible for the growing population of monolingual property owners, property owners who speak English as a second language, and property owners who do not have the benefit of an attorney to navigate. The buyout ordinance is so onerous and riddled with procedural requirements that it sets up underrepresented, monolingual and immigrant property owners for procedural noncompliance, and will undoubtedly increase litigation between property owners and tenants. We are at a time and place in our city where we need to encourage cooperation rather than litigation,” said Small Property Owners of SF Institute President Noni Richen.

“Aside from being illegal, the buyout ordinance will only bring harm to both property owners and tenants. In attaching the same restrictions on condominium conversions that apply to buildings that have been Ellis Acted, this legislation propagates unhealthy and wildly inaccurate myths about buyouts, and removes all benefit of a buyout, which helps many tenants put a down payment on a new home. In doing so, the ordinance incentivizes use of the Ellis Act in a way that is contradictory to the City’s housing goals. The unconstitutional restrictions and the unintended consequences of the law are far too great,” warned Brook Turner, Executive Director of the Coalition for Better Housing.

The leading plaintiff organizations hope to continue a recent string of legal victories against the City and County of San Francisco, where a number of housing laws and regulations have been passed by the Board of Supervisors in the past year and a half but have not sustained legal muster. The organizations have recently succeeded in overturning property restrictions prohibiting units from being made bigger or merged to accommodate growing families, and in striking down exorbitant relocation fee payments where Ellis evictions have taken place. The organizations are seeking declaratory and injunctive relief against the Buyout ordinance.

For more details on this new ordinance on SF buyout agreements, click here.

San Francisco has adopted a new ordinance regulating “Buyout Agreements”

San Francisco has adopted a new ordinance regulating “Buyout Agreements” (agreements by which a landlord pays a tenant money or other consideration to vacate a rental unit) and “Buyout Negotiations” (any discussion or bargaining, oral or written, between a landlord and tenant regarding the possibility of entering into a Buyout Agreement) for residential rental properties which are subject to local rent control laws.

The new law is operative March 7, 2015, but it has a retroactive effect which precludes condo conversions for properties where (a) Buyout Agreements were entered on or after October 31, 2014 and (b) involved 2 or more tenants (even in the same unit), or any tenant of a “protected class” as defined in the ordinance. Note that local law presently (a) allows conversion of certain 2 residential unit properties where each unit is owner-occupied by a separate owner; (b) otherwise disallows conversion of 2–6 residential unit buildings unless approval was sought under the 2013 “Expedited Conversion” Program; and (c) now prohibits conversion of 5+ residential unit properties.

Under the new law, prior to Buyout Negotiations with any tenant, a landlord must provide the tenant with a written disclosure including, among other things, references to their rights to: refuse to negotiate or enter into a Buyout Agreement, consult with an attorney, and rescind (unilaterally terminate) any such signed agreement for a period of 45 days after the agreement was fully executed. Further, this disclosure must include a statement that the tenant may obtain information from the San Francisco Rent Board about other Buyout Agreements in the tenant’s neighborhood, a list of tenants’ rights organizations, a statement explaining the legal implications of condominium conversion for landlords entering any such agreements, and, for entity landlords, the names of all people within that entity conducting the negotiations, as well as the names of all people who will have decision-making authority over the terms of the Buyout Agreement.

Additionally, prior to Buyout Negotiations with any tenant, a landlord, among other things, must also (a) provide notice to the Rent Board of the landlord’s name and contact information, the names of the tenants with whom the landlord intends to negotiate, the address(es) of the unit(s) involved, (b) a statement under penalty of perjury that a proper disclosure (discussed above) has been provided to each tenant, and (c) only enter into written Buyout Agreements and include certain mandatory language in them. A copy of any executed Buyout Agreement must be filed with the Rent Board within 14 days after the tenant’s rescission period has expired. The Rent Board will be creating a publically searchable database of such agreements, and required disclosure and notice forms to use to comply with this law.

If, in considering the purchase of a property, a buyer contemplates any Buyout Negotiations, any such buyer is strongly advised to seek qualified legal counsel concerning such plans before entering into a purchase agreement or removing any relevant contingencies. The above is only a partial summary of the new law (CCSF Administrative Code §37.9E & Subdivision Code §1396(e)(4)). The full text can be found at:

Source: SFAR Form “Tenant Buyout Legislation Advisory and Seller’s Supplemental Disclosure Re Buyouts”

San Francisco Apartment Buildings – Market Update Q4 2014

SF Apartment Buildings 2014 Overview

As we close up the first whole month of 2015, we wanted to take the data that we’ve gathered from the past year and give you a complete market overview for San Francisco Apartment Buildings.

As we forge through 2015, barring any unforeseen catastrophic events or any major economic changes, we believe the apartment market will continue advancing with positive momentum. The lending market is contributing to this positive trend by boasting much liquidity in the marketplace and providing borrowers with historic low interest rates.

The average price per square foot for all 5+ unit apartment buildings in SF is well over $400 and is expected to continue to rise. The rise is largely due to low-paying tenants moving out and market rental prices hitting all time highs.

*Because of the huge variety in buildings sold, average dollar per square foot is a very general statistic when applied to investment property sales. This data is from sales reported to MLS.

In San Francisco, capitalization rates for 5+ unit apartment buildings have continued to drop, in some areas below 4%. While we don’t know how much lower they can go, we do foresee cap rates staying steady until there is a rise in interest rates.

The higher the cap rate the greater the return on investment as measured by net income over purchase price.

* This data is from sales reported to MLS, but may contain errors and is subject to revision.

San Francisco has continued to have steady transaction volume in apartment building sales and with Proposition G being shot down late last year, buildings continue to close at record numbers.

If you are a San Francisco Apartment owner thinking about selling sometime in 2015, contact Red Bridge Group, your top multi-unit sales specialists.

Ellis Act San Francisco Court Case Results

Congratulations, San Francisco Investment Property Owners.

ellis act courthouse

You scored a huge win at the end of last year when a federal judge declared the city’s most-recent Ellis Act relocation fees unconstitutional. The decision by U.S. District Judge Charles Breyer shot down a new city law that required property owners who use the Ellis Act to pay displaced tenants these exorbitant fees:

The difference between the current rent and the amount needed to rent a comparable unit in the city at market rates for two years. Some amounts have exceeded $100,000. Even though the city has filed an appeal, in the meantime the judge’s ruling stands. This appeal could take years to be heard by the courts again.

What issues did the federal judge have with this new Ellis Act law?

Ellis Act and Property Rights

1. Judge Charles Breyers expressed that this violates property rights because it requires owners to pay for conditions they didn’t cause: the skyrocketing prices of rental housing and the gap between market rates and maximum charges under the city’s rent control law.

In a one day trial, Judge Breyers explains that the ordinance “seeks to force the property owner to pay for a broad public problem not of the owner’s making. A property owner did not cause the high market rent to which a tenant who chooses to stay in San Francisco might be exposed, nor cause the lower rent controlled rate the tenant previously enjoyed.”

Ellis Act and Use of Fees

2. Judge Breyers also concluded that the ordinance did not require tenants to spend the fees on replacement housing in San Francisco, or anywhere else.

Ellis Act and a Constitutional Principle

3. The ordinance violated a constitutional principle: when the government confiscates private property, by condemning land or exacting a fee for owners’ use of their property, the price must be at least “roughly proportional” to the impact of the owners’ actions. Let’s relate this to the city ordinance that enacted and upheld in 2005 which required landlords to pay displaced tenants $4,500 plus inflation adjustments, an amount that Breyer said was roughly equal to the expenses they face in moving out.

ellis act relocation payments
To review this entire document, please click here. This document also has this information translated in Spanish and Chinese.

If you were waiting to hear what the verdict was before selling your San Francisco apartment building, now may be a good time for you.

If you are looking to sell your multi-unit property in San Francisco, reach out to our team today for a FREE property valuation and marketing strategy appointment.

What is San Francisco’s Allowable Rent Increase for 2015?

SF’s Allowable Rent Increase for 2015 Announced for 3/1/15 – 2/29/16

SF Rent Board

Per the City and County of San Francisco Rent Board, starting March 1, 2015 through February 29, 2016, the allowable annual increase amount for rent in San Francisco will be set at 1.9%. In accordance with Rules and Regulations Section 1.12, this amount is based on 60% of the percentage increase in the Consumer Price Index (CPI) for All Urban Consumers in the San Francisco-Oakland-San Jose region for the 12-month period ending October 31, which was 3.2% as posted in November 2014 by the Bureau of Labor Statistics.

To calculate the dollar amount of the 1.9% annual rent increase, multiply the tenant’s current rent amount by .019. For example, if the tenant’s current rent is $1,500.00, the annual increase would be $57.00: $3,000.00 x .019 = $57.00. The tenant’s new rent would be $3,057.00 effective March 1st, 2015.

To compare what the allowable rental increases were several years back:
March 1, 2015 – February 29, 2016 1.9%
March 1, 2014 – February 28, 2015 1.0%
March 1, 2013 – February 28, 2014 1.9%
March 1, 2012 – February 28, 2013 1.9%
March 1, 2011 – February 29, 2012 0.5%
March 1, 2010 – February 28, 2011 0.1%
March 1, 2009 – February 28, 2010 2.2%
March 1, 2008 – February 28, 2009 2.0%

For a full comparison list of annual rent increases in San Francisco since 1982, click here.

If you are an apartment building owner or landlord and have any questions, don’t hesitate to contact your San Francisco multi-family specialists today at the Red Bridge Group.

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.

Prop. G – Voters Said NO!

In a shocking (and relieving) turn of events, Proposition G – the proposal to install an additional housing tax on real estate “speculation” – was turned down by San Francisco voters yesterday at the polls. Click here for a more in-depth read about Prop. G’s terms.


The vote that had everyone in the Real Estate sphere spinning is finally over. Homeowners, investors, and San Francisco property owners can take a deep breath today – knowing, they haven’t lost control of their investments to a poorly planned piece of legislation.


Prop. G intended to tax owners of 2-30 unit residential properties if they decided to sell within 5 years of purchase. The Board of Directors – made up of supervisors Avalos, David Campos, Jane Kim and Eric Mar – thought this measure would help reduce speculation in San Francisco’s real estate market – and in turn, help to reduce evictions that have become commonplace in The City as housing costs rise.


Quintin Mecke – Prop. G’s leader – spoke to the SFexaminer yesterday. He stated that real estate interests “outspent his campaign by 12-1”. Over 2 Million USD was raised to fight Prop. G. Considering the cost of property in San Francisco – this is a small price to pay to avoid 100s of Millions lost this tax (had it passed). In fact, according to City Controller estimates – had Prop G passed, this tax would have raised 24.78 Million USD every year. Sadly – this money would have ended up in the general fund, rather than going towards actually addressing the issue of evictions.


Unhappy with yesterday’s result, Quintin suggests that until evictions and housing costs drop, he will continue to propose such legislation every November. We will check in with his stamina next year.


Today – we should all be grateful that Prop. G was voted down. This is truly great news.

Earthquake Preparedness with Ready SF’s David Yacubian

Last Thursday here at Pacific Union | Noe Valley we were honored to welcome locally based Haight-Ashbury company, Ready SF and David Yacubian for an informative seminar on Earthquake Preparedness in The Bay Area – and San Francisco in particular.

David is no stranger to Earthquakes – in fact, he is more qualified than most – having experienced first hand a massive quake while living with his family in New Zealand. Click here to read more about David Yacubian’s story.

As our team gears up for our grand opening of the first ever Pacific Union | Noe Valley office, we wanted to differentiate ourselves from the pack – and avoid the pitfalls of most real estate companies. We are going to be different – and part of this difference will involve a strong involvement in our Noe Valley community. This past Thursday’s seminar at our brand new office at 1400 Castro Street in Noe Valley – was just one of many community related events we have planned. With David’s support, and the support of our greater Noe Valley neighborhood – our next event will be CPR training related. So stay tuned!

The Ready SF seminar was only about 30 minutes – but in that time, David dispelled many of the myths about what one should do in the event of a quake. He is of the belief that having an “Earthquake Kit” is not enough. We live very active lives here in San Francisco – and it is the unusual time when our families are all together – at home. Our children are at school, we are at work, and Mother Nature doesn’t time earthquakes to best suit our needs – they can strike anytime.

David wants us all to know – it is more about your family’s “plan of action” than a kit. And with the 25th anniversary of the devastating Loma Prieta Quake of 89, it is important we all remember just how serious earthquake threats are here in The Bay. We must remain steadfast in our preparedness for the next shake. David is a DIY kind of guy – and recommends that your “Earthquake Kit” be created by you and for you – every family needs different items so avoid a standardized kit and spend a Sunday afternoon creating a kit based on the below information!

Here are some notes from Thursday’s seminar:

  1. Cash is King – when electricity goes out, that means no ATM or credit card scanners at Walgreens. There is no set amount David recommends, but he does suggest keeping an amount on hand (in small denominations – again, no change drawers will be opening with no power).
  2. Have a Plan
  3. Texting Works much better than Calling (interesting point! – SMS will continually try to “get through” while during such a chaotic event likely will not work. Just let someone know that you are alright – even if it takes a few hours to send, your loved ones will be happy to know you are safe. Having someone out of state to text is something to incorporate into your plan – with everyone in San Francisco trying to text at the same time, texts leaving the state often avoid the signal traffic happening in SF proper).
  4. Always keep your gas tank 1/2 full! It could make the difference between getting somewhere safe outside of the city quickly – or waiting in gas lines for hours/days. (Yes, always – your family will appreciate this anyway – earthquake or not!).
  5. Get training – First Aid or otherwise. Check out some of Ready SF courses for more info.
  6. Keep good Hygiene. Water is gold. Potable water can be found in your water heater in a pinch – or the back of a toilet (no, not the bowl!). David recommends hand sanitizer to save your precious water supply.
  7. Expect 72 hours with no help from the city – this is unlikely, but be prepared with a 3 day water supply – and whatever other items (ie. medicine, toys, blankets, flashlights, batteries, radio…).
  8. Know how to use the tools you have. And know what tools your neighbors have! Create a mutual plan – trading and bartering will become common means of “getting by” during an earthquake. Band together with those around you!
  9. Only turn off your gas line if you smell gas. No need to turn it off preemptively because it will take days to get it back on. Use common sense here. Heat helps create potable water, among other things – so use your head and don’t hit the emergency gas shut off unless it is necessary.

Other items to consider – being well prepared involves:

  1. Secure your Home. Valuable items that can fall – can be secured with a putty found at hardware stores.
  2. Make a Plan – and rehearse it. Just like a fire drill. Have the kids play along – as if they were by themselves. Show them what to do – and what not to do.
  3. Make a Kit – using items mentioned above – as well as items specific to your needs. Make sure you have an extra supply of medicine. Many online pharmacies now offer a 90 day supply – for those with conditions requiring daily dosing of medication, this is a MUST.
  4. Stay Inside during a quake!

Finally, we must accept there are many unknowns. We can not prevent an earthquake or control Mother Nature. However, David Yacubian and Ready SF can help you be as prepared as possible. With preparedness comes a level of serenity and comfort – knowing that you have done everything possible to protect your family in the likely event of another Earthquake.

-Andrew Salkin, Operations at Pacific Union | Noe Valley

Please call or email us at 415-997-9964 for more information on Earthquake Preparedness or Real Estate in San Francisco. We would love to hear from you.

San Francisco Ellis Act Payments: Campos relocation payment law invalidated

On October 21, 2014, the U.S. District Court found Subsections 37.9A(e)(3)(E)–(I) unconstitutional. This was the new law invoked by David Campos that altered the San Francisco Ellis Act Payments for landlords looking to Ellis Act a property. The law required landlords to follow an archaic minimum “Rental Payment Differential” for San Francisco Ellis Act payments.

If you look at the SF Rent Board’s website it reads a Federal Judge has enjoined the City from enforcing the new relocation payment requirements. We wrote about these new relocation payments back in August 2014 and even provided a payment example.

While the City is appealing the District Court’s ruling to the Ninth Circuit Court of Appeals, all questions concerning the legal effect of the District Court’s ruling pending a final decision in the case should be directed to private counsel.

We refer our clients to the following San Francisco attorney’s when it comes to tenant-landlord issues. If you have any questions please do not hesitate to contact us.

1- Steve Adair MacDonald
2- Bornstein and Bornstein
3- Andy Sirkin

unemployment in the bay

Unemployment Rates Dropping in The Bay

With summer officially coming to a close (even though we still have some of the best weather of the year ahead of us) – unemployment rates are down from last month in every Bay county! – California Economic Development Department

The 9 Bay Area counties were the only ones in the state of California to show unemployment rates of less than 5 percent – indicating that our market has reached “full employment”.

Marin County still has the lowest % unemployed workers – 4.2%, 2nd is San Mateo at 4.3%, 3rd SF at 4.6%, and Napa at 4.8%. The others range from 5.4% in Sonoma to 6.8% in Solano.

The EDD briefing states that California has gained back the 1.3 Million jobs lost during the Recession in June, 2014. July was the 53rd month in a row of continuous statewide job growth.

Of course, The Bay Area provides for many of these jobs and is largely responsible for helping our job economy normalize – often exceeding expectations. The tech sphere continues to further shape San Francisco’s job market – and for good reason.

Besides “nonfarm” jobs – between ’10 and 2014 – the EDD stats show this to be the largest 4 year job increase compared to all other California regions – showing an unbelievable growth rate of 8.9%!

Even with all that San Francisco has to offer in terms of tech jobs, the EDD estimates that in the next 10 years, the largest growth will actually occur in the hospitality and tourism sphere – which makes sense considering San Francisco is becoming one of the most desirable cities in the United States. The more opportunities we can provide – the stronger our local real estate market will be. An estimated 186,000 positions in hospitality and tourism will open. Info/tech sphere will generate an estimated 160,000 new positions; Retail expected to provide 137,000 new jobs by 2020.

Needless to say, all the new construction currently underway in San Francisco is truly needed. Yet – we know how challenging traffic and congestion can be in San Francisco already. We can certainly expect infrastructure changes from the city to accommodate all the people who will be moving here. Luckily, the tech sphere employs a larger degree of employees who can work remotely.

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