June 7, 2013

Will San Francisco's Condominium Lottery Legislation Be A Winner?

Having been sent back to San Francisco’s Land Use and Economic Development Committee for another round of amendments, the proposed condominium conversion lottery bypass legislation is once again slated to be voted upon by San Francisco’s Board of Supervisors next week.

The proposed legislation would establish a bypass period during which qualifying TICs could condo convert for a fee; establish lifetime leases for tenants in converting non-owner occupied units; restrict future condominium lotteries to buildings with no more than four units; and suspend San Francisco’s annual condominium conversion lottery until at least 2024.

While originally co-sponsored by Supervisor Wiener, he no longer supports the newly amended legislation as proposed which includes a couple of important changes:

Buildings which participated in either the 2012 or 2013 lottery and have been continuously occupied by the required number of applicant owners of record for no less than five years as of April 15, 2013 would immediately qualify for the bypass. Buildings which participated in either the 2012 or 2013 lottery and have been continuously occupied by the required number of applicant owners of record for no less than three years as of April 15, 2014 would qualify on that date.

Buildings which did not qualify or participate in either the 2012 or 2013 lotteries would eventually be eligible to participate in the bypass assuming a formal TIC agreement was in place as of April 15, 2013 and the required number of applicant owners have continuously occupied the building for at least six years by April 15, 2019.

In other words, TIC buildings in which the owner applicants weren't in place by April 15, 2013 would never qualify for the bypass and five or six unit TIC buildings which don't qualify for the bypass would never qualify for conversion as proposed.

And yes, the proposed legislation still contains the provision that if any lawsuit is filed against the legislation (see previous paragraph for a hint as to who might quickly file), the bypass would be suspended until the lawsuit was settled or until 2024, whichever comes first.

UPDATE: Two key changes in the legislation as newly amended: 1. The program has been extended by a year (i.e., the cutoff date for being bypass eligible is now April 15, 2013 rather than April 15, 2012); and 2. The "poison pill" provision would now suspend both the bypass and the lottery until any legal challenges are settled, as previously written the lottery would have resumed.

Amended Condominium Conversion Impact Fee Legislation [sfbos.org]
TIC Owners, Occupiers, Buyers, Agents And Attorneys Take Note [SocketSite]

First Published: June 7, 2013 7:45 AM

Comments from "Plugged In" Readers

UPDATE: Two key changes in the legislation as newly amended: 1. The program has been extended by a year (i.e., the effective cutoff date for being bypass eligible is now April 15, 2013 rather than April 15, 2012), and 2. The "poison pill" provision would now suspend both the bypass and the lottery until any legal challenges are settled.

Our original link to the summary of the pre-amended legislation above has since been corrected.

Posted by: SocketSite at June 7, 2013 11:36 AM

This legislation(as amended) is a giant step towards banning condo conversions in SF, in exchange for (maybe) allowing some current TIC owners to convert now. Terrible legislation if you care about future affordable homeownership for current renters.

Posted by: Mike at June 7, 2013 11:43 AM

This poison pill is the way the sftu will forbid any conversion forever. If this passes, the sftu will add legal action after legal action.

The unintended result for the sftu's actions: there will be NO INCENTIVE to play nice from Landlords who want to sell their units as TICs.

Today, an Ellis will seriously hamper a future conversion. If TIC owners cannot convert, then there's no real reason for a landlord to have a negotiated eviction. They'll go Ellis, pay the token eviction compensation, then sell as a TIC for whatever price they can get.

More pain to come for long-term-rent-controlled tenants...

Posted by: lol at June 7, 2013 11:56 AM

I always knew the socialists on the Board of Supervisors were despicable, but I didn't think they would resort to extortion. Threatening TIC owners with a "poison pill" is nothing more than extortion. They are essentially saying "We are going to permanently ban condo conversions 5 years from now, and if you sue us about it, we are going to ban them immediately". I am embarrassed to live in this city.

Posted by: J at June 7, 2013 11:59 AM

@lol -- I am excited for the moment a few years from now when the SFTU realizes this, after evictions have risen ten-fold. Can. Not. Wait.

Posted by: J at June 7, 2013 12:17 PM

J,

I am not sure the Supes are actually thinking about extortion or punishing TIC owners or even landlords. It's simple: they know the tenant vote is essential, and they are very sensible to any kind of bad press that comes with any phasing out of rent control/protection.

As a result, they'll always choose the easiest path in the short term, which is "protect" the weak, or people they choose to consider as weak.

But any do-gooder knows that too much leniency or compassion leads to unintended consequences causing the exact opposite of what you want.

When you create an unjust system, people on the losing side will fight. In that case, it will be landlords who will not hesitate to go nuclear (Ellis) when they'll have no real disincentive to do so.

The collateral damage will be the current affordable rent-protected tenants.

Posted by: lol at June 7, 2013 12:38 PM

@lol -- I disagree with you about the poison pill. If it were just to "protect the tenants," then it would allow for the lottery to resume while the litigation is worked out, as has been the case for 30+ years. The only reason that provision is included is to be punitive against TIC owners and coerce them to give up their right to Due Process.

Posted by: J at June 7, 2013 12:43 PM

The poison pill just got way worse, what will happen is that the SFTU will immediately file a lawsuit, and keep filing lawsuits, suspending all condo conversions for at least 10 years, or until the legislation is overturned. I would also expect some owners to sue as well.

A lawsuit is guaranteed from this legislation, which means all this legislation will do is stop condo conversions for an unknown amount of time.

I suspect lol is right, if it passes, Ellis Act use will skyrocket.

I don't own a TIC, so it doesn't really affect me, but I suggest anybody that does own one contact their supervisor immediately.

This is shockingly horrible legislation!

Posted by: lyqwyd at June 7, 2013 2:27 PM

There's a plausible argument that the poison pill is an unconstitutional condition on the exercise of First Amendment rights to petition the government. I suspect this question will be litigated right away if the measure passes. If the unconstitutional condition argument succeeds, next question will be whether the poison pill can be severed from the rest of the legislation, or whether the entire ordinance should be enjoined. I suspect most courts would sever the poison pill.

The unconstitutional condition argument probably isn't open and shut, however. The argument would be hard to make in a suit brought by the tenants advocates. (But what exactly what they be challenging?) It would be easier to make in a suit brought by a TIC owner who is clearly disadvantaged by the new law, and who wants to convert to condos.

Posted by: observant neighbor at June 7, 2013 4:33 PM

I don't think a lawsuit would be brought directly by SFTU, but what about a tenant in a TIC? They could have legal representation provided by SFTU.

IANAL, so maybe there's no real claim there, but even without SFTU bringing suit, I would expect a lawsuit to come up.

Even a lawsuit questioning the constitutionality would probably take years to finish, halting conversions for the entire time.

Posted by: lyqwyd at June 7, 2013 5:22 PM

You mean that questioning the legality poison pill would cause the poison pill to be triggered? That's twisted.

Posted by: lol at June 7, 2013 6:03 PM

The more twisted it looks, the more likely a court is to deem it an unconstitutional condition.

I'm no expert on legal procedure, but I'd imagine a court that thinks the poison pill is probably unconstitutional could issue a preliminary injunction and allow the lottery to continue while the constitutionality of the poison pill is adjudicated.

I sure hope that the suit can be brought under Section 1983 or some other federal statute with a fee-shifting provision, and that the city has to pay a ton of money in attorneys fees to the lawyers who put the poison pill to death. Alas, the city's taxpayers would not be able to seek indemnification from their representatives . . .

Posted by: observant neighbor at June 7, 2013 6:17 PM

Posted by: SocketSite at June 12, 2013 8:01 AM

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