Since the mid '80s San Francisco has permitted the annual conversion to condominiums of 200 units (not buildings) in two-six unit buildings. Except for two unit buildings, both of which are owner occupied, this is done by lottery. The conversion provisions are found at Article 9 of Division 1 of the Subdivision Code. Until the units are actually converted, the owners of the apartment building are typically tenants in common [TIC].
The number of tenants evicted from two-six unit buildings has grown over the years. In response, a very aggressive tenant-oriented Board of Supervisors has enacted a series of controversial ordinances, beginning in 1998, limiting the ability of buyers to evict tenants even if they wish to move into their own property. The Owner Move In [OMI] provisions are set forth at Section 37.9(g) of the Rent Control Ordinance. Two of the most severe restrictions are that there can be only ONE owner-move-in eviction per building; and, that no one can evict unless he/she has a 50% interest (some say 25% interest) in the building.
These Draconian measures gave buyers, themselves tenants, an all or nothing choice. Don't even try moving in, or, use the Ellis Act, which is State law, permitting owners to cease being landlords, ie, to take the building out of the rental market. Before the Board of Supervisors began their fierce assault on those tenants who wanted to own a home, I daresay that no one had ever heard of the Ellis Act.
There is a recent article in the Chronicle's Real Estate section by Carol Lloyd, entitled Odds not so hot in S.F. tenants in common lottery. Read the saga of Sabine Kuehner to understand one of the major problems with TICs, selling TIC interests that have appreciated in value. I don't understand how, with a well conceived TIC agreement, she would find herself in her predicament. At any rate, I think this particular problem will eventually be resolved as lenders are stepping up to fill a need, ie, lending solelyon the security of TIC interests.
But I'm getting ahead of myself. The field is so fraught with legal quagmires that I "require" my clients to consult with a legal specialist in the field, such as Messrs Sirkin and Gellman.
Andrew Sirkin and David Gellman
There may be others but I am acquainted with two San Francisco Attorneys who publish extensively in this field, Andrew Sirkin and David Gellman. I recommend visiting both of their sites. With their respective permission I link to several of their online publications.
Mr. Sirkin's site includes the following publications.
Tenancy in Common Q&A, includes these issues: what is tenancy in common; how to structure a TIC; what to include in a TIC agreement; and sale of TIC interests. Two extremely important matters: the drafting of a TIC agreement; and, how to handle the financing on the resale of a TIC interest.
Condo conversion Q&A,
includes these issues: why convert; the lottery system; which buildings may be converted; the conversion process. Take a critical look at the chart showing the odds of EVER winning the lottery!
Owner-Occupancy and Ellis Evictions,includes these issues: effect of rent control law on evictions; requirements for owner-occupancy evictions; one owner-move-in eviction per building; protected tenants; repercussions of Ellis Act evictions; the risk of buying out a tenant.
Andrew Sirkin can be reached at (415) 738-8545. His office is located at 235 Montgomery Street, Suite 1130, San Francisco.
Mr. Gellman's site includes the following publications.
Tenancy in Common in San Francisco FAQ, handles basic TIC issues in an faq format: what is a TIC, how are TIC percentage interest determined, what should be included in a TIC agreement; how are TIC re-sales financed, what are State reuirements for larger TICs, and the like.
Condominium Conversion in San Francisco FAQ, follows up on the TIC issues with a discussion of condominium conversion - which is the base reason why buyers would consider a TIC arrangement. Discussed are the lottery system, the two lottery pools, application for the lottery, required upgrading of the property, required survey, and the like.
David Gellman can be reached at (415) 673-5600. His office is located at 1388 Sutter Street, Suite 1000, San Francisco.
The Lottery Page on the Department of Public Works site includes the Lottery Winner List, the Lottery Standby List, and instructions for participating in this years lottery.
I have done my part by asking Queen Amadala to join the fray. Until she arrives you must each understand the process and its vagaries, and form your own "game plan". Or elect a new slate of Royal Viceroys. Or consider supporting the San Francisco TIC Coalition.
Leo
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