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San Francisco Apartment Association Challenges New Buyout Negotiation Legislation

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The San Francisco Apartment Association filed a lawsuit last Thursday challenging the City’s new buyout legislation. Among other things, that legislation would impose requirements for landlords to provide disclosures to tenants prior to discussing offers to pay tenants to leave their (rent-controlled) tenancies.

The lawsuit alleges violations of free speech, equal protection and privacy rights. It notes that the regulations treat tenants differently than landlords (e.g., providing rights to rescind executed agreements only to the former and imposing penalties only to the latter), and it urges that the regulations inhibit free speech. The Court of Appeal struck down an earlier amendment to the Rent Ordinance, which prevented landlords from discussing efforts to recover possession of a rental unit from a tenant, unless they had a “good faith” intent to evoke a “just cause” for eviction, in Baba v. Board of Supervisors of CCSF.

The City does have an interest in knowing what’s going on with its rental housing supply. Prior to this legislation, the City has had to obtain most of its data on buyout figures from the San Francisco Tenants Union.

It is unknown at this time whether the lawsuit will be successful in knocking out some, or even all, of the provisions of the new legislation. In the meantime, landlords, make sure you comply with all of the current requirements!

You can read the San Francisco Apartment Association’s media release here.

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San Francisco Buyout Agreement Legislation Now Effective

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San Francisco’s new tenancy buyout legislation became effective today. The Rent Ordinance now requires that landlords provide a disclosure form to tenants prior to opening buyout negotiations with them. (Landlords must retain a copy of the signed disclosure forms for five years.)

Landlords must also file a declaration form with the Rent Board, stating that they’ve provided tenants with the required disclosures prior to commencing buyout negotiations.

“Buyout Negotiations” are broadly defined as “any discussion or bargaining, whether oral or written, between a landlord and tenant regarding the possibility of entering into a Buyout Agreement”, with “Buyout Agreement” defined as “an agreement wherein the landlord pays the tenant money or other consideration to vacate the rental unit”.

Landlords are also required to file the executed Buyout Agreement with the Rent Board, which has begun keeping records of these agreements and will be providing access to a searchable database of buyout values by neighborhood. The Rent Ordinance now provides specific requirements for what must be in a Buyout Agreement and imposes two important deadlines: a tenant may rescind the Buyout Agreement for up to 45 days from execution, and the landlord must file the Buyout Agreement with the Rent Board within two weeks after it becomes binding.

The Rent Ordinance also provides for civil penalties for non-compliance (including for failing to include all required information in the Buyout Agreement). And, the execution of Buyout Agreements will now restrict the ability to convert buildings into condominiums for up to ten years, in a manner similar to the existing restrictions based on a landlord’s use of “non-fault” evictions (i.e., the City won’t sell residential condominium conversion lottery tickets, won’t accept residential condominium conversion subdivision application forms and won’t accept a tentative or final subdivision or parcel map, if the landlord entered either two Buyout Agreements or entered one Buyout Agreement with an elderly, disabled or catastrophically ill tenant in a single building.)

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Sinbad’s Waterfront Restaurant Expected To Close March 21st

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The SF Examiner reports that Sinbad’s restaurant, a decades’ old waterfront icon, may soon serve its last shrimp cocktail. The restaurant’s landlord, the Port of San Francisco, is expecting the restaurant to vacate by March 21, 2015, as the San Francisco Bay Conservation and Development Commission plans to demolish Pier 2 that month, allowing construction to expand the ferry terminal in 2016.

That is, unless the Stinson brothers – the restaurant’s owners – are successful in evoking the “no harm, no foul” doctrine, to continue operating until the City breaks ground on construction.

Charles Stinson was also briefly involved in an attempt to reopen a restaurant in the San Francisco historical landmark, Julius Castle, at the top of Telegraph Hill. That effort resulted in, among other things, the decision Julius Castle Restaurant Inc. v. Payne (2013) 216 Cal.App.4th 1423, where the First District Court of Appeals analyzed fraud in the inducement of commercial lease agreements.

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New Rate for Interest on Security Deposits in San Francisco, Effective March 1, 2015

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Beginning March 1, 2015, the new rate for interest on security deposits is 0.1%, for the period of March 1, 2015 to February 29, 2016.

Security deposit interest must be paid every year on the tenant’s “annual due date”. For tenancies beginning after September 1, 1983, the annual due date is the same day and month the landlord received the deposit from the tenant. If the tenant moved in and paid a deposit before September 1, 1983, interest was due on September 1, 1984 and every September 1st thereafter.

For more information, please visit the Rent Board website.

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