What do you look for in a home...three bedrooms, two baths, big kitchen, nice outdoor space, lots of light, and parking. Did I forget anything? Oh yes, of course, that the property is VACANT! Assuming you are looking for a home for yourself as opposed to investment property, you most likely want to move in right away. You are probably not looking to get into the landlord business which is what you have to do when purchasing a tenant occupied property. The whole process of transferring tenant occupied property is unpleasant for everyone involved. It is important for all parties to inform themselves of their rights and understand their role in the transaction.
Sellers
Your property is tenant occupied and you have decided to put it on the market. The first thing you must know is that this will affect the purchase price and the length of time on the market. Vacant properties sell quicker for a higher price. Having said that, you cannot evict tenants in order to sell; that is not one of the fourteen just causes for eviction in San Francisco. If you have a friendly relationship with your tenant, have a talk with them before you list your home. They may decide that they don't want to be around while the house is on the market as it is a huge inconvenience for them. They may decide on their own to start looking for a new home immediately. That, of course, would be your best case scenario. Always keep the communication lines open with your tenants; if they do decide to stay, you must let them know in advance of any and all showings. Keep them in the loop of how the sale is going and what the time line looks like. It will be unpleasant for them. Try to understand their situation and be as courteous as possible.
Buyers
Purchasing a home with tenants means you have become a landlord. Any and all leases and security deposits will be handed over to you in the sale. As I mentioned before, you may have gotten a break on the price of the home because it was tenant occupied, but remember that you may need that cash for tenant relocation fees and attorney's fees. Assuming you purchased this property to be your primary residence, you will have to evict the tenants. In this case you would use the Owner Move In (OMI) eviction which is one of the just causes to evict in San Francisco. You must give 60 days notice and pay relocation fees. Click the link to see a full list of restrictions and qualifications. Before you purchase, be sure to look into the tenant situation. Are they cooperative? Are they paying market rent? If so, it will be easier for them to find a replacement property. Lastly, if you do have to evict the tenants, be sure to use a landlord/tenant attorney and follow the procedure exactly.
Tenants
Let me apologize to you if you are a tenant whose building is being sold. This will not be a fun process for you. I met a woman in my open house this past weekend whose building had just been sold. Luckily for her, she was not evicted. The new owner bought the property as an investment, but she said that the year leading up to the sale was a nightmare. There were constant threats of eviction. When the property finally hit the market she had to deal with open houses. Make sure you know your rights. In San Francisco you have many.
The key for all parties involved is communication. It also helps to be sensitive to the other person's situation, on both sides. Renters are being uprooted and most likely will not be able to find a comparable home as the rental market has gone up lately. On the flip side, buyers have scraped and saved to purchase property in this expensive city and just want to live in their new home. This scenario is not ideal for anyone but is a reality for many. Some tenants, like the woman I met this weekend, may be fortunate enough to use this situation as a jump start to buy their own home. It's time to start paying your own mortgage! Give me a call!
Showing posts with label Tenants. Show all posts
Showing posts with label Tenants. Show all posts
Monday, September 17, 2007
Friday, September 7, 2007
Ellis Act
The Ellis Act is a state law passed in 1985 that was intended to allow building owners to retire from the landlord business. It is now most often used as a way to "change the use" of a building. It is a lawful way of evicting all of the tenants, and in most cases here in San Francisco those units are then converted into Tenancy In Commons and sold separately as percentage ownership in the entire building. There are many requirements that must be met such as:
1. All tenants must be evicted; not only those who pay the lowest rent.
2. Tenants will receive relocation fees of $4500 per person at a maximum of $13,500 per unit. Elderly and disabled tenants receive an extra $3000 each.
3. Landlords are to give 120 days notice; one year notice for elderly and disabled.
4. The Ellis Act is recorded onto the deed and stays with the building even when ownership is transferred.
In order to prevent landlords from using the Ellis Act as a tool to get higher rents by evicting tenants with low rents and replacing them with tenants paying higher rents, there are rental restrictions placed on a building that has been Ellis Acted. Those restrictions are:
1. No unit in the building can be rented out for the first two years.
2. For the first five years, any unit that is rented out must be rented at the same rate as when the Ellis Act was put in place plus any allowed increases that would have otherwise been allowed under rent control.
3. For ten years after the Ellis Act, the tenant who was evicted has the first right of return should any of the units go back on the rental market. They will pay the same rent that they paid at the time of eviction, plus any allowable increases, provided they have registered for the unit.
Most of the Ellis Acts in San Francisco are for the sale of a building, either as a whole or as separate units. In the case of a sale, the seller would be affected as it lowers the value of the building; some say up to 20%. The buyer is affected because of the rental restrictions. As I said, the Ellis Act stays with the building and so do the restrictions. Aside from the rental restrictions I have mentioned, there is another big one. If you are purchasing a Tenancy in Common and are hoping to one day convert the unit into a condominium, if there was an elderly or disabled person displaced during the Ellis Act you cannot condo convert if the eviction happened after November 16, 2004. My advice when dealing with an Ellis Act is this: If you are considering Ellis Acting a building, call a landlord/tenant attorney. If you are considering purchasing an Ellis Acted building, think about whether or not you might want to rent that unit out in the next ten years. Also, you can look into the eviction and find out if there were any protected tenants (elderly and disabled) displaced. If not, and you just want to owner occupy the property, proceed and enjoy your new home.
1. All tenants must be evicted; not only those who pay the lowest rent.
2. Tenants will receive relocation fees of $4500 per person at a maximum of $13,500 per unit. Elderly and disabled tenants receive an extra $3000 each.
3. Landlords are to give 120 days notice; one year notice for elderly and disabled.
4. The Ellis Act is recorded onto the deed and stays with the building even when ownership is transferred.
In order to prevent landlords from using the Ellis Act as a tool to get higher rents by evicting tenants with low rents and replacing them with tenants paying higher rents, there are rental restrictions placed on a building that has been Ellis Acted. Those restrictions are:
1. No unit in the building can be rented out for the first two years.
2. For the first five years, any unit that is rented out must be rented at the same rate as when the Ellis Act was put in place plus any allowed increases that would have otherwise been allowed under rent control.
3. For ten years after the Ellis Act, the tenant who was evicted has the first right of return should any of the units go back on the rental market. They will pay the same rent that they paid at the time of eviction, plus any allowable increases, provided they have registered for the unit.
Most of the Ellis Acts in San Francisco are for the sale of a building, either as a whole or as separate units. In the case of a sale, the seller would be affected as it lowers the value of the building; some say up to 20%. The buyer is affected because of the rental restrictions. As I said, the Ellis Act stays with the building and so do the restrictions. Aside from the rental restrictions I have mentioned, there is another big one. If you are purchasing a Tenancy in Common and are hoping to one day convert the unit into a condominium, if there was an elderly or disabled person displaced during the Ellis Act you cannot condo convert if the eviction happened after November 16, 2004. My advice when dealing with an Ellis Act is this: If you are considering Ellis Acting a building, call a landlord/tenant attorney. If you are considering purchasing an Ellis Acted building, think about whether or not you might want to rent that unit out in the next ten years. Also, you can look into the eviction and find out if there were any protected tenants (elderly and disabled) displaced. If not, and you just want to owner occupy the property, proceed and enjoy your new home.
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