Tenant Buyouts Making Comeback

Tenants like Ronald Saenz are being offered cash to move out of rent-controlled units. Photo by John C. Osborn

En Español.

The tenants on Folsom Street first got an offer for $10,000. When they refused, the owner upped it to $20,000. For now, however, the brother, sister and her two daughters plan to remain in the six-bedroom house.

A Bernal Heights tenant who is disabled — a protected group — decided that even though she might be able to beat her landlord’s attempts to evict her, she would accept his buyout offer of $10,000. The legal costs down the road if she continued to fight just weren’t worth it.

As the real estate market picks up, buyouts — the practice of owners getting rid of tenants by offering them cash to move voluntarily — are making a comeback.

Buyouts reached a high of 30 to 50 a month in the Mission before the crash in late 2008, a number that suggests as many as three times that citywide, according to the San Francisco Tenants Union.

After the crash, buyouts disappeared. But earlier this year, residents started showing up again at the Tenants Union on Capp Street to report offers. The group is now receiving about 10 reports a month, according to Ted Gullicksen, the executive director.

Buyouts first became popular about 15 years ago as a way around the difficulties involved in evicting a tenant; over time, the offers have fluctuated from $5,000 to $100,000. The Mission has always been a hot spot for such offers. Of the 265 people who reported buyout offers to the Tenant’s Union between 2008 and 2010, 62 — or 23 percent — were from the Mission.

To owners, buyouts offer the possibility of an empty apartment without a protracted and potentially costly legal fight.

“Buyouts are a pretty codified practice. It’s kind of like a mutant practice that stems from dysfunctional housing policies,” said Janan New, executive director of the San Francisco Apartment Association, a nonprofit organization that assists owners of rental units.

For tenants, buyouts can be a mixed bag. The cash can be a lure, and in some instances landlords will give tenants more than the law requires — but the money may not cover the costs of replacing what are often rent-controlled units in San Francisco’s tight rental market, said Gullicksen.

Unless the tenant was planning to leave anyway, a buyout can rarely replace the cost of finding and paying for another apartment, he said.

An analysis of Craigslist postings between February 2009 and July 2011 shows an upward trend in market-rate rentals as supply declines, pushing studio units to about $1,700 a month and units with three or more bedrooms to at least $3,600 a month.

For a tenant with a rent-controlled unit, a move could be financially devastating, even with a buyout.

Gullicksen advises tenants who decide to accept a buyout not to take anything equal to or less than what is required by law.

There are 15 ways an owner can evict a tenant, and for two of them relocation money is a must: cases in which the owner is moving into the unit, and those in which the owner is taking the property off the market for at least five years — a method known as an Ellis Act eviction.

Senior and disabled tenants can’t be evicted if the owner intends a condo conversion. Owner move-in evictions are also prohibited if the tenant is over 60 and has been in the rental for more than 10 years, or if they are “catastrophically ill” and have lived in the unit for five years.

For any tenant, relocation expenses are based on the cost-of-living index. At present, it’s a maximum of $15,000, plus an additional $3,000 for seniors and disabled tenants.

Ronald Saenz and his family, the Folsom Street tenants who were offered $20,000 to move out, are paying $1,000 a month for the six-bedroom apartment he’s lived in since he was born. His grandmother lives in the unit next door.

After the property changed owners recently, the new landlord began offering the cash buyouts, but $20,000 “ain’t shit in this day and age,” Saenz said. “We could have bought this place by now,” he added, referring to how long the family has lived there.

Since the owner made the offer, contractors have occasionally shown up to measure windows and the stairs out front, and Laurel Realty, the agency overseeing the property, will be conducting its fourth inspection within a year.

Saenz said he feels harassed by the moves, but his family has not yet felt threatened by an eviction.

“This is my home,” he said, adding that the family is steadfast in wanting to remain. “One hundred thousand dollars isn’t enough to leave.”

Tim Lee, a hearing officer with the Rent Board, said that tenants are often better off going the buyout route, because relocation money can quickly dwindle when dealing with legal fees associated with the eviction process.

Keyoe Halsey, the Bernal Heights tenant who recently took a buyout on the two-bedroom house she was renting for $1,800 a month, knows this well.

Her landlord based the eviction on the fact that she was keeping a chicken on the property. She believed her disability gave her a fair chance of winning the case, but decided to take the buyout to avoid more legal fees.

Of the $10,000 Halsey received, $1,000 paid her legal fees, and a good chunk of it went to buying a car, something she said she may need now that she is uncertain as to where she will live.

“Sure, we have all these rights, but you have to defend them, and that takes money,” she said.

Halsey is currently couch-surfing while she decides what to do next.

Filed under: Front Page, Housing

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7 Comments

  1. Ray

    My understanding is that an owner move-in eviction of a 60 year or older tenant is legal if the owner is also over 60.

  2. Mark

    I don’t understand the Bernal Heights woman’s story. She’s disabled and she keeps chickens…Yet she makes enough coin to pay $1800 a month for an apartment? But not enough for a car? And now she’s couch-surfing? That just sounds weird.

    • Lisa

      If you pay $1800 a month for a place to live there possibly isn’t enough left over to pay a car payment, insurance, etc. for a car. Yes, no doubt she’s couch-surfing – have you tried apartment hunting in this overpriced city lately?

  3. sfmissionman

    After the property changed owners recently, the new landlord began offering the cash buyouts, but $20,000 “ain’t shit in this day and age,” Saenz said. “We could have bought this place by now,” he added, referring to how long the family has lived there.

    Change “could” to “should.” He should have bought the place, or some other place. Renting the same place for a lifetime makes little sense.

    • Valenchia

      Yeah, it is interesting how rent control changes people’s perception. Saenz obviously feels like he owns the place and that moving would be an injustice. Instead, he should be focus on how lucky he has been to pay way below market rent for a 6 (!) bedroom apartment for the last couple of decades.
      Rent control helps those who have been around for a long time and hurts anyone who is new or needs to move.

  4. As Mr. Osborn points out, buyouts are a mixed bag for tenants. Ted Gullicksen, the Tenants Union office manage, rightly portrays them as “a game of chicken.” In my experience, the more money offered, the less likely the landlord can manufacture a “just cause” to evict. That said, when a landlord wants a tenant to move they’ll go to any length to get the tenant to go and often succeed. I’ve written four blog posts about buyouts that can be found here: http://crowandrose.com/category/tenant-buyouts/

  5. Neighbour

    I wish Ronnie would take the deal. He plays his loud gangster rap out his window all day, resulting in many police visits. Here’s one of them:
    http://blog.sfgate.com/inthemission/2011/08/07/suspect-in-police-siege-had-left-long-before-swat-team-arrived-resident-says/
    He is a bad neighbour.

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