Friday, December 19, 2014

2014 Developments in Real Estate in San Francisco

This looks like a perfect moment to look back and observe what's new on our real property scene and what changes were most notable in 2014. I can't climb down your chimney, but please accept as my present to you, this short summary of the most noticeable movements I assembled below:


Short-term vacation rentals legislation.

This development is far from being complete. Several proposed changes are in works, the so-called "trailing legislation," but starting February 1, 2015, at least in some form, and for some time, offering your property for the short-term vacation use is allowed under the new ordinanceapproved in October of 2014. (San Francisco Administrative Code, Sections 41A.4, 41A.5, 41.A6)

Even if you don't have anything to do with short-term vacationing yourself, you are still affected as a property owner, because your tenants may be doing it. What can be done with that? It will first of all depend on your lease agreement. See Rules 6.15A and 6.15B for the various treatment of "no subletting" clause. A thorough review of the particular facts is also in order, was there any evidence of "waiver" of the tenant's conduct, or any implied permission of the later-arriving occupants.

Remember that now the tenant violating the no-subletting provisions has to be given a chance to cure his/her behavior within 30 days, before the eviction may commence. (Amended Admin. Code, Sec 37.9(a)(4))

The tricky part - Rent Ordinance refers itself only to Admin. Code Sec. 41A. (Admin. Code, Sec 37.9(a)(4)). On its face, Section 41A applies only to 4+ units: " the home or residence of four or more households living independently of each other in dwelling units as defined in the San Francisco Housing Code , provided that the residential unit was occupied by a permanent resident on or after February 8, 1981." (Admin. Code, Sec 41A.4(a)).  Planning Code attempts to incorporate this new ordinance without the limit on the households, (Planning Code, Secs. 102.7, 102.13, 790.88890.88), but the definitions are vague and it may be argued that the language doesn't cover it efficiently. Add to it the vagueness of the 41A.4's definition itself, those "four or more households living independently"--are these four separate housing units? Can four roommates live independently? How we will define the "household"? For example, by the IRS guideline, all unrelated roommates are separate households, as they don't file jointly and don't list each other as dependents ...  Planning Code Secs. 102.7, 790.88(a), and 890.88(a) provide a definition of "Dwelling Unit," but this definition does not interact with the limitations of 41A. I smell a loophole!

Tenants' Buyouts.

While all eyes were on the legislation process mentioned above, a no less serious change happened in regulating tenants' buyouts. Meet a new addition to the Rent Ordinance, Section 37.9E. It becomes effective on March 7, 2015. Important to note that although negotiations started before March 7 of next year are not covered by the new requirements for disclosures, all buyouts preceding October 31, 2014, are already required to be registered and will thus become a hurdle on the way to condo-conversion. Under this link is the final version, useful before the clean one will be published online.

Ellis Act Payments Increase.

Another route of payments toward vacating tenants, the payments due under the Ellis Act, had quite a ride this year. First, it was enacted that, starting June 1, 2014, payments will skyrocket under the new way of calculating the dues. Then in October (appears to be a crucial month this year!), that proposition was found unconstitutional by the Federal District Court. While appeal is inevitable, the payments are back to their old limits, the Rent Board took notice and updated its form in November, which now has a footnote explaining the changes.

Legalization of the In-Law Units

Two pieces of legislation were adopted this year, one for the process of legalizing existing "in-law" units, and another for making new additions to the existing properties. A careful review of the situation is required before making a decision of legalizing your unit, because many pros and cons exist on both ends of the equation. For instance, legalizing an in-law unit may cut your otherwise flexible opportunities for construction projects and may also eliminate availability of a rent increase.

Animals on Premises.

A statewide change in allowing animals on premises open for public access is also a notable change for 2014. Premises liability now has a new faucet to be concerned with, don't overlook it!

Rent Board Investigative Hearing on Tenant's Harassment.

Tenants now have yet another way to petition the Rent Board for Wrongful Eviction. Effective February of this year, there is a way to call for an investigative hearing on tenant's harassment as a motive for eviction. It does not change much previously existing procedures, rather adds an area of proof for the parties to argue over the grounds for the alleged eviction.

Zoning Changes For Marijuana Dispensaries

A much discussed increase in areas where marijuana dispensaries may be allowed in San Francisco soon, but not yet. A change proposed by Sup. Avalos has not yet materialized, although researched. If you would like to see how the current situation affects your property, see this map.



Your options and available strategies will depend on your case's particular facts. If you need to learn more about your rights and obligations, make your first step toward taking control over the circumstances, and call my office at (415) 987-7000. I will be glad to assist in guiding you through the jungle. The only thing you can't afford is to stay put and uninformed. My office provides a confidential assessment of your particular scenario, free of charge, and I will share with you the results of the analysis along with my thoughts on available solutions.


______________________
More real property posts

No comments:

Post a Comment