(Tenant-Initiated Home Ownership Program for Equity;  Permanent Affordability,  First Time Home Buyer, Senior and Disabled Housing Fund)

AMENDING THE SAN FRANCISCO SUBDIVISION CODE, DIVISION 1, BY ADDING ARTICLE 11, CONSISTING OF SECTIONS 1399.1 THROUGH 1399.15 TO PERMIT THE CONVERSION OF RESIDENTIAL RENTAL PROPERTY TO CONDOMINIUM OR OTHER OWNERSHIP SUBJECT TO CERTAIN REQUIREMENTS, AMENDING THE CHARTER BY ADDING SECTION 16.121 TO CREATE THE PERMANENT AFFORDABILITY,  FIRST TIME HOME BUYER, SENIOR AND DISABLED HOUSING FUND, AND AMENDING THE SAN FRANCISCO BUSINESS AND TAX REGULATION CODE BY ADDING SECTION 1117 TO ALLOCATE DOCUMENTARY TRANSFER TAX PAID ON THE SALE OF CERTAIN CONDOMINIUMS TO THE PERMANENT AFFORDABILITY,  FIRST TIME HOME BUYER, SENIOR AND DISABLED HOUSING FUND.

NOTE: All Sections are new.

Be it ordained by the People of the City and County of San Francisco.

Section 1. The San Francisco Subdivision Code is hereby amended by adding Article 11, consisting of Sections 1399.1 through 1399. 11 to read as follows:

Article 11

TENANT- INITIATED HOME OWNERSHIP PROGRAM FOR EQUITY

Sec. 1399.1.  PURPOSES.  This Article 11 is enacted to establish an alternative method for subdividing parcels containing existing residential units.  The conversions allowable under this Article 11 are intended (i) to promote the expansion of home ownership opportunities for existing tenants by creating opportunities for a substantial number of them to purchase their units, (ii) to promote opportunities for home ownership by low and moderate income persons by assisting such persons with no interest, low interest and deferred interest loans for down payments or secondary financing, in lieu of designating specific units at regulated purchase prices for purchase by low and moderate income persons, and (iii) to protect tenants in place by disqualifying buildings from conversion under this Article if there have been “Owner Move-In” or “Ellis Act” evictions preceding the conversion and by providing lifetime leases to tenants in buildings converted under this Article, thereby permanently protecting these tenants from “Owner Move-In” and “Ellis Act” evictions in the future.

Sec. 1399.2.  MODIFICATIONS TO CODE.  This Article 11 is entirely new.  It modifies the applicable provisions of this Code in the case of conversions that meet the qualifications described in Section 1399.4. The requirements and restrictions of Article 9 of this Code, including but not limited to the annual conversion limitation set forth in Section 1396, do not apply to conversions under this Article.   The provisions of Sections 1332, 1341 and 1385 of this Code do not apply to conversions under this Article.

 Sec. 1399.3.  DEFINITIONS APPLICABLE TO THIS ARTICLE.   As used in this Article 11:

(a)  “Application Packet” means the tentative map and other documents required under this Article to initiate the subdivision into condominiums or other form of  common interest subdivision under this Article.  The “date the Application Packet is submitted” is the date on which an Application Packet in first delivered to the San Francisco Department of Public Works in connection with a subdivision under this Article.

(b)  “Code” means the San Francisco Subdivision Code, Chapter XIII of the San Francisco Municipal Code.

(c)  “Director” means the Director of the Department of Public Works.

(d)  “Eligible purchaser” means a tenant or an owner who has continuously occupied a unit at the property for at least two years prior to the date the Application Packet is submitted and who occupies a unit in the property on the date the Application Packet is submitted.  A person may qualify as an eligible purchaser only one time in a seven year period.  

(e)  “Intent to Purchase” means a form indicating an eligible purchaser’s intent to purchase a unit in the form set forth in Section 1399.6(j).

(f)   “Permitted Eviction” means  an eviction on one of the following grounds:

(1) the tenant has failed to pay the rent to which the landlord is lawfully entitled under the oral or written agreement between the tenant and the landlord or habitually pays the rent late or gives checks which are frequently returned because there are insufficient funds in the checking account [Rent Ordinance, Section 37.9(a)(1)];

(2) the tenant has violated a lawful obligation or covenant of tenancy other than the obligation to surrender possession upon proper notice and failure to cure such violation after having received written notice thereof from the landlord, provided further that notwithstanding any lease provision to the contrary, a landlord shall not endeavor to recover possession of a rental unit as a result of subletting of the rental unit by the tenant if the landlord has unreasonably withheld the right to sublet following a written request by the tenant, so long as the tenant continues to reside in the rental unit and the sublet constitutes a one-for-one replacement of the departing tenant(s). If the landlord fails to respond to the tenant in writing within fourteen (14) days of receipt of the tenant’s written request, the tenant’s request shall be deemed approved by the landlord [Rent Ordinance, Section 37.9(a)(2)]; or

(3) the tenant is committing or permitting to exist a nuisance in, or is causing substantial damage to, the rental unit, or is creating a substantial interference with the comfort, safety or enjoyment of the landlord or other tenants in the building, and the nature of such nuisance, damage or interference is specifically stated by the landlord in the written notice to quit to the tenant [Rent Ordinance, Section 37.9(a)(3)]; or

(4) the tenant is using or permitting a rental unit to be used for any illegal purpose [Rent Ordinance, Section 37.9(a)(4)]; or

(5) the tenant has, after written notice to cease, refused the landlord access to the rental unit as required by state or local law [Rent Ordinance, Section 37.9(a)(6)].

(g)  “Owner” means a person, firm, corporation, limited liability company, partnership or association that owns at least a 10% record title interest in the property for which an Application Packet has been submitted.

(h)   “Rent Board” and “Rent Ordinance” mean, respectively, the San Francisco Residential Rent Stabilization and Arbitration Board and the San Francisco Residential Rent Stabilization and Arbitration Ordinance, San Francisco Municipal Code, Chapter 37.

(i)  “Subdivider” means a person, firm, corporation, limited liability company, partnership or association that proposes to divide, divides or causes to be divided real property for himself or for others, and any successor in interest.   Where a subdivider acts only as an agent for the owner, the term “subdivider” includes the owner where the context requires.

            (j)   “Tenant” means an individual residing in the property on the date the Application Packet is submitted who has an express oral or written agreement directly with the owner.

(k) “Unit” means a legal residential dwelling unit. 

(l)  Other Definitions.  Except as provided above, the definitions and terminology found in Article 2 of this Code apply to this Article 11.

SEC. 1399.4  QUALIFICATION FOR CONVERSION UNDER ARTICLE 11.  A property is eligible for conversion under this Article 11 only if the following qualifications are met as of the date the Application Packet is submitted:

(a)  Eligible purchasers from the total number of units in the property, as provided below, demonstrate their intent to purchase their units by executing an Intent to Purchase in the form set forth in Section 1399.6(j), below, and having their signatures notarized;

Buildings of 2 to 6 units                         eligible purchasers from 40% of units

Buildings of 7 - 12 units                        eligible purchasers from 33% of units

Buildings of 13 or more units                 eligible purchasers from 25% of units 

and,

(b)  A Notice of Right to Lifetime Lease, in the form set forth in Section 1399.5 (i), below, has been served, personally or by certified or registered mail, on each tenant who resides at the property.

SEC. 1399.5  LIFETIME LEASES. 

(a)  A lifetime lease arises as to each tenant on the date that the subdivision map for the property is recorded.   

(b)  The initial rent payable under the lifetime lease shall not exceed the rent charged on the date the Application Packet is submitted, plus any increases permitted under the Rent Ordinance since that date.  The lease shall provide that rent increases shall be subject to the provisions of the Rent Ordinance, including the approval of the Rent Board for any increase requiring such approval, and that any dispute between the landlord and the lifetime lease tenant concerning the rent shall be determined by the Rent Board.  In the event the Rent Ordinance is no longer in effect, then rent may be increased not more than once a year in an amount equal to the percent increase in the U.S. Bureau of Labor Statistics Consumer Price Index-All Urban Consumers-San Francisco-Oakland-San Jose, CA, or any succeeding index, from the date of the last rent increase.  Rent increases under the Section 1954.52(a)(3) of  the Costa-Hawkins Rental Housing Act (concerning rent increases on condominiums and other forms of subdivisions) are superseded by the rent increase provisions of the lifetime lease.

(c)   The lease shall contain a provision allowing the lifetime lease tenant to terminate the lease and vacate the unit on thirty days written notice.

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(d)  The lease shall terminate on the death of the tenant or the date on which the tenant ceases to actually and continuously reside in the unit as his or her principal residence, whichever occurs first. The landlord may terminate the lease during its term only for a Permitted Eviction.

(e)  There shall be no decrease in maintenance of the unit occupied by a tenant under a lifetime lease. 

(f)  If, on the date the Application Packet is submitted, the tenant occupies the unit with a person who is not a tenant but who is a related party, at the request of the tenant the related party shall become a tenant under lifetime lease.   A “related party” is an adult who is a grandparent, grandchild, parent, child, brother, sister, spouse, or domestic partner of the tenant.

(g) A tenant’s rights under a lifetime lease are not transferable, and any attempted transfer shall be of no force or effect. The foregoing does not prevent a tenant with a lifetime lease from allowing other persons to occupy the unit with him or her to the same extent as allowed under the existing agreement between the landlord and the tenant, provided that (i) the lifetime lease tenant continues to actually reside in the unit as his or her principal residence, and (ii) no other person residing in the unit shall have the rights of a lifetime lease tenant on account of any acts of, or oral representations made by the landlord or the lifetime lease tenant to any other person occupying the unit.  A tenant must provide the landlord with the name of each person who occupies the unit with the tenant as well as emergency contact information for that person.  The tenant must also give any other occupant of the unit a notice that the occupant is not a tenant and has no rights under the lifetime lease.

(h)  The owner of a unit subject to a lifetime lease or his or her successor in interest may require a lifetime lease tenant to enter into a written agreement documenting the tenant’s lifetime lease rights.  The lifetime lease shall include the terms set forth in this Section and shall also include the terms of the existing written rental agreement between the landlord and the tenant to the extent those terms to do conflict with this Section.  If there is no existing written rental agreement, the written agreement shall include the usual and customary terms of residential rental agreements in the City that do not conflict with the terms of this Section.  Where the tenant has the right to use certain common areas of the property, as, for example, parking or storage, or the right to have pets, those rights shall be included in the written agreement.  Any controversy between the landlord and the tenant over the terms of the written agreement shall be decided by the Rent Board.  If either a landlord or a tenant refuses to execute a written agreement after a decision by the Rent Board, the decision of the Rent Board shall serve as the agreement.

(i)  A Notice of Right to Lifetime Lease shall be in the following form, printed in 12 point type or larger:

NOTICE OF RIGHT TO LIFETIME LEASE

TO:  (name of tenant)

RE:  (address of unit)

This Notice of Right to Lifetime Lease is given to you as required by Section 1399.5 of the San Francisco Subdivision Code.   If the property in which you live becomes condominiums and you do not purchase your unit, you will have a lifetime lease. 

A.  The lifetime lease will start on the date that the subdivision map for the condominium is recorded with the San Francisco Recorder. 

B.  The following terms will be incorporated into your lifetime lease.

1.  The initial rent payable  under the lifetime lease will not exceed the rent charged on the date the subdivision application is submitted to the City, plus any increases permitted under the Rent Ordinance since that date.  The lease will provide that rent increases are subject to the provisions of the San Francisco Rent Stabilization and Arbitration Ordinance, including the approval of the Rent Board for any increase requiring such approval, and that any dispute between the landlord and the lifetime lease tenant concerning the rent shall be determined by the Rent Board.  In the event the rent ordinance is no longer in effect, then rent may be increased not more than once a year in an amount equal to the percent increase in the U.S. Bureau of Labor Statistics Consumer Price Index-All Urban Consumers-San Francisco-Oakland-San Jose, CA, or any succeeding index, from the date of the last rent increase.  Rent increases under the Section 1954.52(a)(3) of  the Costa-Hawkins Rental Housing Act (concerning rent increases on condominiums and other forms of subdivisions) are superseded by the rent increase provisions of the lifetime lease.

2.  You have a right to terminate your lifetime lease at any time on thirty days prior written notice to your landlord.

3.  The lifetime lease terminates only on the death of the last person named as a tenant in the lease or when you no longer actually and continuously reside in the unit as your principal place of residence.  

4.  Your landlord may terminate the lifetime lease during its term only if:

a.  you fail to pay the rent to which the landlord is lawfully entitled under the oral or written agreement between you and the landlord or you habitually pay the rent late or give checks which are frequently returned because there are insufficient funds in the checking account;

b.  you have violated a lawful obligation or covenant of tenancy other than the obligation to surrender possession upon proper notice and you have failed to cure the violation after having received written notice of it from the landlord; provided that notwithstanding any lease provision to the contrary, your landlord shall not endeavor to recover possession of your unit as a result of your subletting the unit if your landlord has unreasonably withheld the right to sublet following a written request from you, so long as you continue to reside in the rental unit and the sublet constitutes a one-for-one replacement of the departing tenant(s).

c.  you are committing or permitting to exist a nuisance in or are causing substantial damage to the rental unit, or you are creating a substantial interference with the comfort, safety or enjoyment of the landlord or tenants in the building;

d.  you are using or permitting the unit to be used for any illegal purpose;

e.  you have, after written notice to cease, refused the landlord access to the unit as required by state or local law; 

5.  If, on the date the application for condominiums is submitted to the San Francisco Department of Public Works, one of the following persons lives with you at the unit and is an adult, at your request the landlord must name that person as a tenant on the lifetime lease, even if the landlord has not previously accepted that person as a tenant:  your grandparent, grandchild, parent, child, brother, sister, spouse, or domestic partner.

6.  You may not assign or transfer the lifetime lease.  However, you may allow other persons to occupy the unit with you to the same extent as allowed under the existing agreement between you and your landlord so long as you actually and continually reside in the unit as your principal place of residence and you give the landlord the name of each person who resides in the unit with you and emergency contact information for that person. You must give any person who resides in the unit with you notice that he or she is not a tenant and has no rights under the lifetime lease.

C.  At your landlord’s request, you must enter into a written lease with your landlord that includes those terms of your existing rental agreement that do not conflict with your rights under the lifetime lease.  If you do not have a written rental agreement, the written lifetime lease will contain provisions usually and customarily found in a residential rental agreement in San Francisco that do not conflict with your rights under the lifetime lease.  If you and the landlord are unable to agree on the terms of the written agreement, the terms will be decided by the San  Francisco Residential Rent Stabilization and Arbitration Board.  If  either you or the landlord refuse to sign a written agreement on the terms decided by the Rent Board, the decision of the Rent Board will serve as the agreement.

Date:__________________________

_______________________________

Signature of Subdivider

SEC. 1399.6  TENANT PURCHASE RIGHTS.

(a)  Each tenant at the property has the right to purchase the unit he or she occupies provided the tenant continues to reside in the unit up to and including the date of close of escrow on the purchase.

(b)  If one tenant purchases a unit and another tenant who resides in the same unit with the purchasing tenant does not jointly purchase the unit, the purchasing tenant takes the unit subject to the lifetime lease rights of the non-purchasing tenant.

(c)  Within thirty calendar days following the issuance by the California Department of Real Estate of the Final Subdivision Public Report for a property containing five or more units, or the recording of the Parcel Map for a property containing four or fewer units, the subdivider shall notify each tenant in writing of the right to purchase the unit in which that tenant resides.  The written notice shall be served in person or by certified or registered mail, and shall include the price at which the unit may be purchased and the date on which the offering period expires.

(d)  The tenant’s right to purchase expires 180 calendar days following the date the offer to purchase is made to the tenant.  The offering period may be extended by an agreement in writing between the subdivider and the tenant.

(e)  With respect to a tenant who signed an Intent to Purchase, the right to purchase shall be at the price stated in the Intent to Purchase and on the other terms negotiated between the subdivider and the tenant in connection with the purchasing tenant’s Intent to Purchase.  Where more than one tenant executes an Intent to Purchase for a unit, the tenants who executed the Intent to Purchase shall purchase the unit jointly.

(f)  With respect to a tenant who did not sign an Intent to Purchase, the selling price for the unit shall be determined by the subdivider at the time the offer is made to the tenant, which price shall be no greater than the price at which the unit would be offered to the general public. 

(g) A tenant may not assign his or her right to purchase a unit, except as follows:  (i) a tenant may jointly purchase a unit with another person who resides in the unit with that tenant; and (ii) a tenant may add a person to title who is a co-signer on a first or second loan secured by the unit.

(h)  To effectuate a purchase, a tenant must, before the offering period expires, execute a binding, non-contingent purchase and sale agreement that includes all material terms negotiated between the subdivider and the tenant,  such other usual and customary terms found in an agreement for the purchase and sale of residential real property in the City and, where a Final Subdivision Public Report from the California Department of Real Estate is required, all terms required by that agency.  Unless the subdivider and the tenant have agreed otherwise:  (i) close of escrow shall be 60 days from the date the purchase and sale agreement is executed by the tenant; (ii) brokerage, attorney and inspection fees incurred in connection with execution of the purchase and sale agreement and closing escrow shall be paid by the party who incurred the fee; and (iii) documentary transfer tax, title insurance, and escrow fees and costs shall be paid according to custom in the County of San Francisco.

(i)  A signed Intent to Purchase is irrevocable by the signing tenant for purposes of establishing the subdivider’s compliance with the qualifications for conversion under this Article 11  unless the Director finds, after hearing as described in Section 1399.10, that the subdivider obtained the signature by fraud or duress.   

(j)  An Intent to Purchase required for a conversion under this Article shall be in the following form, in 12 point type or larger.

INTENT TO PURCHASE

Definitions:

“Eligible purchaser” means a tenant or an owner who has continuously occupied a unit at the property for at least two years prior to the date the Application Packet is submitted and who occupies a unit at the property on the date the Application Packet is submitted.  A person may qualify as an eligible purchaser only one time in a seven year period.  

“Tenant” means an individual residing in the property on the date the Application Packet is submitted who has an express oral or written agreement directly with the owner.

The undersigned states that:

1.  I   reside at ____________________________________________, Unit ____. By signing below, I indicate my intent to purchase this unit at the price of ________________.

2.  I am an eligible purchaser, as defined above.  I have not executed an Intent to Purchase with respect to any other property within the last seven years.

3.  I have read and understand my right to purchase my unit at the price stated above and on the terms set forth in Section 1399.6 of the San Francisco Subdivision Code.

4.  I have received a Notice of Right to Lifetime Lease and have read and understand my  right to a lifetime lease as stated in that Notice.

5.  I understand that any person who lives in my unit with me, who does not purchase the unit with me and who is a “tenant” of the current owner has a right to remain in the unit under a lifetime lease.  Once I become the owner of the unit, I will become the landlord under the lifetime lease.

6.  I am buying my unit with the intent of residing in it for at least two years.  I understand that if I resell my unit within 12 months after the date that escrow closes on the purchase of  my unit, I will be required to pay 20% of my net profit to a housing fund administered by the Rent Board, and that if I resell my unit between 13 and 24 months after the date that escrow closes on the purchase of my unit, I will required to pay 10% of my net profit to that fund.  This payment is due unless I can demonstrate that I did not know or could not reasonably foresee at the time that escrow closes on my purchase of the unit that I might be required to resell the unit within 24 months of purchase.

7.  I understand that signing this Intent to Purchase does not create a contractual obligation. However, as of this date, it is my intention to purchase my unit at the time that the unit is available and offered for sale.

8.  I understand that this Intent to Purchase will be filed with the City and County of San Francisco in order to establish that the building qualifies for conversion, and that my signed Intent to Purchase is irrevocable for establishing that purpose unless my signature was obtained by fraud or duress.

9.  I have been advised that I have a right to seek legal or other professional assistance in connection with my rights to purchase my unit or to have a lifetime lease, and either have obtained counsel or have waived my right to do so.

I/We declare, under penalty of perjury, that the foregoing statements are true and correct.