Buyouts
A buyout is an offer of money in exchange for the tenant vacating the premises. Often landlords offer buyouts when they have no grounds for a legal eviction, or to get around the constraints of the legal eviction process, including potential restrictions on what happens to the unit after the tenants are out.
Buyouts are almost never a good deal for tenants, especially with the cost of living in San Francisco at all-time high. Let’s look at an example to see how quickly buyout money can disappear in today’s housing market:
Carla moved into her 2-bedroom apartment in 2003. Her apartment cost $2,000. With allowable rent increases each year, her rent is now $2,532.07.
Carla’s landlord offers her $10,000 to move out. She negotiates and gets the offer raised to $20,000. She accepts the offer!
Now Carla has to move. She searches and searches her neighborhood, where the average rent is now over $4,500. She decides she can squeeze into a 1-bedroom to make rent more affordable, and finds a place for $3,500.
Before signing the lease, she sits down to do a budget.The new landlord wants first month’s rent, last month’s rent, and a security deposit up front. That’s $10,500.
She decides she’ll pay for the cost of hiring movers with the money she makes from selling off all of the furniture that won’t fit in her new, smaller apartment.
Now Carla has $9,500 left of her buyout agreement. But rent on this new place is an extra $968 month. That means she’ll have spent her entire buyout on that extra rent in less than 10 months.
Carla realizes that $20,000 isn’t a good deal after all. She had 45 days under city law to rescind her buyout agreement, and so she tells her landlord that she has changed her mind, and that she plans to stay in her home.
Many tenants who have taken buyouts would have preferred to stay in their apartments but were pressured through intimidation, harassment, or threat of eviction. Buyouts are now regulated by the City and a tenant has 45 days to change their mind and rescind a buyout agreement. Some things to consider when offered a buyout:
How much is rent on a new lease in your neighborhood?
How much time did you plan to stay in your unit or your neighborhood?
Will you find another place here in SF?
There is a reason your landlord wants you to take a buyout. Is your apartment worth more to you than the money?
Information about the new law regulating buyouts:
A landlord must register a buyout offer with the Rent Board via a “pre-buyout negotiations disclosure form” and also give the tenant a second form that includes a list of tenants’ rights groups, before negotiations can begin.
A tenant does not have to agree to enter into a buyout negotiation, but if they do, they may consult a lawyer and back out of the agreement within 45 days of signing it. The final agreement must be filed with the Rent Board within 46-59 days.
Any violation of this law can be enforced via civil action in state court. A landlord’s ability to condo convert may be effected by buyouts if a senior, disabled or catastrophically ill person is given a buyout, or if two or more tenants got buyouts up to ten years before the condo conversion is approved.