Tuesday, August 22, 2006

Ellis Act Evictions

Our building went TIC in 2000. The owner took it off the rental market by exercising the Ellis Act, a state law that permits property owners to get out of the landlord business. Because state law trumps local ordinance, property owners in San Francisco can use the Ellis Act to remove tenants and re-sell individual apartments as tenancies-in-common units. Tenancy-in-common is a form of cooperative ownership that gives the owner of each flat a percentage share in the building.

Think about it. If you owned a hundred-year-old six-unit building in San Francisco during a real estate boom, what would you do? You could either retain a roll of under-market rate rents and struggle to keep the place maintained, or you could remove your building from the rental rolls, and sell each unit for a hefty profit. If you opted for the latter, you would walk away with a pile of cash, and could forget about fielding all those complaints about wood rats and leaky pipes.

The only downside would be - you've got to ask some people to find new places to live, and you've got to pay them some compensation for the inconvenience.

I used to live up the street in a sixteen-unit rental building. Like 40% of the renters in San Francisco I dreamed about becoming a homeowner. For two years I canvassed the city trying to find a unit I could afford. I had given up hope until I happened to walk by an open house in my neighborhood where six TIC units were going on the market. No elderly, disabled or ill people had been cast out into the street. The owner of the building simply found it more profitable to sell off the units than to try and remain a landlord in San Francisco. And the members of my group who bought units in the building have all profitted in turn.

Am I OK with the fact that the former owner of my building did an Ellis Act, allowing me to become a home owner in San Francisco? The answer is - yes.

Related links:
SF Rent Board
Owner Occupancy and Ellis Act Evictions
SF Tenants Union


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