On Selling Out: How to Negotiate a Tenant Buyout in San Francisco
A buyout is a type of eviction. You’re losing your home; don’t settle for less than you can afford.
In this essay, I first explain why hiring a startup to negotiate a buyout is a terrible idea. After that, you’ll find a comprehensive guide to everything I’ve learned about buyouts and how they pertain to tenants’ rights in San Francisco.
Newsweek posted an article Friday about a San Francisco startup called Rent Masters, which purports to streamline the process by which landlords can buy tenants out of their leases. I looked at the actual web site today, and it’s worse than I feared: They are not just adding a middle-man step between you and your landlord, or you and your lawyer; they are suggesting that people make offers to their landlords to buy them out of their leases, with no mention on their site of the tenant doing so because of a building sale, the threat of eviction, or imminent financial ruin.
The site’s FAQ reveals the company’s motive: ending rent control through “increased liquidity [taking] pressure out of the system.”
If all eligible Rent Control customers accepted offers, we would expect to see a much closer distribution of rents in the city, with market-rate prices coming down, while average out-of-pocket rent amounts would be higher because more folks would be paying the market-rate. In other words, you might be able to find a decent 1-bedroom again for $2400, but the days of finding a shared room for $1200 will have disappeared.
The idea that the endgame of rent stabilization is $2,400 one-bedroom apartments is beyond my comprehension. For comparison, $2,400 is more than twice the average Social Security check. Two minimum-wage workers could manage a $2,400/mo 1-BR if, out of the pooled $1,050 they had left over after taxes, they didn’t have any student loans.
There seems to be a belief that everyone who’s low income can find subsidized housing or a room in a large apartment. I myself have been without a place to live in San Francisco for quite a while now. As a disabled person living on Social Security, I can’t afford to pay more than $500 for a bedroom in a shared apartment, and those rooms, while not extinct, go fast.
What Rent Masters is proposing: That “Buyouts can and should be a mutual scenario,” according to Brian Bensch, the company’s founder. This utterly contradicts the sentiments of the constant stream of friends and acquaintances I hear about, online and in person, who are utterly devastated by the idea of having to move at a time when the housing market is so treacherous. But then, the web site says, “if your long-term plan is to remain living in SF as a renter for the foreseeable future, then Rent Masters is probably not for you.”
Once more, with feeling: If you re-gentrify your own neighborhood by encouraging your landlord to raise the rent on the apartment you currently live in, so that you can walk away with some cash, you are not helping anyone except yourself and some unseen dude you heard about online who is taking a cut.
Rent Masters’ tiered pricing shows how dangerous and ill-thought-out the entire concept is, even leaving aside the fact that, according to Newsweek, none of their employees are lawyers, including the consultants giving advice over the phone.
Don’t It Yourself for $99
In this scenario, you’re paying a stranger $99 for an unseen contract you might as well download for free from the Internet, and then approaching your landlord and asking him to evict you. This is a stunning plan remniscent of sending your gold in the mail to a stranger in a special envelope and hoping they respond with a check of any size.
Rent Masters gives you a “free consultation” for that $99, after which point they will neither look at the contract nor help you negotiate. The idea, of course, is that you’ll convert that one-time fee into a deposit on one of the premium plans.
Gold and Platinum Self-Immolation
The Standard package still leaves you on your own to approach and negotiate with your landlord, who might tell you to buzz off and remember you as the sucker willing to take a hike.
In the Premium package, someone who is not a lawyer will negotiate on your behalf for the same thing a real lawyer would charge.
“Unlimited access to market comps,” as far as I can tell, means that the company will let you look at the buyout agreements held on file by the Rent Board, which anyone has free access to anyway (with tenant names redacted).
You Can Read This Post for Free But You Should Still Get a Lawyer
I need to affirm up front—in this essay about how important it is to get a laywer before you sign anything—that I Am Not a Lawyer, and this essay is not legal advice. I’m sharing what I’ve learned in my own travels and through helping other tenants navigate these shark-infested waters.
Also, this essay specifically addresses landlord-tenant law in the City and County of San Francisco. The San Francisco Rent Ordinance differs from that in other counties in California and is probably not at all applicable to other U.S. states, but there is some common-sense stuff in here that might transfer.
Also by way of preface: DO NOT respond to me with “not all landlords” or “you’re making landlords sound like bad people” or “this is just an inefficiency in the system working its way out.” Many, many people, when confronted with the prospect of making millions of dollars off of doing nothing more than making a handful of people homeless, will become unscrupulous, heartless bastards, and they can go fuck themselves. You may join them if defending them is the best thing you have to do with your time.
In October 2014, the San Francisco Board of Supervisors passed Item 37.9 E of the San Francisco Rent Ordinance, regarding landlord-tenant buyouts; the law took effect in March 2015. Previously, these agreements were neither regulated nor tracked. Tracking was a major reason for this legislation, as organizations attempting to follow trends and actualities of displacement had no data for how many tenants were leaving their homes due to landlord buyouts. The first tracking report was released in January.
Not everyone agrees that a buyout is a form of eviction, but in my case, it was. My housemates and I endured a two-year fight from when our building went on sale until when we vacated. While one by one, the landlord bought out all the other units in the building, we defeated two illegal eviction attempts a year apart, and after the second, our landlord’s lawyer told our lawyer that the landlord didn’t care how much money he’d lose by evicting us: He would get us out one way or another, so we might as well take his money.
My housemates were tired of fighting, and I couldn’t see my way through. So the buyout, in our case, was certainly an eviction. I didn’t leave voluntarily, although the contract I signed said that I did.
Our apartment now rents for $10,000 a month to an agency that subleases 10 bunkbeds per unit.
And now, some answers to some questions you may have about buyouts.
Why do landlords offer buyouts?
- To speed the eviction process
“No fault” evictions allow 120 days (in case of an Ellis Act eviction) or 60 days (in the case of most owner move-ins) for the tenant to clear out. If a landlord wants a tenant gone sooner, they may offer more money.
Under the 2015 law, tenants can rescind the agreement up to 45 days after signing it, although landlords still can and do offer less time than that to move out in exchange for more money. - To prevent tenants from exercising right to return
All no-fault evictions attach some restrictions on further disposition of the property, many of which adhere even after the landlord sells the building. For example, evicted tenants have right of first refusal to re-rent the units—at or near the rent when the tenant was evicted—under Ellis, owner move-in, and capital improvements evictions. Accepting a buyout waives this right. - To bypass other restrictions on future development
Eviction history of a building may prevent the building from being converted to condominiums. These are separate concerns from the tenancy-in-common law, which was designed to circumvent most of the condo conversion restrictions. - To prevent tenants from suing them
A buyout agreement will almost certainly indemnify the landlord from all other claims related to the tenants’ residency in the property. If a tenant accepts a buyout, they’re relinquishing the ability to sue the landlord for such things as habitability issues and harassment.
This is one huge reason to consult a lawyer before signing these rights away. You may have a case with a low buyout offer and a high probability of winning a lawsuit because the landlord infringed upon your rights.
Do I Have to Take a Buyout?
No!
Does That Mean I Get to Stay in My Apartment Forever?
Well. No. Not necessarily. Sorry.
So Why Shouldn’t I Just Take the Buyout?
Because your landlord might not have the right to evict you, either not now, not ever, or not right away; until you research your rights and their restrictions, you shouldn’t take an offer.
Why Might My Landlord Not Have the Right to Evict Me?
A wide range of circumstances might come into play. Maybe your lease isn’t up yet, which would stave off some evictions. Maybe you have kids in school, or other special rights that would at least delay the date. Your landlord might be claiming he’s going to move into your unit when he just moved into a different unit across town, or maybe your landlord doesn’t even own the building! See the “What Kind of Research Should I Do” section, below, and GET A LAWYER.
Do I Only Have Rights If I Have Rent Control?
No! Tenants in rent-controlled units do have more rights, but no one can just be up and evicted for no reason. The right you explicitly don’t have is the right not to have your rent raised by a ridiculous amount. That means that your landlord, when trying to get you to leave, can up and double the rent, and if you can’t afford to pay it, you’re basically being given notice. (A landlord must give 60 days’ notice for increases over 10 percent, and 30 days for 10 percent or less.)
If I’m on a Month-to-Month Lease, Can’t My Landlord Just Tell Me to Move Out in 30 Days?
Nope. I mean, he can tell you that, and some people believe it, but you don’t have to move out unless he files for eviction, which, again, he can’t do for no reason.
If Someone Buys My Building, Do I Need to Sign a New Lease? Can They Evict Us If We Don’t Sign?
Nope. Your old lease serves as the agreement with your new landlord.
What If I Want to Leave Anway?
Hey, man, do whatever you want, but if you sign a buyout agreement without a lawyer looking at it, you’re leaving money on the table at best and opening yourself up to some weird liabilities at worst. (Just for starters, landlords have been known to submit buyout agreements that indemnify them, but not the tenants, from future lawsuits.)
My Housemates Want to Fight, But I Just Want to Leave. Can the Landlord Buy Me Out Separately?
Nope. I mean, he could, but that would be really foolish, because the remaining housemates could just rent out the room to someone else, and then he would have spent money for nothing. If you move out during a buyout negotiation, you’re taking your name off the contract, basically.
Can You Repeat That, About the One Contract for Everyone in the House?
Sure! Everyone in the unit will be signing the same contract with the landlord. All of you have to agree to sign the same document. If someone doesn’t want to sign, you can’t coerce them. This is another reason to hire a lawyer—besides having your back on actual nefariousness, someone needs to be able to explain which parts of the contract are fair and which parts that sound shady are just legal boilerplate.
What If the Master Tenant Wants to Leave, But We Don’t?
No one can make someone else sign a contract, and the landlord is unlikely to buy out one person (see above). If the master tenant leaves, with no money, in the middle of a buyout negotiation, that complicates things for the rest of the tenants, but doesn’t necessarily mean they have to move out with no money. The landlord would normally get the remaining tenants to sign a new lease, probably at a higher rent, but is he really going to have people sign a new lease when he’s trying to get them to move out? Hard to know! Ask a lawyer!
Can I Tell My Landlord to Stop Pestering Me to Take a Buyout?
You sure can! Under Proposition M, San Francisco’s 2008 Tenant Anti-Harassment statute, you can write to your landlord and request that he not make any further buyout offers. He has to respect that.
Will My Landlord Evict Me If I Refuse a Buyout?
Hard to say. It depends on what he has in mind for the disposition of the building, and he may not tell you what that is. One thing to keep in mind is that if your landlord is claiming he’ll use the Ellis Act to evict you, he will need to evict the entire building, not just your unit, and not rent any units for 5–10 years. If you have reason to believe he’s not going to evict the entire building, calling his bluff might be a safer bet, but it’s still a bet.
Does Stalling Work?
In my experience, stalling not only buys you time but may buy you money as well. If your landlord is buying out the units in your building one by one, the offers for each may go up subsequently and as time passes. If the landlord has external deadlines tied to investors, developers, contractors, and the City, he may be in a hurry. YOU ARE NOT IN THE SAME HURRY AS YOUR LANDLORD.
How Can I Buy Enough Time to Figure Out What’s Best for Me?
Demand communication only through email or post. Do not accept any calls. Do not accept any text messages. Reply to these with a request for written communication so you can accurately relay it to the rest of the household.
Typical landlord response: “Are you cutting off communication with me?”
Your reply: “No, I am requesting communication via email.”
Stall on whether you’re interested in entertaining a buyout offer in the first place. If he hands you a contract, you need time to review the offer with your entire house, and someone is on vacation. You finally had a house meeting, and you all decided you need to consult a lawyer. You’ve been interviewing lawyers and the ones who returned your calls aren’t available until next month. No, look, it says right here on the buyout contract that we shouldn’t sign it unless we get a lawyer to look at it. Stall like a motherfucker. People have varying opinions as to when you should drop the world lawyer, but “we’re thinking about getting a lawyer” is not a phrase a landlord wants to hear unless they’ve gotten a contract into your hands already.
If My Landlord Gives Me an Offer, Should I Reply With a Counter-Offer?
Generally, no, unless you have an exact figure in mind that you’ll take right away. (See “What Factors Should I Keep in Mind,” below.) Because if you say, “Sure, how about $40,000,” and he says, “Okay,” it’s harder to back up and say, “Shit! We should have asked for $100,000!”
Bargaining for a buyout is like any other kind of bargaining: Start high, negotiate down toward what you want. It’s different, however, in that it feels—and can be—more dangerous, because the negotiation always ends in you losing your home. This is yet another reason why having a lawyer helps: Not only will she not be afraid to start with a higher number, your landlord isn’t going to threaten her with retaliation. (Yes, landlords will say all kinds of illegal, harassing things if they think it’ll get you to do what they want. In the absence of documentation, they largely get away with it.)
Is It Illegal for My Landlord to Say “If You Don’t Take My Buyout, I’m Going to Have to Move Forward with This Eviction?”
This is a matter of legal interpretation that I am neither going to confirm or deny. Read Prop M carefully, and forward a copy to your landlord with commentary about what provisions he may have violated.
What Kind of Research Should I Do?
You’ll want to know the answers to the following questions:
- Is my unit rent-controlled?
Generally speaking, if you live in a multi-unit building built before 1979, you have rent control. There are exceptions to this, and there are also single-family homes that do have rent control. - Who owns my building?
Google your landlord! See whether they’ve been in the news for bad behavior, whether they’re a serial evictor, what other properties they own, where they live, and how long they’ve lived there. (Those last three items are particularly important if they’re threatening you with an owner move-in.) - What is current market-rate rent like in my neighborhood?
You may think you know, or you may have been holding your hands over your ears trying not to find out. No judgment. You might be shocked. Check Craigslist, Zillow, and Apartments dot com in a place where you can weep. - What have buyouts been like in my neighborhood?
The SF Rent Board keeps a database of buyouts, accessible in their office. The 2015 law backdated the requirements for buyout agreements to October 2014, but realistically as of this writing there’s only a year’s worth of data. - How “desirable” is my neighborhood?
If you live near a BART station in a neighborhood with a lot of coffee shops; if your house is near a Google Bus stop, a Whole Foods, or a private school; if your block is less hilly, less foggy, and less congested with cars than the city overall: People are going to pay a premium for your building. This may not bode well for your prospects of getting to stay, but it’s favorable as far as the amount you can ask for in a buyout. - What has my landlord said to my neighbors in the building? How have they replied?
If your landlord hasn’t said anything to the rest of your neighbors, they might have picked your unit as the first to cave, after which point they’ll use you as leverage to influence everyone else to take the buyout. Sorry, pal. No offense. If I were you, I’d try to surprise them by asserting the fact that you know your rights. - Should my neighbors and I negotiate as a block?
It’s worth looking into. If you all want to fight to stay, absolutely do this as a group. Have buildingwide house meetings at the very least. Call yourselves a Tenants Union. It’s good for the morale if nothing else. If you want to get buyouts, it might help to work together. - Is anyone in my unit a protected tenant? Is anyone else in the building a protected tenant?
People with disabilities, life-threatening illnesses, and in some circumstances, small children, as well as seniors over 60, have more protections from eviction.
How Much Should We Ask For?
Your basic calculation should include the following:
- Do I want to stay in San Francisco or the Bay Area?
You might be satisfied with less money if you want to move out of the area. What might supplement your rent for a couple years here—after which point you might be scrambling again—could buy you a house in many other parts of the country. - How many people are in my unit? Are we going to try to find a unit of the same size or are we going to split up?
If you live in a place with several roommates who are going their separate ways, you may want to ask for more money, because four separate rents will cost more than a large apartment. See also: - What is rent like on a comparable unit, and/or on enough separate rooms or units to house everyone?
- Remember, capital gains tax will be somewhere between 15–30 percent of your buyout payment, so factor that in to the payment. Yes, this sucks. Yes, this varies based on the amount and type of your other income. No, your buyout lawyer is not a tax lawyer, so factor that in as well.
- Remember, a lawyer who helps you negotiate will take 15–30 percent of your buyout payment, but only over and above what you negotiated for yourself. In other words, if your landlord has offered you $40,000, your lawyer will take her cut out of the portion over $40,000.
What Do I Look for in a Tenant Lawyer?
- ONLY work with lawyers who ONLY work for tenants. Real estate attorneys who also do work with landlords are not really on your side. A list of tenant lawyers and legal service agencies is available in person from the SF Tenants Union and from the SF Rent Board.
- Some tenant lawyers only negotiate buyouts. These work for a percentage of the buyout, as described above, wherein they take a cut over and above the last offer you received. These folks will help you get the best deal you can, and they know your rights as a tenant, but they might not be your best choice if you’re thinking about fighting to stay.
- Some lawyers do not negotiate buyouts, instead focusing their practice on either fighting eviction (in which their fee is hourly) or on affirmative defense, a.k.a., suing landlords (in which their fee is contingency-based—they get paid if they win a settlement).
- Some lawyers, especially those early in their careers, have a more wide-ranging, hybrid practice and are willing to take on any tenant case.
- My personal suggestion would be to interview several lawyers. Most will give you a consultation over the phone, through which you can find out, at the very least, if they practice the kind of law you need.
- It may be harder than you think to find a lawyer who will examine a buyout contract for a fee. If you have already been offered a large buyout, some lawyers will decide they won’t be able to get much more out of the landlord than that, so they won’t be able to recoup the cost of representing you. Tenant lawyers are often heroes, but few of them are saints.
In Conclusion
Property law is complicated in California, and tenant-landlord law is really complicated in San Francisco. Not everyone has the stamina to fight to try to stay in their apartment. At the very least, though, you don’t want to walk away with less money than you’d get if you got evicted, but people do that in this town all the time. It’s heartbreaking.
Don’t give your money to some startup dude trying to help himself to a fee, who ends up speeding up the process of gentrification by encouraging people to take affordable units—people’s homes—and capitalize on them like stocks and bonds. In the article, Mr. Dude said that he didn’t want to work with longtime tenants who might get screwed by the process. But if he helps people in their buildings? He’s still doing the screwing, just by proxy, and not even taking a cut.
As of this writing, Tarin Towers hasn’t had a place to live in 10 months. She and her lawyer negotiated one of the largest buyouts in San Francisco history, and she is now using her share of it to negotiate old debt while she floats from housesit to housesit.
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