Don’t Get a Buyout from Your Landlord: Part 3

In my last two blogs, “Don’t Get a Buyout for Your Landlord: Part 1“ and “Don’t Get a Buyout for Your Landlord: Part 2,” I discussed how landlords favor buyouts. In this blog, I’ll take an even closer look at the amounts paid to tenants to show the pitfall for you as a tenant accepting a buyout.

Landlords offer cash buyouts to tenants in exchange for the tenants vacating rental units. These are generally called buyout agreements.

Section 37.9E of the San Francisco Rent Ordinance, called Tenant Buyout Agreements, is about the procedures landlords need to follow for tenant buyouts.

Despite this, I’ve heard tales of many landlords skirting the ordinance by offering buyouts “under the table.”  I discussed this in “Don’t Get a Buyout from Your Landlord: Part 1“ on why this tactic helps landlords. For obvious reasons, these deals are kept secret.

Knowledge protects your tenant rights

Knowing the amount other tenants receive in buyouts is a powerful tool for you to use in order to understand the deal your landlord is offering.

I wrote in my blog, “The Case of the Tenant Who Changed His Mind” about how one tenant who asked and received $25,000 to move while another tenant in the same building asked and received $5,000. A little research goes a long way to protecting your tenant rights.

Why might you want to take a buyout

Only in certain circumstances should you contemplate a buyout. The most important question to ask yourself is:

Are you moving out of the San Francisco Bay Area for good?

Otherwise, if you stay in the San Francisco Bay Area, you’ll have to re-rent an apartment at market rate. Just how far will your money from the buyout go?

Do some math. Find the difference between what you pay for rent right now in your rent-controlled apartment and what you will have to pay for a market-rate apartment. If you’re offered a buyout amount, divide the buyout amount by the difference.

You’ll find out how many months your buyout money will last. In most cases, not very long.

How much money, really?

Let’s take a look at last year’s buyout amounts paid to tenants.

In 2017, a total of 334 buyouts were completed under Section 37.9E. Seven of those had a reported buyout of zero dollars. I don’t know what’s the story is with these seven deals, but I won’t count them in the statistics.

Of the remaining 327 buyouts, the amounts paid to tenants ranged from a low $475 to a high of $285,000.  If you’re contemplating a buyout, of course you’re hoping to receive cash on the high end.

What are most tenants getting?

The mean, or what is typically called the average, is calculated by adding up all the amounts and dividing by 327 buyouts. The average is only about $42,000.

Other statistic averages might be more helpful.

The median is the midpoint of all the numbers and helps eliminate the extreme numbers in a high or low buyout amount. The midpoint is about $32,000, about $10,000 less than the mean.

Which amount occurs most frequently? This statistic is call the mode. The amount is $20,000, which occurs 15 times.

Part of it is the neighborhood

If you have lived in a rent-controlled apartment for many years, it’s likely your rental rate is well below the market rate. Obviously, the desirability of the neighborhood affects the market rate. As a rule of thumb, a landlord could get more from an apartment in the trendy Mission neighborhood than in the Outer Sunset.

The anticipated increase in the market rate will influence what your landlord will offer you. (Part of what the landlord will offer will also depend on whether he thinks that you are knowledgeable.)

Here’s the range of Buyout Amounts for the neighborhoods that had the most agreements:

• Castro/Upper Market ($2,850 – $106,440)
• Mission ($15,000 – $95,000)
• Excelsior ($6,300 – $90,000)
• Haight-Ashbury ($2,500 – $96,785)
• Hayes Valley ($10,000 – $115,000)
• Inner Richmond ($6,800 – $86,250)

The range even varies considerably within a neighborhood. Part of this may be dependent on location of the property within the neighborhood, the length of time the tenant lived in her rent-controlled apartment, and the bargaining ability of the tenant.

What you should do if you are offered a buyout agreement

Get informed. Go online and research the amounts paid for similar buildings around you. The Rent Board statistics online include the block and street address of buyout agreements, not just for 2017 but for past years as well.

Then do some research regarding current vacant apartments with the same number of bedrooms that you have to get a sense of the market rent that you may have to pay. Calculate the difference in how much you pay now in rent to what you will have to pay at another home at market rent.

You might be surprised to find the buyout amount does not last very long. That’s why, if a landlord is waving money at your face, I suggest you stop and think about your long-term situation.

Have you received an eviction notice and are unsure whether it follows the multiple requirements of the Rent Ordinance for the city where you live? You should consider talking to an experienced tenant attorney who can help you with your issues.

Know your rights. Protect yourself.