Landlords Are Trolling For Tenant Buyouts

When we last visited the topic of landlords offering tenants a buyout, we left out a few tips for a future day. That day is here. Pandemic-weary landlords are now anxious to raise rents, or sell their long-term apartment investments to eager corporations amassing huge real estate portfolios. Tenants who survived the initial struggles of the pandemic may now face a boomerang effect.  Landlords may be ready to cash in at your expense.  Be ready to fight for a fair deal.

Your Landlord Is Playing for Big Dollars

There is no law against landlords selling their rental property. Prices of income property are on the rise, as are the maintenance and utility costs associated with owning rental housing.  What happens when your landlord wants you out so they can sell out? You might be offered  a lump sum to break your lease, a couple of months of free rent, money for moving expenses and/or forgiveness of your move-in deposits. In most cases, these offers can be considered “chump change.” You can do better.

Optimize Your  Power as a Tenant

If your landlord is selling your unit, redeveloping it or even combining it with another unit to command higher rent, they are in a position to benefit. For tenants, it means time lost seeking new housing, moving expenses, and possibly increased rent payments and more costly commutes in a new location. You deserve compensation for this disruption.

Landlords are simply answering the call of market demand, and they are attempting to clear their properties of tenants to move forward. Now is your time to negotiate, build your case and get smart fast.

If you are living in a rent-stabilized unit, online calculators can help you determine the true cost of relocating. Use these results to strengthen your buyout offer.  The devil is in the details. For example – a landlord may think the buyout they are offering to you is “tax-free.” It is most likely taxable as a capital gain – check with a tax professional to calculate this aspect of a buyout offer.

Review Your Buyout Options

Believe it or not, you have many options and protections under San Francisco rental law. Before your landlord cashes out at your expense, stop – and move forward on these basic steps.

  • Stay focused on YOUR needs
  • Treat the buyout process as a “commercial transaction.”
  • Optimize your 45-day option to rescind a buyout from your landlord after you’ve signed an agreement (and remember not to sign immediately!)
  • Pursue assistance from a tenant attorney

Examine the Documents You Received from Your Landlord

If you did not receive the required 3-page disclosure form from your landlord, along with a list of tenants’ rights organizations, your landlord is already in violation of the buyout process. Before you sign anything, even if financial compensation is offered, note it is not necessary to respond immediately.

Make a list of reasons leaving your rental will be a burden. Will your daughter’s schooling need to change? Will your commute time double if you can’t afford market rates in the same neighborhood? Will you be forced to move far away from beloved family and friends? How do you feel about moving away from your favorite coffee shop?  List the pros and cons of accepting a buyout offer.

Understanding the Dollars Behind “The Deal”

On January 29, 2021 the San Francisco Residential Rent Stabilization and Arbitration Board published the 6th Annual Rent Board Report on Buyout Agreements. The board reported 615 buyout declarations filed.  Not only are declarations listed by Zip Code (with the Mission District alone reporting 120 of these) – you will also find individual addresses of rental buyouts near you.

Astonishingly, recorded buyout payments to renters by landlords ranged from $1750 to $310,000 in a special needs case. Every buyout is a different situation. Your landlord wants to go high (on their profit margin) and low on their costs to get rid of you. A vacant apartment building will sell for more money, a lot more, than a building filled with long term, low rent tenants.

Calculate the difference between your current monthly rent, and your potential higher market rent at a new place, and multiply the increase  by the number of months you expect to rent in the future. Add this number to your original list of concerns. It is your bargaining chip.

Follow The Money

An average buyout to renters in San Francisco is $36, 688. In a study of 137 agreements negotiated over 8 months in 2015 this happened:

  • Average buyout to renters not represented by a tenant attorney: $26,265
  • Average buyout to renters represented by a tenant attorney: $62, 947

Being represented by a tenant attorney meant that tenants increased their buyouts by more than $35,000.

Win the Buyout Game on Your Terms

Every buyout outcome is different. Without negotiating, you might receive thousands of dollars less than your next door neighbor who fights back. Contact a tenant attorney as soon as possible after receiving a buyout offer.

Know Your Rights. Protect Yourself.

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Mary Catherine Wiederhold

Real Estate Attorney
1458 Sutter Street
San Francisco, CA 94109

Mary Catherine Wiederhold
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