When Your Landlord Tries to Sell You a Buyout

Maybe you heard a rumor in the stairwell, or perhaps you saw a notice somewhere. Your landlord is selling  your apartment building. Then you get a notice in the mail. It’s true. You’re going to end up on the streets, penniless. You will never be able to find another affordable place to rent in your neighborhood. You will lose all your local friendships and familiar hangouts. It’s a crisis. You barely saw it coming, and now you feel blindsided. What is there to do but fold up your tent? Not so fast.

Stop. A Buyout May Not Be the End of the World

As soon as you calm down, sit down and consider your options. Believe it or not, you have many options and protections under San Francisco rental law. Before your landlord cashes out at your expense, 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?  Write all the pros and cons about accepting a buyout down.

Your Landlord Wants to Play “The Art of the Deal”

There is no law against landlords selling their rental property. It is an investment for them, like stocks and bonds. They may want to retire or cash out. They could even have your best outcome in mind if you have a good relationship. Beware if they invite you to a wine and cheese party to broach the subject (not likely). Also beware if they want to meet with you in your apartment to talk about a buyout. This may simply be “grooming” you for a no-fuss exit.

Rocketing property values, low interest rates for buyers and the landlord’s long wait to hit the jackpot are the main drivers of tenant buyouts.

Although landlord attorneys urge their clients to follow the laws, some landlords are not below attempting under-the-table arrangements with unknowing or vulnerable tenants. For example, an unscrupulous landlord may offer to waive your final two months of  rent, pay your moving costs, and throw in $1,500 for your trouble.

The answer to this offer is, “No deal.” You are now negotiating a commercial transaction, with higher stakes for you than your landlord. Take your time to improve your odds.

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.

Bear in mind, there will be math. Astonishingly, recorded buyout payments to renters by landlords ranged from $1750 to $310,000 in a special needs case. Every buyout is a different animal, with different challenges, history and emotions. Gentrification, housing shortages, condominium conversions and exhaustively complicated downstream legal entanglements are typical elements of buyout situations. Remember – 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.

Your Patience Will Be Rewarded

Optimize every opportunity to respond, not react to the buyout process on your terms. If you sign an agreement unwillingly, or without consulting a tenant attorney, you still have a 45-day right to rescind the agreement and remain in possession. This gives you time to pursue free advice from tenant advocacy groups, or contact an attorney to help you make a more favorable deal. Avoid being tantalized by an enticing-sounding lump sum – your landlord is simply baiting the hook and hoping you’ll bite.

Follow the money. Did you know an average buyout to renters in San Francisco is $36, 688? Did you know 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

There’s a lot more to learn about buyouts beyond this overview. For example, any buyout money  you receive is probably taxable. 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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