San Francisco Rent Ordinance Section 37.9(e) states:
“It shall be unlawful for a landlord or any other person who willfully assists the landlord to endeavor to recover possession or to evict a tenant except as provided in Section 37.9(a) and (b). Any person endeavoring to recover possession of a rental unit from a tenant or evicting a tenant in a manner not provided for in Section 37.9(a) or (b) without having a substantial basis in fact for the eviction as provided for in Section 37.9(a) shall be guilty of a misdemeanor and shall be subject, upon conviction, to the fines and penalties set forth in Section 37.10A. Any waiver by a tenant of rights under this Chapter shall be void as contrary to public policy.”

Despite the language of the above quoted section, it has become a common practice in the Landlord Tenant community to engage in and consummate the buyout of a Tenants Tenancy. Landlords have substantial monetary upside in successfully buying out a tenant and a tenant in turn reaps a large financial gain as a result. The buyout negotiation process is not however without liability. There are however, certain steps that can be taken in order to negotiate in a manner which helps to insulate against liability. These steps are:

DO NOT THREATEN OR INSUATE THAT YOU WILL EVICT A TENANT IF THEY DO NOT WANT TO TALK ABOUTOR NEGOTIATE A BUY OUT. Threatening evictions is illegal and may create the basis for a wrongful eviction lawsuit against a Landlord. The tenant may also feel harassed by such conduct which could also result in a lawsuit. If the tenant indicates he, she or they are not interested, do not proceed any further.

Avoid any written negotiation. This will help to reduce the possibility of creating a binding agreement where there was no intent to do so. It will also decrease the possibility of the use of any written negotiations being used in any subsequent court proceedings as evidence.

Give the Tenant a very specific time frame in which he, she or they have to respond to any buyout offer. This will ensure that the process proceeds in a timely fashion and prevents delay.

Once an agreement is reached have an attorney with experience in drafting buy out agreements reduce the terms of the buyout to writing which contains, among all the other terms, a full release of liability.

There is no rule or specific computation used to determine what is an appropriate amount for a buyout . I personally have done buyouts for as little as $5000 and as much as $100,000.00. However, with the passage of Proposition H, the minimum starting point for most buyout is approximately $4, 700 per person , which is the amount which a tenant would receive if he, or she were evicted for a no fault eviction (i.e, Owner Move In, Relative Move In). A Landlord should undertake a cost benefit analysis of the particular situation in order to determine what amount is financially feasible and beneficial to pay. As part of this analysis, a Landlord should attempt to determine what type of financial gain he or she will make as a result of a successful buyout, and how long it will take to recoup any money paid for a buyout in the assessment of how much to pay the tenant. This process should be approached as a pure business decision, leaving emotion aside.

While buyouts are, as of this writing, negotiated and consummated on a regular basis with little liability to Landlords, this situation may change come the November 2008 election. Supervisor Daly has put forward legislation which seeks to amend the language of Section 37.2 of the San Francisco Rent Ordinance which if successfully approved by the voters, will effectively put an end, at least temporarily, to buyouts. The legislations seeks among other things to define harassment as “Any act or omission by or on behalf of an owner that causes or is intended to cause any person lawfully entitled to occupancy of a dwelling unit to vacate such dwelling unit or to surrender or waive any rights in relation to such occupancy.” The legislation would further amend the rent ordinance to prohibit a Landlord from “Influence(ing), attempt(ing) to influence a tenant to vacate a rental unit through fraud, intimidation or coercion, including attempts to coerce the tenant o vacate with offer(s) of payments to vacate which are accompanied by threats or intimidation which continue to be offered after the tenant(s) has told the Landlord that such offers of payment are unwelcome.” This proposed legislation contemplates civil and criminal penalties, among other things, for its violation.

While the San Francisco City Attorney has already expressed the opinion that such legislation would not be constitutional, if it passes in November, which all indicators suggest it will, the legislation will put at end to tenant buy outs, at least temporarily. The constitutionality of the legislation will be challenged and it will most likely be held unconstitutional. However, the court process to challenge the constitutionality of the legislation will take many months or even years and unless, during that process, the courts enjoin the legislation, tenant buyouts will be unlawful until the court ultimately determines that the legislation is in fact unconstitutional. Therefore, Landlords who are considering tenant buyouts should initiate the negotiation process sooner rather than later.

Daniel R. Stern, Esq.
Wasserman Stern Law Office

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