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Lance King's Blog

By Lance King-Founder/Broker | Managing Broker in San Francisco, CA

New Condo Lottery Bypass Legislation is Seriously Flawed

So what is the real impact of the new legislation regarding TIC conversion to condos?

There seems to be a lot of confusion about this, and there should be – it’s one of the worst pieces of legislation we’ve had the misfortune to have affect our clients and our industry. Here’s a short summary of what has happened and what some potential issues are:

• The condo lottery as we have known it in San Francisco that has allowed 200 units annually to convert to condominium will be suspended for a minimum of 10 years regardless of any legal challenges to the law.
• Upon resumption of the lottery 5 and 6 unit buildings formed as TICs will no longer be eligible to convert.
• 3 and 4 unit TICs will need to meet increased owner occupancy requirements in order to become eligible for future lotteries, making it harder for these groups to convert.
• The fee set at $20k per unit to convert, reduced by the number of years a building unsuccessfully participated in past lotteries, was effectively increased. The reduction is now based upon the number of years each applying TIC owner has unsuccessfully participated.

Tenant activists said the trade-off for these restrictions was that the thousands of TIC units would be able to bypass the annual condo lottery and convert their units to condos. While it is debatable whether these additional restrictions represent a fair compromise, it’s only a compromise if TIC owners actually get to bypass the lottery. Whether or not that will happen is a huge if, because tenant advocates also put in “poison pill” language in the legislation that will suspend the bypass program and the normal condo lottery if anyone files a lawsuit challenging the legislation, until the lawsuit is resolved. So there is a very real possibility that few, if any TIC units will be able to convert under the bypass program – and that the normal lottery will be disabled for a long time. Brilliant.

I spoke with a real estate attorney today who owns a TIC and is hoping to bypass the lottery, and according to him the planning department doesn't even have the applications yet.

And what happens to the $20K in fees of all those who put down their money to convert and a lawsuit is filed (I can’t imagine there aren’t people lined up to file them)? Nobody knows, but I can see how all those funds might very well sit in limbo while everything gets sorted out, and we all know that lawsuits, especially ones on issues as contentious this, do not get resolved quickly.

This legislation makes no sense. It likely offers nothing to TIC owners and suspends the lottery while doing so. Tell your supervisors to fix this horrible legislation as it does no one any good.

For more information on TICs or other Real Estate matters contact:
Lance R King - Broker/Owner
King Realty Group
50 California Street Suite 1500
San Francisco, CA 94111

415.722.5549 Cell
lance@king-realtygroup.com
www.king-realtygroup.com

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