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 â€“
itâ€™s one of the worst pieces of legislation weâ€™ve had the misfortune to
have affect our clients and our industry. Hereâ€™s a short summary of what
has happened and what some potential issues are:
â€¢ 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.
â€¢ Upon resumption of the lottery 5 and 6 unit buildings formed as TICs will no longer be eligible to convert.
â€¢ 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.
â€¢ 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
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, itâ€™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 â€œpoison pillâ€
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 â€“ 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 canâ€™t imagine there arenâ€™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