Tenant Law Group

Know Your Rights: What Does a Buyout Entail and How Do I Know If It’s Right for Me?

Given the limited stock of available rental units in the Bay Area, it has become more common for tenants in below-market rent-controlled apartments to be approached by their landlord to discuss a buyout. A buyout is a voluntary transaction whereby a tenant agrees to vacate a rent-controlled apartment in exchange for (1) payment and (2) an agreement not to sue the landlord for any claims arising out of the tenancy. While tenant rights organizations such as the San Francisco Tenants Union are opposed to buyouts because they decrease the overall supply of affordable housing, under certain circumstances (e.g., a job or other life circumstance requiring a permanent move out of San Francisco), a buyout may be in a tenant’s interest. In October 2014, the San Francisco Board of Supervisors passed Ord. No. 225-14, which added provisions to the San Francisco Municipal Code to regulate buyouts. This legislation, which went into effect on March 7, 2015,

1. requires landlords to provide tenants with a disclosure of the tenant’s rights before the landlord begins buyout negotiations;

2. requires landlords to file a form with the Rent Board indicating the address of the unit that may become the subject of buyout negotiations;

3. requires all buyout agreements to be in writing and to include certain statements about the tenant’s rights;

4. allows tenants to rescind buyout agreements for up to 45 days after the agreements are fully signed;

5. requires landlords to file a copy of buyout agreements with the Rent Board;

6. requires the Rent Board to create a publicly available, searchable database of buyout agreements;

7. requires the Rent Board to provide an annual report to the Board of Supervisors regarding tenant buyouts;

8. authorizes tenants to bring civil actions for actual damages and civil penalties against landlords who fail to provide the required disclosures about the tenants’ rights; and

9. authorizes certain nonprofits to bring civil actions for a landlord’s failure to file a buyout agreement with the Rent Board.

This Ordinance provides numerous protections for tenants. And there are a few key points every tenant should know. First and foremost, all buyouts are completely voluntary, i.e., tenants have the right not to engage in buyout negotiations if they do not wish to. Second, before even discussing a buyout, the landlord must present the tenant with a Pre-Buyout Negotiations Disclosure Form, which the San Francisco Rent Board has made available for download here. By signing this Form, a tenant is not committing himself or herself to enter a buyout agreement; signing this form simply allows the landlord to begin discussing a buyout with the tenant. Third, tenants can visit the Rent Board prior to entering any agreement to research buyouts in the tenant’s geographical area. Fourth, tenants have up to forty-five days after entering into a buyout agreement to back out of it. And fifth, a tenant can bring a civil action for penalties against the landlord for failing to provide the tenant with the disclosures required by law.

Although San Francisco tenants have the option of negotiating a buyout on their own, tenants should strongly consider retaining legal counsel to negotiate the terms and amount of the buyout and to ensure the buyout agreement is fair to all parties. An experienced tenant attorney can engage a professional property appraiser to help prove the market value of the rental unit, employ a methodology for calculating the buyout to maximize the tenant’s recovery, and help draft a buyout agreement that protects the tenant’s rights.

If you have recently received a Pre-Buyout Negotiations Disclosure Form or are already in the process of negotiating a buyout and would like a second opinion, call Toscano Law Group, PC to schedule a complimentary, no obligation consultation to discuss your rights.