What Are Buyouts?
January 17, 2018
By Tenant Law Group, PC
As individuals continue to flock to the Bay Area, demand for rental housing exceeds supply, driving up rents. Many Bay Area renters live in cities with both rent control and eviction control. Rent control limits how much a landlord can increase rent each year. Eviction control prohibits landlords from evicting tenants except for certain specified reasons. Rent control and eviction control ensures long-term renters have a much more predictable and affordable place to live.
Because landlords can lease a newly available unit at current market rates, they have an incentive to get long-term, rent-controlled tenants to vacate. One legal method for doing so is by way of a buyout.
What is a Buyout?
With sky-high rents throughout the Bay Area, rent-controlled tenancies are valuable and sometimes a tenant may wish to monetize that value. A buyout is a situation where a landlord pays a tenant a lump sum to move out of a unit subject to rent control and waive his or her right to legal remedies against the landlord. A buyout benefits a landlord by permitting him or her to offer the unit at a higher market-value rent with the certainty he or she will not be sued. A buyout benefits a tenant by way of financial compensation. Buyouts are legal so long as landlords follow proper legal procedures. In San Francisco, for example, a landlord must provide tenants with a Pre-Buyout Negotiations Disclosure Form prior to engaging in buyout discussions with a tenant. This form provides the tenant with important information, including (among other things) a statement that the tenant has a right not to enter into a buyout agreement or buyout negotiations; a statement that the tenant may choose to consult with an attorney before entering into a buyout agreement or buyout negotiations; a statement that the tenant may rescind the buyout agreement for up to forty-five days after the buyout agreement is fully executed; and a statement that the tenant may visit the Rent Board for information about other buyout agreements in the tenant’s neighborhood. Failure to follow the procedural requirements can subject a San Francisco landlord to legal liability, including a $500.00 penalty or up to fifty percent of the tenant’s damages. A prevailing tenant in a civil action can also recover reasonable attorneys’ fees.
What Should You Do?
If you are a San Francisco tenant who has recently received a Pre-Buyout Negotiations Disclosure Form, understand that your landlord is simply following the legal requirement to begin this process of discussing a buyout. It does not mean that you are being evicted or that you are otherwise required to engage in buyout discussions with your landlord. That said, service of a Pre-Buyout Negotiations Disclosure Form is a sign that your landlord may wish to recover possession of your rental unit and that an eviction attempt may be forthcoming.
If you are already thinking about moving out of your apartment or are interested in the compensation a buyout may present, a buyout can present an opportunity for you to have a voice in how you end your current tenancy. In some situations, it may make sense for you to approach your landlord about a buyout, but this should be done strategically. (Remember, a buyout is a voluntary agreement between a landlord and a tenant. If a landlord senses you plan on leaving your rental unit anyway, he or she may have little incentive to pay you money to leave.) Due to the complex laws pertaining to Bay Area tenancies, a buyout is not something tenants should ever negotiate on their own. Having an attorney represent you in these negotiations can help you maximize your buyout payment.
If you are not at all interested in moving or even in engaging in buyout negotiations, your landlord must respect your decision. If your landlord is threatening you with eviction, failing to make repairs, and/or otherwise repeatedly harassing you, you may have legal claims against your landlord for money damages.
While we frequently fight to preserve a tenant’s rent-controlled apartment, we recognize that for some tenants the value of a buyout payment exceeds the value of continuing to reside in a rent-controlled apartment. We believe buyouts can benefit some tenants so long as the tenant makes that determination with a full understanding of his or her rights. Landlords frequently take advantage of a tenant’s ignorance of the law and their rights. Our goal is to provide tenants whose landlords have approached them about a buyout with a full understanding of what they are giving up and, should they wish to proceed, to recover as much money as possible. So whether you are interested in engaging with your landlord in buyout negotiations, not interested in a buyout but interested in learning more about your rights, or interested in learning how to stop harassing behavior by your landlord directed towards recovering possession of your rental unit, we are here for you. Contact us to discuss your options and learn more about how we can help you today.