Buyout Blues 2017

Posted by wasserman

Can a landlord negotiate a buy-out agreement with a tenant at the start of a tenancy?

This author believes that the answer is definitively “no.”  In March of 2015, a “buyout” provision was added to the rent law.  The legislative intent behind this amendment was to provide tenants who were negotiating a buyout agreement the opportunity to seek meaningful help from the Rent Board, an attorney, and/or the various non-profit tenant advocacy groups in town.  Pro-tenant legislatures felt, rightly or wrongly, that many landlords were unfairly pressuring long-term tenants to take money and leave.  Some owners, tenant advocates argued, employed dishonest tactics like eviction threats and outright harassment to strong-arm tenants to accept buyout terms.  The Board of Supervisors also wanted to track buyouts and to compile regular statistics, so the law contains a requirement that buyout agreements shall be filed with the Rent Board and the Rent Board must maintain a public data base which outlines where each buyout occurred as well as what was paid.

The primary component of the buyout law is that tenants be given a series of disclosures about their rights before they bind themselves to a contract to vacate, and there is a mandatory rescission period of 45 days after such an agreement is signed.  The legislative intent behind the 45-day rescission period is to permit tenants the ability to confer with advisors to contemplate the ramifications of leaving for payment.  To this end, before buyout agreements are even initiated, owners must disseminate to their tenants a Rent Board informational form entitled Pre-Buyout Negotiations Disclosure Form Required by Ordinance Section 37.9E.  This form is available on the Rent Board’s website.  In conjunction with delivering the preliminary disclosure to affected tenants, a landlord shall file a declaration with the Rent Board (this document is also available on the Rent Board’s website and is entitled Declaration of Landlord Regarding Service of Pre-Buyout Negotiations Disclosure Form).

Someone who is signing a lease and has yet to move in is not even a “tenant” entitled to Rent Ordinance protections, so owners including buyout Rent Board forms and move-out agreements as part of the leasing package do not yet have persons subject to rent control rights.  And, as stated above, negotiating terms of vacating at or around the time someone moves in thwarts the very purpose of this law:  For better or worse, our legislators created a mechanism whereby existing tenants who during their tenancy were approached by their landlords would be apprised of available resources to help them when deciding to stay or vacate.  To begin the tenancy with a termination mandate thwarts this purpose.

For landlords contemplating a buyout of existing tenancies, note the following.  One, even though the law affords a 45-day rescission period, tenants may always change their minds up until the time that they actually leave.  Indeed, many landlords believe that once the 45-day period expires a superior court judge may order the Sheriff to evict the tenant once the agreed upon date to vacate occurs.  That is not true.  While the tenant will have to return any received payment, enforcement of a buyout agreement is not a “just cause” for eviction.  Two, with regard to evictions, the buyout law states that its provisions do not apply if there is a pending unlawful detainer (eviction) action.  Therefore, if you are otherwise evicting your tenant in court and you reach a settlement that involves a payment to vacate, the buyout rules are inapplicable and, incidentally, if the agreement to leave is crafted properly the court will order the Sheriff to remove your tenant as required by the judicial settlement.  Lastly, the buyout paperwork is quite extensive, so you may want to retain a landlord attorney to assist you with the processes; if you do not complete everything correctly, your departed tenant, the City Attorney, as well as a non-profit agency may take you to court.

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