Tenant Buyout Agreements Now Regulated With Protections for Tenants

The San Francisco Rent Ordinance has a new section, added on March 7, 2015. Section 37.9E covers the very common tenant buyout agreement, where landlords offer cash buyouts to tenants in exchange for tenants vacating rental units.

The ordinance specifies that the main purpose of this Section 37.9E is to increase the fairness of buyout negotiations and agreements. It requires landlords to provide tenants with a statement of their rights and allows tenants to rescind a buyout agreement for up to 45 days after signing the agreement. This reduces the likelihood of landlords pressuring tenants into signing buyout agreements without allowing the tenants sufficient time to consult with a tenants’ rights specialist. The ordinance has a secondary goal of helping the City collect data about buyout agreements.

Buyouts are advantageous to landlords because, even if a landlord spends tens of thousands of dollars, the landlord can recoup that cost by retaining ownership and re-renting at market rates or selling the unit. However, the buyout amounts vary wildly and at times are even below minimum relocation benefits, which are required to be paid for all no-fault evictions. As tenant buyouts were unregulated, landlords could use them to circumvent many of the restrictions that apply when a landlord executes a no-fault eviction. In addition, landlords sometimes employ high-pressure tactics and intimidation to induce tenants to sign the agreements. Further, some landlords threaten tenants with eviction if they do not accept the terms of the buyout. Disabled, senior, and catastrophically ill tenants can be particularly vulnerable, and can face greater hurdles in securing new housing.

The new law requires that, prior to commencing any buyout negotiations, the landlord has to provide the tenant a disclosure that states that the tenant has a right not to enter into a Buyout Agreement or Buyout Negotiations; that the tenant may choose to consult with an attorney before entering into an Agreement or Negotiations; that the tenant may rescind the Buyout Agreement for up to 45 days after it is fully executed; and specific information regarding the Rent Board, tenants’ rights organizations, and information regarding legal implications of an Agreement, among other information. If the parties are able to reach an agreement, it must also contain specific information to that effect.

The landlord has to notify the Rent Board prior to commencing negotiations and has to file a copy of any Buyout agreement after execution.

If a landlord does not comply with the provisions of Section 37.9E, a tenant may bring a civil action. If the tenant wins the civil action, the landlord will be liable for the tenant’s damages, penalties, and attorney’s fees.

For more information regarding Section 37.9E Tenant Buyout Agreements, please see the Rent Board site. For any questions, please contact the Hooshmand Law Group at (415)-318-5709.