The average reported tenant buyout agreement in San Francisco weighed in at $53,828 in 2022 according to public records. Our takes follow.

Whenever the topic of tenant buyout agreements comes up, inevitably we are asked what the average dollar amount owners have to pay out to effectuate a vacancy, and our answer always is that it is all across the board.

Sometimes, there is no money exchanged at all. With the assistance of our office, clients have secured an agreement with tenants whereby there is a voluntary move-out in exchange for a return of the security deposit, a rent waiver, or forgiveness of COVID-related rent debt and so the financial impact is minimal. In other cases, clients have paid six figures and up to $200K, and so there is a wildly fluctuating range.

Read our earlier article: The art of the tenant buyout deal »

This data is published by the Rent Board and interestingly, no parties like that this information is being disseminated. Although we oftentimes don't see eye to eye with tenants' attorneys, there is some common ground found to disfavor publishing the dollar amounts involved in buyout agreements.

It turns out that the odd bedfellows of both landlord and tenant camps do not like Big Brother prying into their lives and finances.

According to the data reported, two holdout tenants in a six-unit building in Pacific Heights got the most lucrative payday last year with a buyout agreement totaling $460,000. This may seem like a shocking amount at first blush but we have to consider the upside potential of a vacancy and not all that surprising. In New York City, for instance, we've seen buyout agreements north of $1 million dollars.

Back in San Francisco, the most frequently consummated buyout agreements were in the Mission, followed by the Sunset, Ingleside, and Haight-Ashbury. The Inner Richmond, Eureka Valley, and Parkside trailed behind.

Read the stats here →

Are tenant buyouts worth it? 

This depends on the unique circumstances, but a buyout agreement - if the dollar amount is reasonable - may be attractive and less expensive than going down the path of litigation if there is a just cause reason to evict. If no just cause reason can be found, the landlord has few other options to effectuate a vacancy.

The fundamental question: what is reasonable?

When a tenant vacates, the landlord can typically raise the rent to market rate, so this vacancy has tremendous value. As a general rule of thumb, every $1,000 a month in rent that can be obtained for a unit translates to an additional $100K value in the property.

Yet sometimes, the tenant or their attorney approach owners with an outrageous dollar amount that is out of whack with reality. We often like to ask the open-ended question to the tenant, "What would you need to leave?" because this dollar amount may be less than what the owner is willing to pay.

Ideally, leave attorneys out of the discussion. 

Our strong preference is for the owner to have a heart-to-heart discussion with the tenant in a pleasant environment and leave Bornstein Law out of this dialogue because our involvement can spook the would-be outgoing tenant.

Act one: He or she will likely do a Google search on us, become intimidated, and call an attorney of their own.

Act two: We receive a call or email from the tenant's attorney indicating that their client is willing to vacate for a rent waiver and, say, $250K or some other unacceptable amount.

Ideally, then, Bornstein Law would provide a coaching role and stay out of the actual discussions with the tenant. We do recognize, however, that some clients are a bull in a china shop, and/or the rental relationship is so acrimonious that there can be no productive conversation between the two parties. If this is true, Bornstein Law can handle the negotiations, but the legal expenses are ratcheted up.

Not just "cash for keys"

In a properly prepared, ethical, and enforceable tenant surrender of possession agreement, while owners are paying to recover possession of the premises, the tenant is agreeing to release all legal claims that may have arisen during the tenancy, and this would include claims the tenant knows about and those claims that are unknown.

For example, the tenant vacates and six months later, claims that there is a respiratory infection because of mold. Because of the agreement, the tenant is barred from making that kind of claim.

Parting thoughts on tenant buyout amounts

It may be painful for housing providers to part with money by paying a tenant to voluntarily vacate the rental unit, especially when the tenant owes rent or has damaged the property. Yet it may be prudent.

Always above the emotional fray, Bornstein Law is all about landlords thinking smartly and strategically about their real estate investments, taking into account time, risk, and attorneys' fees.