Ideally, attorneys do not get involved in tenant buyout discussions
Although we are not doctors, our office takes the Hippocratic oath of doing no harm.
When Bornstein Law is retained to accomplish the goal of effectuating a vacancy through a Tenant Surrender of Possession of Agreement (known colloquially as a tenant buyout agreement), our strong preference is that we do not start the conversation with the tenant. More ideal is that the owner broaches the subject. Why? Two reasons.
One, when the tenant gets a call from the landlord's attorney, it is intimidating. They will do a Google search on our firm and become even more spooked when they learn that we represent rental property owners. It is likely that they then reach out to an attorney of their own who gets involved and complicates the discussion.
When our firm broaches the topic of a buyout, the tenant or their legal counsel is likely to come back with demands that may be unreasonable. We might get a call from the tenant or their attorney stating that the renter will vacate for $95K and three months rent waiver or some other outrageous request that is a deal-killer.
Whenever possible, Bornstein Law would prefer that the owner have a heart-to-heart conversation with the tenant themselves while we remain on the sidelines and play an advisory/coaching role in the negotiation.
We do understand that some owners can be a bit aggressive and that there is so much acrimony in the rental relationship such that, the landlord and the tenant cannot engage in a pleasant discussion. When the relationship is so toxic that the parties cannot come to the table to have a constructive dialogue, our firm can be injected into the conversation. However, if we are the ones interacting with the tenant in attempting to hammer out a deal, it will come with a greater legal expense and we never want that. We always want to accomplish the goal of our clients as quickly and cost-efficiently as possible, taking into account time, risk, and attorneys’ fees.
What's the average buyout agreement?
It's all across the board.
SocketSite crunched some numbers on legally inked San Francisco buyout agreements here and we can only say, anecdotally, that the buyouts our office has handled have been as low as a rent waiver and north of $200K. It is on a case-by-case basis. Of course, there are many undocumented voluntary move-outs that go unreported. Oftentimes, this comes in the form of "cash for keys," a term dubbed from the foreclosure crisis.
What we need to understand is that in a proper, ethical tenant buyout agreement (with all of the procedural requirements checked) it is not just "cash for keys" - the landlord is not merely paying for removal - the tenant agrees not to sue the landlord for any problems that arise out of the tenancy.
Parting thoughts
Nothing prevents two parties from entering into a private contract, although tenant buyout agreements are regulated in certain jurisdictions. Rent boards want transparency in these discussions and ensure that everything is done above the board.
Tenants must be apprised of their rights and in certain locales like San Francisco, Oakland, and Berkeley, there are nuances in the documentation that must be provided to the tenant. In Oakland, for example, the landlord is required to notify the would-be outgoing tenant what he or she would be entitled to if the owner were to pursue a “no-fault” eviction.
When there are no other convenient or legal means to evict, let’s start a dialogue about how we can transition out a tenant through a buyout agreement. Practicing landlord-tenant law is partly an art, partly knowledge of the law, and partly social engineering, and these are our core competencies.
Peel the onion deeper
WEBINAR: Daniel discusses how we approach tenant buyout agreements →
DOWNLOAD: Get a 360-degree view by reading our guide on tenant buyout agreements →