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Keep in mind that in the above example, it is first-time homebuyers looking to purchase and live in their San Francisco home. These types of evictions are relatively easy, so long as there is no prior acrimony between the new owners and the tenant, and the owner intends on staying put for 36 continuous months, among other caveats. In fact, there are other scenarios where blameless tenants can be transitioned out of the unit through no fault of their own. We are hard-pressed to go over them all in-depth, but in bulleted fashion:
- Owner or Relative Move-In (OMI): The landlord, or a close family member, intends to move into the unit, usually within 90 days, and live there for a continuous, prescrimed amount of time.
- The Ellis Act: Landlords can withdraw all units in a building from the rental market, essentially going out of the rental business.
- Substantial Rehabilitation/Renovation: Major repairs requiring a building permit that cannot be completed while the unit is occupied.
- Demolition: Removing the unit from the housing stock.
- Code Compliance: Government-ordered vacates due to health and safety violations.
Relocation ordinances are highly nuanced, varying wildly by city and specific circumstances.
We'll get to what state law says about relocation payments, but suffice it to say that local laws in rent-controlled cities invariably override the state minimum payouts. In addition to larger checks, these local rules require specialized payouts for certain disabled or vulnerable tenants and specific timelines for temporary versus permanent displacement, among other nuances.
Questions best journeyed with a landlord attorney:
Payment structure
Are payments per-tenant, or per unit? This will determine the dollar amount that landlords will have to fork over; it's not a flat rate. The math quickly changes when we factor this in.
Let's put an asterisk on Oakland, where relocation payments vary based on unit size, tenant longevity, household vulnerability, and the type of no-fault eviction. Whereas San Francisco tells landlords the price, Oakland tells them, "It depends." And in this business, "it depends" is usually where the risk lives. Depending on the unit size, tenant profile, and annual inflation adjustments, relocation payments can creep considerably higher. Oakland may look like a discount, but that can be deceiving when we look deeper into who lives in the rental.
Berkeley’s system of relocation payments is the closest to a “pure flat” system. With a flat payment per unit, the city has high baseline. There is less math and fewer variables for Berkeley landlords. Berkeley’s rules on relocation are politically “maximalist” but simpler.
Ownership structure
An owner must own a certain percentage of the property to perform an OMI/RMI. The level of equity necessary varies by locale. Keep in mind that if ownership of the property is in an LLC, we can transfer the requisite ownership stake over to an individual, for the time being, to satisfy these requirements.
In San Francisco, for example, we can deed at least a minimum 25% ownership stake in the property to a natural person. Oakland landlords must possess a minimum 33% ownership stake in the property to initiate an OMI/RMI. In Berkeley, that's not enough skin in the game; owners of rental properties in Berkeley must have no less than 50% recorded interest in the property to effectuate an OMI/RMI.
Relocation payment timing
Whenever there is a discussion about relocation payments, most landlords focus on how much… and get burned on when. We need to understand that relocation payments are not just about how much is paid out, but also very much about when they are paid.
Timing errors can lead to delays and/or wrongful eviction claims, the likes of which are proliferating throughout the Bay Area. A late payment can cost more than the payment itself, with some unsuspecting clients scratching their heads, asking us, “I paid the tenant– so why am I still getting sued?” It’s then that we have to inform them that they paid at the wrong time. Most landlords look at relocation payments through the lens of which city is the most expensive, but that is the wrong question. The real question is which system is the hardest to control?
With that in mind, here’s a practical breakdown of relocation payment timing in a few select cities.
→ San Francisco is a “split payment” system (most predictable)
The standard rule is that 50% is due upon service of the notice, with the balance of 50% due upon the tenant's vacating. If housing providers don’t pay the first half correctly, their eviction may be invalid before it even starts.
- Qualifying relatives in a Relative Move In (RMI). Some cities have a broader definition of qualifying relatives (grandparents, siblings, etc.) compared to neighboring cities.
- Ownership threshold: An owner must own a certain percentage of the property to perform an OMI/RMI. The level of equity necessary varies by locale. Keep in mind that if ownership of the property is in an LLC, we can transfer the requisite ownership stake over to an individual. In San Francisco, for example, we can deed at least a minimum 25% ownership stake in the property to a natural person. Oakland landords, meanwhile, must possess a minimum 33% ownership stake in the property to initiate an OMI/RMI. In Berekely, that's not enough skin in the game; owners of rental properties in Berkeley must have no less than 50% recorded interest in the property to effectuate an OMI/RMI.
- In San Francisco, a landlord must hold a minimum 25% ownership stake in the property to perform an Owner Move-In (OMI) or Relative Move-In (RMI) eviction. If the ownership interest was recorded on or before February 21, 1991, a 10% minimum interest is required. The owner must be a natural person and intend to occupy the unit as their primary residence for at least 36 continuous months.
- School Year Protections: A growing number of cities have prohibited families with minor school children or school employees in the household from being evicted during the school year through no fault of their own.
- Scope of work/time of displacement:When
- We'll have to ascertain how long the tenant has to be displaced when the unit is unsafe or looks like a construction zone, and how much money they are entitled to for their time and trouble of being uprooted.
- This list is not exhaustive. Most importantly, we want housing providers to become familiar with the local rules of the road.
What does state law say about relocation payments?
Lawmakers got together in 2019 to come up with what we think is a balanced piece of legislation in the form of the Tenant Protection Act of 2019 (AB-1482). On every count, state law is preferable to more onerous local rules. Relocation payment mandates are a case in point.
Under AB-1482, landlords must pay relocation assistance equal to one month's rent for no-fault evictions. Payment must be provided within 15 calendar days of the notice, or alternatively, the landlord may waive the last month's rent in writing. Clearly, this is relatively easy and cheap compared to several tenant-friendly jurisdictions that require much more money and scrutiny.
Now is a good opportunity to impart cautionary remarks, one to housing providers who are in the enviable position of being exempt from both state and local rent control, and the other to owners who are endeavoring to substantially remodel their property.
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