Four Things Every Tenant Should Know About San Francisco Buyout Agreements

Did you know that there are laws in San Francisco regulating tenant buyout agreements? The San Francisco Rent Board tracks buyouts as a result of a law passed on March 7, 2015.  Effective April 6, 2020, San Francisco has expanded its buyout rules. In this article, we break down the new changes and give you the top four things every tenant should know about the law.

What is a Buyout?

A tenant buyout is when a landlord pays a tenant to move out in exchange for money.  Landlords usually are the ones to propose buyouts. Landlords pursue buyouts with tenants for many reasons. Most commonly, landlords want to buy out a tenant so 1) they can replace them with a tenant who will pay more rent, or 2) in connection with the sale of a property. Click here for more information about buyouts and our services.

What is the New Buyout Law? 

The new tenant buyout law comes with several changes to the initial buyout laws set out in the San Francisco Rent Ordinance. Here are the big ones.

1. Landlords Can't Call Buyouts Evictions Anymore

Previously landlords structured buyout deals to look like evictions. They filed made up eviction lawsuits (where no basis for eviction existed) as part of the terms of a buyout agreement. These lawsuits were then used as a way to enforce buyouts if a tenant failed to move out. This also allowed landlords to avoid classifying a settlement as a buyout, or filing it with the Rent Board.

The city saw this as a loophole that was being exploited. Buyouts were not getting filed with the Rent Board. Data about how much people were getting in buyouts and where was not getting recorded at the Rent Board. The goal of the new law is to get rid of this loophole. As a result Tenants and the city will have more insight on buyouts, including the number of buyouts and amount of money. 

2. Landlords and Tenants Must Wait 30 days Before Finalizing A Buyout Agreement

Under the old law there was no waiting period for entering a buyout. The new law requires the parties to have a cooling off period before entering a deal. The new rule is designed to relieve some of the pressure to enter a deal.

3. Tenants can File a Buyout Agreement with the Rent Board

Under the new law tenants can file a buyout agreement with the Rent Board. Before this was something only landlords could do. This change is intended to ensure that information about buyouts actually gets to the Rent Board. The change allows for a far more accurate representation of buyouts filed in San Francisco so that tenants can make an educated decision on whether or not to move forward with an agreement.

4. Buyout Agreements Have to Include a Disclosure About a Tenant’s Right to Cancel

Under the 2015 law tenants have up to forty-five days to back out of a buyout agreement. The law required that this information was included in any written buyout agreement. The new law further reinforces the rule. Landlords are required to provide the address of the unit and the assessor's parcel number of the building where the unit is located, among other items. Tenants have 45 days after the buyout agreement has been finalized to cancel it if they wish to do so. This allows the tenant more time to assess the agreement and to prevent being forced into bad deals.

We are here to help

Buyouts are tricky, and involve technical knowledge and expertise to do well. If you’ve been offered a buyout from your landlord it’s important that you speak to an attorney to weigh all of your options. Contact us today to set up a free consultation.