WHITE TIGER CONDO CONVERSION
“Different forms of tenure, going beyond a binary choice between rental and homeownership, can offer more options to city residents struggling to afford a house. They include build-to-rent, shared ownership, and shared equity ownership.”
— WORLD ECONOMIC FORUM
RULES and REGULATIONS GOVERNING CONDO CONVERSION
The rules and regulations governing condo conversions can be intricate and vary widely depending on the city, county, and state in which the property is located. Even different neighborhoods within the same community may have different regulations on conversions, and these rules are subject to change at any time. EVERY property is different and no two projects have the same requirements. Each project must be evaluated individually.
Local regulations may vary in terms of the type of protections offered to tenants, the number of units that can be converted each year, and the approval process itself. There are inspections to contend with, timelines to comply with, and eligibility requirements related to eviction history, tenant rights, and rent control to consider. And, of course, market conditions vary from one city to the next, and even one neighborhood to the next, and are constantly changing. This is particularly true in the wake of the COVID-19 pandemic, which is having a major impact on economic and social activity and has added to the uncertainty in the housing market but new solutions are inevitable.
Even savvy real estate professionals and investors find condo conversion a daunting process, without an expert familiar with the farrago of regulations to guide them.
Below is a brief primer on condo conversion rules in San Francisco and beyond. Other Bay Area cities have less stringent regulations that allow for immediate conversion, regardless of whether the property is owner-occupied or newly purchased.
SAN FRANCISCO
San Francisco's condo conversion laws underwent recent revisions, introducing complexity and a phased implementation over several years. Eligibility for conversion hinges on various factors, such as the building's size and type, occupancy status (owner-occupied or tenant-occupied), and the building's eviction history.
Prior to recent changes, residential property owners seeking conversion had to participate in an annual city-administered lottery, with only 200 units permitted to convert annually. Consequently, some applicants faced prolonged waiting periods before conversion, with some still awaiting their turn.
In 2013, San Francisco suspended the lottery until at least 2025. In its place, the city adopted an “Expedited Conversion Program” (ECP) to help address the backlog of buildings waiting to be converted to condos. The ECP ended on January 24, 2020, due to litigation challenging the Expedited Conversion Program (Pakdel v. City and County of San Francisco et al., Case No.: 3:17-cv-03638 (U.S. District Court, N.D. Cal.)), the City was forced to suspend the operation of the program. While the case was being litigated through various federal courts, the Public Works Bureau of Street-Use and Mapping was prohibited from accepting or approving certain condominium conversion applications due to occupancy by tenants or the passage of application deadlines.
In February 2024, the San Francisco Board of Supervisors approved an ordinance authorizing the City to settle the ongoing litigation, and the City and the plaintiffs agreed to settle the lawsuit. Following the settlement, the lawsuit was dismissed on April 4, 2024.
TEMPORARY RESUMPTION OF SAN FRANCISCO EXPEDITED CONVERSION PROGRAM (ECP)
On April 22, 2024, the Bureau of Street Use and Mapping will resume accepting and processing applications submitted under the Expedited Conversion Program according to Article 9 of the Public Works Code and Ordinance No. 117-13.
The ECP will only allow for 2-4 unit residential buildings and the continuous owner-occupancy requirements for entering the lottery may increase. Under the new rules, all but one of the units must be owner-occupied continuously by the same owner for at least three years, among other requirements. Even one “no-fault” eviction will disqualify a building from entering the lottery for at least seven years.
Two-unit residential buildings remain unchanged and are eligible for conversion under the city's "bypass lottery conversion" process. Additionally, two-unit mixed-use buildings are also eligible for conversion.
* The revised rules do not impact existing nonresidential commercial buildings, the majority of which can still undergo conversion into commercial condos available for individual sale.
CALIFORNIA - UNITED STATES - CANADA
Numerous cities across California, including Oakland, San Jose, Sacramento, and beyond, as well as cities across the United States, Canada, and elsewhere, have regulations governing condo conversions. These regulations are often less stringent than those in San Francisco. Many states and territories have established requirements for condo conversions, and in several cases, the process can be initiated promptly, albeit with some variations depending on the local jurisdiction.
While general principles apply to condo conversions nationwide, specific rules and regulations can vary at the state and local levels. Condo conversion regulations are primarily governed by state laws, local ordinances, and zoning regulations.
Since the onset of the COVID-19 pandemic, numerous states and municipalities have implemented new housing regulations in response to the evolving living conditions
Disclaimer: The rules and regulations governing condo conversions are subject to change at any time at the discretion of city, county, and state officials.
WHITE TIGER teams with leading legal experts experienced in the condo conversion process to guide you through the tangle of laws and regulations.