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

REGULATIONS GOVERNING CONDO CONVERSION

WHITE TIGER teams with leading legal experts experienced in the condo conversion process to guide you through the tangle of laws and regulations. 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 have undergone significant revisions, introducing greater complexity and a phased implementation process over several years. Eligibility now depends on various factors, including building size and type, occupancy status (owner- or tenant-occupied), and eviction history.

Previously, residential property owners had to enter an annual city-run lottery to convert their units, with only 200 units permitted per year. This restriction led to lengthy wait times, and some applicants are still waiting their turn. The lottery was suspended in 2013, with its return anticipated at an undetermined future date. When it does, it will apply to 2–4 unit buildings in which all but one unit has been continuously owner-occupied by the same owner for at least three years. Importantly, the qualifying owner must own their unit at the time of lottery entry but may have been a tenant during the three-year occupancy period.

To address the backlog, the city introduced the Expedited Conversion Program (ECP) in 2013. However, the ECP was suspended on January 24, 2020, due to ongoing litigation (Pakdel v. City and County of San Francisco), which prohibited the Bureau of Street Use and Mapping from processing certain condo conversion applications.

In February 2024, the San Francisco Board of Supervisors approved a settlement, and the case was officially dismissed on April 4, 2024—paving the way for updated program implementation.

Temporary Resumption of the Expedited Conversion Program (ECP)

As of April 22, 2024, the Bureau of Street Use and Mapping has resumed accepting and processing applications under the Expedited Conversion Program, in accordance with Article 9 of the Public Works Code and Ordinance No. 117-13.  Key highlights of the resumed ECP:

• Eligible Buildings: Only 2–4 unit residential buildings may qualify

• Owner-Occupancy Requirement: All but one unit must be continuously owner-occupied by the same owner for at least three years

• Eviction History: Even a single “no-fault” eviction will disqualify a building from the lottery for seven years

Two-Unit Buildings (TIC)

Two-unit residential properties remain eligible for condo conversion through the city’s “lottery bypass” process, provided they meet existing criteria. Two-unit mixed-use buildings may also qualify for conversion.

Commercial Conversions

These updated rules do not affect nonresidential commercial buildings, most of which may still convert into commercial condominiums available for individual sale.

CALIFORNIA and NATIONWIDE

Numerous cities across California, including Oakland, San Jose, Sacramento, and beyond, as well as cities across the United States, 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.