WHITE TIGER CONDO CONVERSION
City governance will require much greater collaboration between all stakeholders, and the forging of new partnerships between city governments, businesses and real-estate owners.
CITY ELIGIBILITY: SAN FRANCISCO - CALIFORNIA - BEYOND
The rules and regulations governing condo conversions are complicated 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.
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 of condo conversion rules in San Francisco. Other Bay Area cities have less stringent regulations that allow for immediate conversion, regardless of whether the property is owner-occupied or newly purchased.
Condo conversion laws in San Francisco are complicated and were recently revised. Some of these changes are being phased in over several years. Which units are eligible to convert depends on several factors, including the size and type of the building, whether the unit is occupied by an owner or a tenant, and the eviction history of the building.
Until recently, residential property owners who wanted to convert had to enter an annual city-run lottery. Only 200 units were allowed to convert each year. As a result, some applicants were forced to wait many years to convert — and some are still waiting.
In 2013, San Francisco suspended the lottery until at least 2024. 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, and no new condo conversion applications mixed-use or otherwise will be accepted, most conversions will now have to wait until the eventual restoration of the lottery in 2024 or later.
When the lottery does return, it will be revised and open to 2-4 unit residential buildings and the continuous owner-occupancy requirements for entering the lottery will 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 are currently the ONLY type of residential buildings eligible for conversion under the city's "bypass lottery conversion." In addition, two-unit mixed-use buildings are eligible for conversion.
** The revised rules do not affect existing nonresidential commercial buildings, most of which can still be converted into commercial condos that can be individually sold.
CALIFORNIA CITIES - NORTH AMERICA - BEYOND
Many cities in California, North America, and beyond have similar rules governing condo conversions and often are less stringent than the rules in San Francisco. Many states or territories have enacted conversion law requirements; in many cases, the conversion process in these cities (local jurisdiction) has some differences and can be started immediately.
It’s important to note that since the outbreak of the COVID-19 pandemic, many states and municipalities have enacted new housing regulations in response to the ongoing epidemic.
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.