New Ordinance Amendment Regulating Buyout Agreements

Rent Ordinance Section 37.9E, effective March 7, 2015, is a new provision that regulates "buyout agreements" between landlords and tenants under which landlords pay tenants money or other consideration to vacate their rent-controlled rental units. An agreement to settle a pending unlawful detainer action does not constitute a "buyout agreement" for purposes of Section 37.9E.

Starting March 7, 2015, Section 37.9E requires landlords to provide tenants with a Rent Board-approved Disclosure Form and to file a Rent Board-approved Notification Form with the Rent Board before beginning buyout negotiations. The Rent Board will make this information publically available (except for information regarding the identity of the tenants). Section 37.9E also requires that all buyout agreements be in writing and contain certain disclosures, including a tenant's right to rescind the agreement within 45 days of execution. For buyout agreements executed on or after March 7, 2015, the new law requires the landlord to file a copy of the buyout agreement with the Rent Board within 46 to 59 days after execution. The Rent Board will post all such buyout agreements in a searchable database that is available to the public at the Rent Board's office. Before posting a copy of a buyout agreement on its database, the Rent Board will redact all information regarding the identity of the tenants.

If a landlord begins buyout negotiations before March 7, 2015, but those negotiations result in a buyout agreement executed after March 7, 2015, the Disclosure and Notification Forms are not required, but the buyout agreement must still be filed with the Rent Board. Any dispute about when buyout negotiations began must be resolved in court and not at the Rent Board.

Section 37.9E also specifies various remedies and penalties against a landlord for violation of the above requirements that can be enforced in a civil action in state court. In addition, Subdivision Code Section 1396(e)(4) was amended to provide that buyout agreements with certain tenants after October 31, 2014 shall be the basis to deny an application for condominium conversion of the building.

A copy of Ordinance No. 225-14 amending Rent Ordinance Section 37.9E and Subdivision Code 1396 is provided here for your convenience.