Topic No. 263: Buyout Agreements
[Effective April 6, 2020, the Board of Supervisors amended Rent Ordinance Section 37.9E (the “Amended Buyout Ordinance”) to revise the requirements that landlords must follow when engaging in buyout negotiations with tenants. On October 8, 2020, the San Francisco Superior Court found the Amended Buyout Ordinance invalid and enjoined the City from enforcing the amendments. The prior Buyout Ordinance set forth in Rent Ordinance Section 37.9E and effective March 7, 2015, remains in effect. The City has not yet indicated whether or not it will appeal the Court’s Order.]
Rent Ordinance Section 37.9E, effective March 7, 2015, regulates buyout agreements between landlords and tenants of residential rental units that are subject to the Rent Ordinance. A “buyout agreement” is an agreement wherein a tenant is paid money or given other consideration (for example, a waiver of rent) to vacate a rental unit. However, an agreement to settle a pending unlawful detainer lawsuit does not constitute a "buyout agreement" for purposes of Section 37.9E and is not subject to the same requirements described below.
A landlord is required to comply with the following procedures before engaging in any discussions or bargaining with a tenant concerning the possibility of entering into a buyout agreement (whether the discussion is in writing or verbal):
· Step 1: Pre-Buyout Disclosure to Tenant – Before buyout discussions begin, the landlord must first provide each tenant in the rental unit a completed Pre-Buyout Negotiations Disclosure Form. The landlord must retain a copy of each signed disclosure form for five years, along with a record of the date the landlord provided the disclosure to each tenant.
· Step 2: Pre-Buyout Notice to Rent Board – After serving each tenant with the above Disclosure Form, but before beginning buyout discussions with the tenant, the landlord must file a completed Declaration of Landlord Regarding Service of Pre-Buyout Negotiations Disclosure Form with the Rent Board.
Both of the Pre-Buyout forms are available in the Forms Center on the Rent Board’s website.
To be effective, a buyout agreement must comply with the requirements of Rent Ordinance Section 37.9E(f), which, among other things, requires the agreement to be in writing and to contain a statement that the tenant may cancel the agreement at any time before the 45th day after all parties have signed the agreement. A buyout agreement that fails to satisfy the requirements of Section 37.9E(f) is ineffective and can be rescinded by the tenant at any time.
A tenant can cancel the buyout agreement within 45 days after it was signed by all parties by informing the landlord in writing that the tenant has cancelled the agreement (or words of similar effect). The tenant’s notice of cancelation may be delivered to the landlord by hand-delivery, postal mail, or email.
The landlord must file a copy of the fully signed buyout agreement with the Rent Board within 14 days after the tenant’s deadline to cancel the agreement expires (i.e. since the tenant has 45 days to cancel, the buyout agreement must be filed between 46 and 59 days after the agreement was signed by all parties). The landlord is not required to file a buyout agreement that has been canceled by the tenant.
All buyout agreements filed with the Rent Board are posted in a searchable database that is available to the public at our office. However, all information regarding the identity of the tenants is redacted before being posted to the database.
Section 37.9E specifies various remedies and penalties against a landlord for violation of the above requirements that can be enforced by civil action in state court. In addition, a landlord’s ability to convert a building into condominiums may be affected by a Buyout Agreement pursuant to the Subdivision Code.
You can obtain additional data about buyout agreements filed with the Rent Board, including the amounts and the number of tenants, by visiting the Rent Board’s website.