Is your primary reason for wanting to convert your TIC to a condo in order to limit your liability / reduce your risk, or is there a financial incentive? Or something I'm not thinking of.

Yeah, I also wouldn't want my home ownership to be tied to the yoga lady upstairs.

Gene, I think in general it's a combination of both. The market definitely values condominiums higher than TICs, mainly because they are less risky, easier to transfer, and due to the way they are assessed. I seriously suspect the bump in value for converting would less than a 10%, and probably closer to about 5%, depending on the property, of course.

In our specific case, it's more a matter of limiting risk and having flexibility, which are interrelated issues. In a condominium situation, people can buy or sell their units relatively autonomously. In a TIC situation, if someone sells their interest, the entire building has to refinance. This is complicated by the fact that we could not requalify for a mortgage, because Jay is self employed and has been for less than two years.

In addition, everyone has to agree to the sale, and the buyer has to have enough money to pay cash to the seller, if the value of the unit is more than the owner's proportion of the total assessed value of the property. Jay can probably explain this last point better than I can.

I was on the bus last week and some middle school kids were discussing "March Gladness", a city-run three-on-three basketball tournament. One kid was skeptical of the teams' composition (two middle school kids, one SFPD officer, and one city worker), but the other kid insisted the games were good. "Newsom's got a sweet jumper, man."

There was an article in the chronicle today. It's online at
SFgate.com

I also found an article at
KCBS

Channel 7 also ran a story.

If you saw the news show on TV, then you saw shots of Jay talking with our neighbor, and me standing behind Gavin Newsom, looking slightly terrified and about to cry.

Here's some more coverage from KTVU.

http://www.ktvu.com/news/4333083/detail.html

Jay and I are working on capturing the TV segments. We'll try to upload them so you can watch.

The quotes from Ted Gullicksen, of the San Francisco Tenants Union, are great. He overstates his case so much that it's clear he can't be trusted. He says this legislation is rewarding people for evicting people. The statement on their website says supporters of this legislation are trying to create a Bush-inspired ownership society in San Francisco. It's so ridiculous I could die laughing.

One thing I've noticed about the far lefties of San Francisco is that they live in a world of their own making, disregarding facts when facts are inconvenient, and putting forth a vision of the world that is inaccurate, bleak and completely unproductive. Yes, there are problems in the world, but please, stop whining and do something useful to address them.

My values: protect those who can't protect themselves, and reward people who work hard for a better life.

Ted's values: stop the bad people, everyone who disagrees with me is bad, if you disagree with me, you are wrong, because I am always right, I am always right, I'm not listening to you, because I am always right.

I was so fired up that I wrote a letter to the editor. I'm reproducing it here:

Dear Editor,

In your March 30 story about legislation that would allow 100% owner occupied TICs to convert to condominiums, the bulk of the story was based on the comments of the San Francisco Tenants Union's spokesman, Ted Gullicksen. Mr Gullicksen's views are biased, and it was unfortunate that you did not seek to balance the article with views of the many people who support the legislation.

I attended the Land Use Commission hearing and there were dozens of people who spoke in favor of the legislation, more than the people who opposed it. The people who spoke were solid, middle-class citizens who bought TICs because they are the most affordable homeownership options in San Francisco. They want to convert to condominiums to protect their investments. They are not landlords, contrary to they way they were portrayed, and their voices were absent from KTVU's reporting.

I realize that this is a complex issue, but in these cases the news media has a responsibility to appropriately and fairly report on the controversy, and to air both sides of the issue. Please feel free to contact me if you have any questions about TICs and I look forward to a response.

Sincerely,

Cody Sisco

I set my DVR to record all the local news but I only saw Jay briefly on 6:30 Ch. 5 news and wasn't able to record the 7pm news on Ch. 7 because the new South Park and the newest "World Poker Tour" were pre-scheduled. Bummer. I hope you can get the TV segments. The Ch. 5 news' longest interview was with a guy named Noonan who used to live in Noe Valley and had to give up like 8 birds to live in the Tenderloin. The story doesn't really do a good job of explaining how this could possibly lead to more evictions since it notes that the people who own the buildings in common collectively own it. If anything, it seems that the TIC's make it harder to get out. Am I missing something?

I also like that your building is now an SF landmark ;)

Sorry I keep coming back to comment more... you could make these all one posting if you want. I'd also like to point out that the news didn't mention that the measure would only apply to 100% owner-occupied TIC's. Are the renters associations implying that owners will kick out tenants so they can move in long enough to convert to condos?

Kris,

The premise of the Tenants Union's fearmongering is that apartment buildings are being bought up and turned into TICs as a way to evict people. One of the only ways to evict tenants in San Francisco is to move into a unit that you buy. So they say people are buying apartments, turning them into TICs, and moving in to evict the tenants. Then they are converting to condominiums so that they can sell the unit or rent it out at a higher price.

In their minds, restrictions on converting TICs to condominiums makes the above scenario more difficult to perform, so it doesn't happen as much and renters are protected. Therefore, if the restrictions were removed, then there would be more evictions.

BUT, the facts are that TICs are a growing form of homeownership, because it is more affordable and because people want to own their residence and not send a check to their landlord every month. The condo conversion restrictions are hurting people who can't afford to buy condominiums, the middle class of San Francisco. These are people who used to be renters. I have trouble understanding how people can so quickly change from being good to being evil, but the Tenant's Union may have more to say about that.

I'd like to pose a question to all my friends who live in San Francisco:

What has the Tenant's Union done for you lately?

-Cody

I think you've hit the nail on the head. Isn't it interesting the contortions of logic that are necessary to justify their opposition to this legislation. It really was great to go to the hearing today because there were so many people who could stand up and simply say, "I just want to protect myself and my investments in my home. I'm not hurting anyone, I'm not evicting anyone. I live here and I want to stay. Please help me to do that."

Cody,
I'm still confused. You said that the TU says : "One of the only ways to evict tenants in San Francisco is to move into a unit that you buy. So they say people are buying apartments, turning them into TICs, and moving in to evict the tenants." I've read this on their website also. So I'm imagining a building with like 6 units in it, or let's say 3 units. I'm imaginng Joe Building Owner decides to move from wherever he lives, into one of the unit's in his building, thereby evicting the people living in one of the units. How then does he evict the rest of the people living in the rest of the units in the building in order to turn it into a TIC then a set of condos? Can an owner "move into" all of the units in one of his or her buildings? Would he move into one unit evicting the tenants, then move into another unit evicting the tenants, etc? I read all through the TU website and couldn't figure out the logic myself. I was also turned off by the extreme language.

Is part of this "method" to turn a building into condos utilizing "Ellis evictions"? What the heck are those and how do they fit in here?

So ya, I'm all questions.

Gene has a very good point; Joe Building Owner can really only live in one unit at a time and the measure will only allow 100% owner-occupied TIC's to take advantage of the easy conversion. I guess it's possible that all the joint owners could move into the building and push out all the renters at once, but considering how hard it is to get people to do anything collectively, it's very unlikely that 2-6 owners can get their shit together enough to all move in. Moreover, I assume that people who own buildings in SF and don't currently live there are currently living in much nicer places and may not even live in San Francisco. Who's going to move from their big-ass house in Marin to a flat in the Castro just for an at-most 10% property value increase.

I'd also like to point out that while home ownership is cool and all, Aaron once sent me some study that showed it's actually more cost effective, at least in the short-run (meaning not your whole life) to rent in SF than to buy because housing prices are so astronomically hight. Granted, if more TIC's were condo's, there would be more property for sale overall in SF, which may bring prices down some and make it a better idea to buy... but I really doubt it'll bring prices down enough overall to really make it that much more cost effective for average people to buy. I guess my point is that SF is damned expensive and it makes me want to cry.

This proposal certainly won't have a large effect on the market, it's only a couple hundred units that would be affected and it would leave the lottery system in place.

It's generally very difficult to evict someone in San Francisco. We have some of the strongest protections for renters in the country. One of the only ways this can be done besides owner-move in evictions is through an Ellis eviction. Ellis evictions are governed by state law and can only be used when a building is taken off the rental market permanently. That means that units in an "Ellis-acted" building can never be rented out.

However, it's my understanding that an Ellis-acted building can be converted to condominiums directly and there's no need to create a TIC group to own these buildings. I could be wrong about that.

The Ellis Act and other renter protections and how they apply to condominiums are constantly under legal tests, so you would really need a lawyer to sort all this out.

Let's just say I never plan on becoming a landlord because I don't need that kind of stress in my life.

I plan on living in San Francisco forever, if I can make it work, so owning is really the only stable option. I'm hoping I get that chance.

Gene, our upstairs neighbors moved in after an Ellis eviction in the panhandle, when their old building was sold to facilitate conversion to condominiums. One of them is a law student, so he could answer any questions you might have. The Ellis act deals with removing a property from the rental market completely, and includes ceilings on rent and obligations toward re-renting to old tenants, should the property go back on the market. There are provisions designed to prevent the eviction of tenants just to dodge rent control rules.

The Ellis Act is a big issue in SF, but like Cody says, it's not really applicable to the TIC lottery. The Joe Building Owner scenario above wouldn't work, since the SF's Rent Control Ordinance only allows one owner move-in per property. Joe can move in, but he can't have any co-owners evict tenants and move into their spaces. He can evict *everyone*, and then do what he wants with the property, as long as he gives notice, pays moving expenses, and doesn't rent the place out again.

I am a home TIC building owner and I would just like to convert my building. It was Ellis'ed before I bought it. We had 3 owners who moved in and are trying to convert it.

Here is how it works for Ellis Acted buildings.
They are not rentable for at least 5 years and then they can go back on the market. The unit has to be offered to the previous tenant first at their same rent unless they decline. If they do, rent control is lifted and the unit can be rented just like it was never Ellis'ed.

As you can see, it is tough to just buy, Ellis, and then flip the property.

As for the Owner move in Evictions. A building can be bought by a TIC but only 1 unit can have an OMI Eviction. IF you have a 3 unit building with 3 owners, only 1 unit can be evicted. Further, that unit is marked as the OMI unit and no other unit can have an OMI eviction in the future except that unit. So TIC is useless unless the building is vacant, which is why people use the Ellis act.

Ellis just means you had better stay for at least 5 years.

For other info, loans are now becoming available for TIC properties where the note is assumeable. This really helps when 1 owner wants to leave by alleviating the need to refinance. It also helps when you need other owners for a TIC since the loan can add and subtract owners very easily. This will not get rid of the shared note but does ease the transfer to new parties - a big step forward.