Re: What would you do with a lifetime leased unit?

[Mabel L.]

I need some input for a SF specific situation that no one but those who knows the tenants laws in SF could possibly understand:

I purchased a 1 bdrm TIC to live in, moved back home temporarily (so I thought) when my mother was sick, rented it to someone who knows & maxes tenant's rights laws and was grandfathered in with a lifetime lease when we went through the expanded condo conversion. It's been 8 years, I really do want out of this but not quite sure what is the best financial option. Do I...

Option A: Sell like 50% under-market value with tenant (who will surely let buyers know she is a lifetime tenant).  If I do a buy-out, I am working on an informed assumption based on her past history that she will ask for so much that it's like selling it for 50% under market.

Option B: Sell to tenant like 70% under market value knowing well she will turn around and sell the unit for market value making a better profit than I? (The 70% guess comes from 2 different realtors who thinks she would probably agree to that price point)

Option C: Keep hanging on hoping she will want a bigger place, get married, have kids and move.

Option D: You tell me!

About the tenant:

-Single, early 30's.

-Pays on time, takes care of the place but I have had to relocate her twice and she demanded max payment and faked disability to get more money.

Thank you in advance for anyone willing to chime in!

[Amit M.]

I’m familiar with the expedited condo Pgrm. The “lifetime lease” is iron clad- no evictions allowed. Basically you’re screwed. (Sorry.)  

One thing you don’t tell us is how much under market is her rent now, and how big is the unit?

Based on that, your best 2 choices are:

1- wait her out, pray she moves out eventually 

2- attempt a buy out agreement. May not be worth it, as you need to weigh the rent differential vs buy out payment total (could easily be a 10-20 year payback schedule, which is not worth it IMO.)

At any rate, if you get serious about a potential buy out, definitely get a qualified lawyer before you begin any negotiations with her. Buy outs are now registered in SF, so you need to follow the process. 

Lastly, DO NOT make any cosmetic improvements to her unit! Just do the most minimal maintenance required by law. And don’t be intimidated by her “lawyer friend.” You’d be surprised that only safety, heat, hot water, basic functioning appliances and keeping the place dry are the main things you must upkeep. You have no requirements to paint, recarpet, nicer counters, cabinets, etc!  Don’t make the place any nicer than it need be. And DO NOT allow here to make ANY improvements on her own, like painting, etc.  She will eventually get tired of living in a typical run down RC unit. 

Let us know about the rent she pays and the unit size, bedroom count.