Would you sell your property to the City?

Question

City Commissioner Chloe Eudaly plans to unveil her idea requiring that multifamily owners provide the City of Portland 90 days notice before sale. As the Portland Mercury reports, she wants to give renters a 60-day option to purchase, with an additional 30 days to the City of Portland.

Lauren Speidel · Answer

@Kelvin Lee I would recommend reviewing the fine details of this plan with your attorney. Condemnation of a property is when the government exercises their power of eminent domain. There are two ways this can happen. #1 - You are forced to sell and therefore, you must be compensated OR #2 you place your property up for sale because there is an imminent threat of a requisition or condemnation. If this plan fits into one of the situations above, then the governmental agency must justly compensate you for any loss due to selling the property. In this situation you could do a 1033 Exchange. A 1033 is different from a 1031 exchange. A 1031 exchange is specifically for property that is used for rental, investment, or use in a trade or business and also has a number of other requirements. A 1033 not only covers rental/investment property but also primary residences (unlike a 1031). The like-kind requirement for an investment property is pretty similar to a 1031 like-kind requirement but you are not allowed to move from an investment property to a primary/second residence (and vice verse) because it's not considered like-kind. You typically have two - three years to reinvest the funds. It is not an IRS requirement to hire a Qualified Intermediary in a 1033 transaction. The taxpayer is allowed to take receipt of the funds. I'll pm you, in case you would like to discuss further.

Kelvin Lee · Answer

The only answer to your question is they are all clueless of what they are doing. None of them has real estate development background neither do they understand how affordable housing works. Remember they are politicians not problem solvers.

Steve Moody · Answer

I'm having a hard time understanding the end game here. Does she just want to give tenants a 90-day notice? Does she expect a lot of renters to be able to purchase a multi? Does she think the city wants to be in the landlord business? (That last one might work out in our favor a few years down the line when the city needs to liquidate a bunch of property).

Whatever her plans, I really have a hard time finding a way that any of this will benefit renters.

Robert Hudson · Answer

Easy solution: price it for twice what its worth. After 90 days go to market price.

Kelvin Lee · Answer

I am glad you are on board. Please tell the Committees all the stuffs they have done so far are useless but only making more renters suffer.

Nicholas Cook · Answer

@Kelvin Lee; this is likely wishful thinking by the Commissioner. This is a much tougher sell and will have a lot of landlords and Realtor's groups up in arms.

The city of Portland just formed the Renter Owner Services Advisory Committee (ROSAC) which to help guide ideas and provide feedback to the Commissioners. The Mayors office selected me to be one of the committee members so I will have a better idea of what will happen moving forward. I'll keep you posted.

Kelvin Lee · Answer

Agreed. All the things they have done are for their political career and richness but not so much for the low income families.

Jeff Wallenius · Answer

@Kelvin Lee if you have not been in Portland long, here's all you really need to know. Any law or regulation passed by the city council or Portland brass will not have the landlords or sellers best interest in mind.

Dave Foster · Answer

@Kelvin Lee, Condemnations and eminent domain processes are very cumbersome, finite in scope and legally intricate and detailed. This doesn't sound like that. It sounds like at least one council member is hoping to legislate first right of refusal first to renters and secondly to the city. Certainly you'll want to follow it and get specific details but it's highly unlikely that something like this could be legally put into place and stay.

I have worked with a city in the past that was attempting to reclaim acreage all around the town to rezone into commercial or to place into the city recreation site coffers. These were strictly voluntary sales at a mutually agreed upon price. And yes 1031 exchanges were allowed and encouraged for these land owners. It would be the same for you as well.

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Kelvin Lee · Answer

My question is if I can reject the offer from the City? Will there be any consequence to do so? Will the City work with the seller and the QI for 1031 exchange? If not, the seller will eat the captain gain taxes and depreciation recap. What if there is only one tenant in a 10 plex to make an offer and the rest refuse? Will the City force the seller to convert the property to condo to entaintain that particular tenant and the seller to pay for the legal fee of conversion?

Would you sell your property to the City?

Would you sell your property to the City?

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