In the April edition of their magazine, the San Francisco Apartment Association discussed a very illustrative case, Geraghty v. Shalizi, that has affirmed the validity of owner buy out agreements, when done properly. To get a quick overview of owner buy outs, consult our article here.
In a nutshell, the owner expressed an interest in moving into an apartment unit that was occupied by a long-standing tenant. The landlord gauged the tenant’s interest in a voluntary buyout agreement, and after some negotiation, the tenant agreed to receive $25,000 and being afforded several months to move. In exchange, the tenant agreed to vacate the apartment and release the owner from any claims relating to the premises, including any claims arising from wrongful eviction or any assertion of the right to reoccupy the premises.
Initially, everything went according to plan. The owner/landlord moved in, but life happened and he lost his job. He found new employment in Cupertino and moved once again to be closer to work. For additional income, the landlord rented out the unit to a new tenant for higher rent than the first occupant. Despite agreeing to relocation, the original, disgruntled tenant brought suit when he learned someone else took his former abode.
The plaintiff contended that the buyout agreement violated the San Francisco’s Rent Ordinance and sought to rescind the agreement he voluntarily entered into. The crux of the former tenant’s argument was that the buyout agreement was in violation of the SF Rent Ordinance which states, “Any waiver by a tenant of rights under this Chapter […] shall be void as contrary to public policy”.
At Bornstein Law, we have always maintained that an owner buyout, when brokered compassionately, tactfully, and in good faith, can result in win-win for both the owner and tenant, and we were encouraged that the Court embraced this logic.
After studying the Rent Ordinance and the city’s legislation regarding landlord-tenant buyout agreements, the Court of Appeals observed that “the conclusion is inescapable that these agreements have been utilized and honored for decades.” It validated the buyout agreement and held that “… the entire premise of the buyout agreement was to dispense with rent ordinance provisions in exchange for a significant amount of money. Otherwise, the deal would have been pointless”.
At Borstein Law, we can impart a couple hard-won observations.
You need to know that buyout agreements are enforceable and can be a powerful tool to alleviate the trouble and costs of potential and future litigation.
Secondly, owner buy out agreements must be done properly, in full compliance with applicable laws and regulations, or you will expose yourself to substantial legal and financial liability. This is not something to trifle with, and is best approached with the real estate attorneys at Bornstein Law.
As the founding attorney of Bornstein Law, Broker of Record for Bay Property Group and expert witness, Daniel Bornstein is a foremost and well-respected expert in landlord-tenant disputes and other property management issues with over 23 years of experience in handling real estate and civil litigation related disputes.
CONTACT BORNSTEIN LAW
415 409 7611
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