San Francisco Community Opportunity to Purchase Act (COPA)  in a nutshell

If you or a client is looking to buy or sell a multi-unit building, you should know that under a newly minted law, qualified nonprofits must be given preferential treatment in the purchase of eligible properties and given deference when matching other offers from private buyers.

In an effort to solve the affordable housing dearth and give “qualified nonprofits” the first chance of permanently protecting rent-controlled buildings from the speculative market, the San Francisco Board of Supervisors unanimously voted to enact the San Francisco Opportunity to Purchase Act (COPA).

Read the unabridged ordinance here »

Under COPA, sellers of residential buildings with 3 or more units must notify a vetted pool of nonprofit organizations of their intent to sell the rental property, essentially giving the nonprofit buyers the right of first offer - these organizations are entitled to be first in line when multi-unit buildings go on the open market, but it doesn’t end there.

Although the seller is not obligated to hand the keys over to the nonprofit when that group expresses an interest and can entertain other offers from other buyers, the nonprofit must be given the opportunity to match a competing offer from a private party - in legalese, we call this the first right of refusal.

A rather exclusive bunch

The Mayor’s Office of Housing and Community Development was tasked with promulgating regulations, chief among them developing a list of qualified nonprofits. As Bornstein Law predicted, it is a short list we can roll off our tongue, in what amounts to an oligarchy.

However scarce the number of nonprofits, rest assured these organizations have vast legal resources to go after owners and brokers when they sense non-compliance with COPA.

LIST OF QUALIFIED NONPROFITS

View the short list →

PROGRAM RULES

The law of the land →

Listen to presentation on COPA

Daniel was privilaged to give a talk on this process, and you can listen to the recording to get a baseline understanding on the obligations that accompany the newfangled law.

 

Play the video »

Don't have time to watch the movie? Download the slides.

Understand San Francisco's new multi-family building legislation and explore the impact of COPA on sellers, buyers, and real estate brokers.

View the PDF →

Till death do us part? Thinking in terms of post-purchase

Deed restrictions will be placed on the building and so once the multi-unit building is sold, it becomes rent-restricted housing in perpetuity - the new landlords cannot set rents that exceed 80% of the Area Median Income.

More on this fluctuating metric from the Planning Department →

We hasten to say that existing tenancies will not be impacted - if a tenant is paying market rent when the property is exchanged into the hands of the nonprofit, the rent regulations will not be imposed on the tenant already implanted.

FAQ
Some loose ends need to be tied up, but here's the answer to some basic questions.

What buildings are subject to COPA?
The ordinance applies to any residential building with at least three rental units or a vacant lot zoned for at least three units. An existing conforming single-family building is not subject to COPA; however, if the land was vacant and the zoning was R3, COPA would apply. Unpermitted “in-law” units do not count as units under COPA.

What about Tenancies in Common?
Our original assessment was that when an individual who wants to sell their TIC interest, it will not trigger qualified non-profits right to be informed of it, and this was confirmed by MOHCD. The exact quote was, “TIC would not be considered a building sale if the transfer of sale is not connected with the transaction or set of transactions for sale of the entire building.

When does the legislation go into effect?
COPA was initially slated to go into effect on June 3rd, but that was too ambitious – the Mayor’s Office of Housing and Community Development (MOHCD) was given 90 days, or until September 3rd, to publish a list of qualified non-profits and issue further regulations and guidance for the nascent law. The law is thus in effect.

What if a property is already listed prior to September 3rd?
We advise our clients to do nothing – assuming you have listed the property and entered into a binding contract for sale prior to September 3rd, the property is exempt from COPA requirements.

What should sellers do to stay compliant with COPA?
It is important to be tethered to an attorney and a real estate brokerage that is acquainted with the requirements because there is a disclosure aspect to this. Sellers will be required to sign a statement upon closing that they substantially complied with the requirements of COPA.

What should buyers do to stay above the board?
Buyers who are eyeing the purchase of buildings with 3 or more units need to ensure that the seller has lived up to their obligations by interfacing with nonprofits and have made a good-faith effort to afford these organizations the opportunity to purchase the property.

Will the law be challenged?
Bornstein Law does not have a crystal ball but we can say with a good deal of confidence there will be judicial challenges centered around the right and freedom to contract.  Although we are unaware of any pending litigation at the time of this writing, the most likely contester will be a trade group. Washington, D.C. was a pioneer in implementing similar legislation and has been the object of numerous challenges and so if history is any indication, COPA will likewise be disputed.

WEBINAR
Daniel offers some insights and premonitions into the new law in this video.

We can't predict the future but we can do the next best thing by giving you a glimpse into what is known about COPA and the variables that are yet to be worked out.'

If you don't have the time to watch the movie, download the slides →

 

 

 
 

If you your clients are looking to sell, get informed advice.

The sale of multifamily units is ordinarily tough, but the complications are compounded in the era of COPA.

 

HOW WE CAN FACILITATE