Property owners sue over S.F. law

Two owners of a tenancy-incommon have sued the city over a law the Board of Supervisors passed in 2013 that was designed to help owners convert TIC’s into condominiums, but with a provision that they offer a lifetime lease if there was a tenant in the unit.

Plaintiffs Peyman Pakdel and Sima Chegini purchased their TIC in Russian Hill eight years ago, intending to move in when they retired. The new law thwarted their plans, requiring them to offer the property to the current tenant.

To Pakdel and Chegini’s attorney, Paul Utrecht, that’s a clear example of a municipal government seizing private property.

“My client bought the property to live in, and now he’s not allowed to,” Utrecht said.

Supervisor Mark Farrell and former Supervisor Scott Wiener, who originally sponsored the ordinance, saw it as a way to help small property owners

who were jammed up in the city’s lottery system for condo conversions.

Farrell and Wiener wanted to expedite conversions for more than 2,000 tenancies-incommon — residential buildings in which two or more people share ownership — that were on a waiting list. They offered the lifetime lease provision as a concession to tenants’ rights groups, who feared the sudden flood of conversions would cause many longtime renters to be displaced.

The two supervisors also required each tenancy-incommon owner to pay a $20,000 fee to the city’s affordable housing fund in exchange for the right to convert the property.

But Wiener and Farrell — who both represented the moderate side of the board — didn’t vote for the final version of the measure. It was taken over by former Supervisor David Chiu and his colleagues, progressives Norman Yee, Jane Kim and David Campos. They inserted a series of amendments that complicated the law, including a 10-year moratorium on conversions after the initial pipeline ran out and a provision that stopped conversions of rented units if anyone sued.

That didn’t stop Utrecht and his clients from suing.

“I don’t know how many people our lawsuit affects,” Utrecht said. “But this is not a theoretical issue for my client. It’s a real issue.”

City attorney spokesman John Cote said the city had just been served with the complaint and that his office was in the process of analyzing it.

“In general we try very hard to protect all rental housing in San Francisco, because it’s considered a source of affordable housing,” Cote said.

Owners of tenancies-incommon can bypass the lifetime lease requirement by offering buyouts to the people renting their units. It’s not clear whether Pakdel and Chegini did that.

The plaintiffs seek more than $500,000 in damages and a declaratory judgment that would strike down the lease requirement, which they say violates federal and state laws.

Chiu and Farrell were not immediately available for comment.