San Francisco’s Next Big Move in Maintaining Housing Affordability: Nonprofits’ First Right to Purchase Multi-Family Rental Properties

Pending legislation introduced by San Francisco Supervisor Fewer would amend the City’s laws to give certain qualified non-profit organizations certified by the City (“Qualified Nonprofits”) the first right to purchase multi-family rental properties and certain vacant lots in San Francisco. 

Highlights are as follows:

  • The legislation applies to any residential building with at least three rental units or a vacant lot zoned for at least three units.
  • Sellers subject to the new law would be required to notify all Qualified Nonprofits of the intent to sell before putting a qualifying property on the market.  Qualified Nonprofits would have five days to respond, triggering an obligation for the seller to provide information about building tenants.  Qualified Nonprofits would then have an additional 25 days to make an offer to purchase the building.  The seller could reject an offer made, and if no Qualified Nonprofit makes an offer, or if the seller rejects any Qualified Nonprofit offers, the seller could offer the building to the general public.
  • If a seller is prepared to accept an offer from a buyer other than a Qualified Nonprofit, then it would be required to give all of the Qualified Nonprofits the right of first refusal on the same terms and conditions and Qualified Nonprofits would have five days to accept or reject that offer (or 30 days if the seller is responding to an unsolicited offer).
  • Qualified Nonprofits would have the right to institute a civil action against any non-compliant sellers, with the potential for damages as specified in the legislation.
  • The legislation includes protection for existing tenants.  It also requires that a property purchased by a Qualified Nonprofit remain rent restricted, meaning that the value of all rents paid in the building could not exceed 80 percent of Area Median Income (AMI) and the gross household income of new tenants could not exceed 120 percent of AMI.
  • Certain sales would be excluded, including but not limited to transfers made under a mortgage, deed of trust, or deed in lieu of foreclosure and transfers between certain family members.  Seller incentives are also contemplated, which could include a partial City transfer tax exemption, if ultimately adopted by the Board of Supervisors, and federal tax benefits, if available.