Tenant Buyout Ordinance; Amending Berkeley Municipal Code Chapter 13.79

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1 Office of the City Manager ACTION CALENDAR February 23, 2016 To: From: Honorable Mayor and Members of the City Council Dee Williams-Ridley, Interim City Manager Submitted by: Zach Cowan, City Attorney Subject: Tenant Buyout Ordinance; Amending Berkeley Municipal Code Chapter RECOMMENDATION Adopt first reading of an Ordinance amending the title of Chapter and adding a new section to the Berkeley Municipal Code, regulating tenant buyout agreements. FISCAL IMPACTS OF RECOMMENDATION Minimal impact to develop buyout agreement form. CURRENT SITUATION AND ITS EFFECTS The City does not currently regulate tenant buyout agreements. BACKGROUND On January 19, 2016, the Council directed the City Manager to return to Council with an ordinance regulating tenant buyout agreements. (Attachment 1) The proposed ordinance (Attachment 2) is closely modeled on the Santa Monica ordinance that was included in the referral. ENVIRONMENTAL SUSTAINABILITY There are no identifiable environmental effects or opportunities associated with the subject of this report. RATIONALE FOR RECOMMENDATION This report is in response to Council s direction to staff at its January 19, 2016 meeting. ALTERNATIVE ACTIONS CONSIDERED None. CONTACT PERSON Zach Cowan, City Attorney, Milvia Street, Berkeley, CA Tel: (510) TDD: (510) Fax: (510) manager@cityofberkeley.info Website:

2 Tenant Buyout Ordinance Amending Berkeley ACTION CALENDAR Municipal Code Chapter February 23, 2016 Attachments: 1: Council item # 24 from January 19, : Ordinance regulating tenant buyout agreements Page 2

3 Attachment 1 24 Jesse Arreguín City Councilmember, District 4 CONSENT CALENDAR January 19, 2016 To: From: Honorable Mayor and Members of the City Council Councilmember Jesse Arreguín Subject: Tenant Buyout Agreement Ordinance RECOMMENDATION Refer to the City Manager and the Rent Stabilization Board to draft an ordinance regulating situations where a tenant agrees to vacate a rent-controlled unit in exchange for a sum of money, known as a buyout. BACKGROUND As rents continue to rise, and the disparity between market-rate and rent controlled rents increases, landlords have a greater incentive to offer buyouts to tenants of rent controlled units in order to greatly increase the rents of that unit. Buyouts are an alternative to evictions that are currently unregulated, allowing landlords to circumvent restrictions that apply in an eviction process. This can cause some landlords to employ high-pressure tactics and intimidation on tenants who often agree to such buyouts without understanding their rights. The Berkeley Rent Board recently prevailed in an appellate case that has been certified for publication (Mak v. City of Berkeley Rent Stabilization Board). The Court upheld a Rent Board Regulation designed to protect tenants from landlords acting in bad faith by serving owner move-in eviction notices upon which they never intend to act and then negotiating terms of a buy out in order to displace mostly long-term tenants so they can significantly increase rents. The Court held that the City has an interest in protecting tenants from this type of subterfuge and these regulations are fair, reasonable, and necessary. In January 2015, Santa Monica passed an ordinance relating to the regulation of buyouts. Before making a buyout offer, landlords must provide a written notice to the tenants of their rights pertaining to buyout agreements including: The right not to enter into a buyout agreement; The right to consult with an attorney and/or the Rent Board before signing an agreements; and The right to cancel the agreement at any time up to 30 days after all parties have signed it. Martin Luther King Jr. Civic Center Building 2180 Milvia Street, 5 th Floor, Berkeley, CA Tel: (510) Fax: (510) TDD: (510) jarreguin@cityofberkeley.info Web:

4 Tenant Buyout Agreement Ordinance CONSENT CALENDAR January 19, 2016 Additionally, the buyout agreement must be in writing and provide a list of the tenant s rights as listed above. Any buyout agreement that does not satisfy all of the requirements is not effective and may be rescinded by the tenant at any time. San Francisco has passed a similar ordinance, with tenants having the right to cancel the agreement up to 45 days after the agreement has been signed. FINANCIAL IMPLICATIONS Staff time. ENVIRONMENTAL SUSTAINABILITY No adverse effects to the environment. CONTACT PERSON Jesse Arreguin, Councilmember, District Attachments: 1: Santa Monica Municipal Code Section : Buyout Offers and Agreements 2: San Francisco Municipal Code Section 37.9E: Tenant Buyout Agreements

5 Santa Monica Municipal Code Up Previous Next Main Search Print No Frames Article 4 PUBLIC WELFARE, MORALS AND POLICY Chapter 4.56 TENANT HARASSMENT Buyout offers and agreements. (a) Applicability of Section. This Section shall apply to every rental housing unit in the City that is a controlled rental unit pursuant to City Charter Section 1800 et seq., (including a room in a single-family home, hotel or motel, rooming house or apartment, single-family home, mobile home or mobile home space, trailer or trailer space). (b) Disclosure Prior to Buyout Offers. Prior to making a buyout offer, the landlord shall provide each tenant in that rental unit a written disclosure, on a form developed and authorized by the Rent Board, that shall include the following: (1) A statement that the tenant has a right not to enter into a buyout agreement; (2) A statement that the tenant may choose to consult with an attorney before entering into a buyout agreement; (3) A statement that the tenant may rescind the buyout agreement for up to thirty days after it is fully executed; (4) A statement that the tenant may visit the Rent Board for information about other buyout agreements in the tenant s neighborhood and other relevant information; (5) Any other information required by the Rent Board consistent with the purposes and provisions of this Section; and (6) A space for each tenant to sign and write the date the landlord provided the tenant with the disclosure. The landlord shall retain a copy of each signed disclosure form for five years, along with a record of the date the landlord provided the disclosure to each tenant. (c) Requirements for Buyout Agreements. Every buyout agreement shall: (1) Be in writing. The landlord shall give each tenant a copy of the buyout agreement at the time the tenant executes it. (2) Include the following statements in bold letters in at least fourteen-point type in close proximity to the space reserved for the signature of the tenant(s): (A) You may cancel this agreement in writing at any time before the thirtieth day after all parties have signed this agreement. (B) You have a right not to enter into a buyout agreement. (C) You may choose to consult with an attorney or the Rent Control Board before signing this agreement. The Rent Control Board may have information about other buyout agreements in your neighborhood. A buyout agreement that does not satisfy all the requirements of this subsection shall not be effective and may be rescinded by the tenant at any time. (d) Rescission of Buyout Agreements. A tenant shall have the right to rescind a buyout agreement for up to thirty days after its execution by all parties. In order to rescind a buyout agreement, the tenant must hand-deliver, , or place in the U.S. mail a statement to the landlord indicating that the tenant has rescinded the buyout agreement.

6 (e) Filing of Buyout Agreements. The landlord shall file a copy of the buyout agreement no sooner than the thirty-first day after the buyout agreement is executed by all parties, and no later than sixty days after the agreement is executed by all parties. Buyout agreements shall be filed with the Rent Control Board unless the Board opts not to adopt regulations implementing this Section, in which case buyout agreements shall be filed with the City Clerk. This filing requirement does not apply to buyout agreements rescinded under subsection (d). (Added by Ord. No. 2478CCS 4, adopted 1/13/15) View the mobile version.

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10 Attachment 2 ORDINANCE NO. N.S. AMENDING THE TITLE OF CHAPTER OF THE BERKELEY MUNICIPAL CODE AND ADDING A NEW SECTION TO THE BERKELEY MUNICIPAL CODE REGARDING TENANT BUYOUT AGREEMENTS BE IT ORDAINED by the Council of the City of Berkeley as follows: Section 1. That the title of Chapter of the Berkeley Municipal Code is amended to read as follows: Chapter TENANT PROTECTIONS: AUTOMATICALLY RENEWING LEASES AND BUYOUT AGREEMENTS Section 2. That a new section is added to the Berkeley Municipal Code to read as follows: Buyout offers and agreements. A. This Section applies to every controlled rental unit. B. Prior to making a buyout offer for a controlled rental unit, the landlord shall provide each tenant in that unit a written disclosure, on a form developed and authorized by the City, that shall include the following: 1. A statement that the tenant has a right not to enter into a buyout agreement; 2. A statement that the tenant may choose to consult with an attorney before entering into a buyout agreement; 3. A statement that the tenant may rescind the buyout agreement for up to thirty days after it is fully executed; 4. A statement that the tenant may consult the Rent Stabilization Board with respect to the buyout agreement; 5. A space for each tenant to sign and write the date the landlord provided the tenant with the disclosure. C. Every buyout agreement shall be in writing and include the following statements in bold letters in at least fourteen-point type in close proximity to the space reserved for the signature of the tenant(s): You may cancel this agreement in writing at any time before the thirtieth day after all parties have signed this agreement. You have a right not to enter into a buyout agreement. You may choose to consult with an attorney or the Rent Stabilization Board before signing this agreement. The Rent Stabilization Board may have information about other buyout agreements in your neighborhood. D. A buyout agreement that does not satisfy all the requirements of this Section shall not be effective and shall be void at the option of the affected tenant(s). However any remedy based on an ineffective or void buyout agreement shall not include displacement of a subsequent tenant or tenants of the affected unit. E. A tenant shall have the right to rescind a buyout agreement for up to thirty days after its execution by all parties. In order to rescind a buyout agreement, the tenant must

11 hand-deliver, , or place in the U.S. mail a statement to the landlord indicating that the tenant has rescinded the buyout agreement no later than the 30 th day after it is executed by all parties. F. 1. The landlord shall retain a copy of each signed disclosure form for five years, along with a record of the date the landlord provided the disclosure to each tenant, and shall give each tenant a copy of the buyout agreement at the time the tenant executes it. 2. The landlord shall provide a copy of the buyout agreement to the Rent Stabilization Board no sooner than the thirty-first day after the buyout agreement is executed by all parties, and no later than sixty days after the agreement is executed by all parties. Section 3. Copies of this Ordinance shall be posted for two days prior to adoption in the display case located near the walkway in front of Old City Hall, 2134 Martin Luther King Jr. Way. Within fifteen days of adoption, copies of this Ordinance shall be filed at each branch of the Berkeley Public Library and the title shall be published in a newspaper of general circulation.

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