Measure I Proposes Big Changes in City’s Condo Law

By J. Douglas Allen-Taylor
Tuesday October 31, 2006

Measure I would make substantial changes in Berkeley’s existing condominium conversion law, specifically promising to:  

1) increase annual condominium conversions from 100 to 500; 

2) increase the ability to evict tenants of converted units; 

3) reduce the affordable housing fee for condominium conversions; 

4) provide a discount for existing tenants to purchase condominiums; and 

5) eliminate “certain” existing restrictions to conversion (those “certain” eliminations are detailed below). 

The measure has the support of former Mayor Shirley Dean and Claremont Neighborhood Association President Dean Metzger as well as councilmembers Betty Olds and Gordon Wozniak. It is opposed by the remaining councilmembers, as well as Mayor Tom Bates and State Assemblymember Loni Hancock. 

The battle for and against the proposed measure has so far taken place outside the review of Berkeley’s campaign finance disclosure laws. No campaign committee for the measure has registered with the City Clerk, and the No on I Committee (which has registered with the clerk listing Rob Wrenn and Jesse Arreguin as co-treasurers) lists only $100 in contributions and no expenditures. Both the Berkeley Chamber of Commerce and the Berkeley Democratic Club have taken no position on the measure. None of the other campaign committees registering with the City Clerk hass listed expenditures for or against the measure. 

The proposed new law would increase the allowable condominium conversion approvals from the current 100 units per year to 500 units. Presumably, then, the proposed new law would do two things: it would make condominium conversions easier at the same time it is making more of them possible. How a voter decides on this issue, therefore, may hinge in large part on whether the voter thinks more condominiums or fewer are best for Berkeley and its residents. 

Measure I would also make it easier for existing tenants to purchase their converted units by requiring the building owner to pay tenants 5 percent of the purchase price of the unit; in effect, this would mean existing tenants would get a 5 percent discount on the price of the purchase. But that advantage is offset by some reductions in the rights of existing tenants that presently are guaranteed in Berkeley’s law. 

Below are highlighted some of the major provisions to Berkeley’s condominium conversion law that would be changed if Measure I passes. 


Elimination of restrictions to conversion 

The elimination of “certain” existing restrictions to conversions should get special scrutiny by local voters.  

Berkeley’s existing ordinance currently bars condominium conversion for buildings where the owners have filed notice of intent within the last 20 years to go out of the rental business, where no evictions have occurred within the last ten years for the purpose of owner or relative occupancy, or for units that have become vacant over rent limitation law issues or following serious safety, health, or building code violations. 

All of those restrictions are eliminated in the proposed new ordinance, making condominium conversion easier, but giving existing tenants fewer rights in the process. 

Voters will have to decide whether the need for new condominiums weighs more heavily than the loss of those tenants rights. 


Affordable housing fees 

Berkeley’s current condominium conversion ordinance provides that money from such conversions be used to help finance affordable low and moderate income housing development in the city. This money goes primarily to increase the amount of affordable rental housing stock in the city. The new proposed ordinance continues to provide affordable housing money, but substantially reduces the amount of money that would be transferred. 

Current law sets the affordable housing fee for condominium conversions by a complicated formula based upon the actual sale price of the condominium unit itself. 

The inclusion of that fee was a critical part of the current ordinance. Councilmembers included a provision in the ordinance that read: “the City Council finds and declares that it would not adopt this chapter permitting conversion of rental property to condominiums or cooperatives, but for the provision that the adverse effects of such conversions on low-income households will be mitigated by the affordable housing fee described herein.” 

While the proposed new ordinance includes that affordable housing fee, it in effect guts it, providing that the fee would be capped at $8 per square foot, with provisions that it be increased annually based upon increases in the Consumer Price Index. 

The Berkeley City Attorney’s Analysis of the proposed new law estimates that the affordable housing fee paid by each converted unit would be reduced by 90 percent. Thus, while the new law would probably open up more existing rental units in Berkeley for tenant ownership, it would also decrease the number of new rental units available to citizens with low or moderate incomes. 


Notice to tenants of proposed condominium conversion 

The new law would weaken provisions in Berkeley’s existing condominium conversion law guaranteeing that existing tenants are informed of the proposed conversion. 

Under Berkeley’s existing law, the owners must submit either a signed notice of intent from tenants to purchase their units, or else “evidence that a certified letter of notification was sent” to the tenants. 

The new law would eliminate that provision, referring only to notification based on state law. The state law referred to only requires that notices to the tenants be addressed to them and dropped in the mail; it does not require that the notices be sent by certified mail. That leaves open the possibility that some tenant notices may get accidentally “lost” in the mail. 


When a rental tenant chooses not to purchase 

As with the existing ordinance, the new ordinance gives existing rental tenants first rights to purchase the unit they are renting if the building converts to condominium use. But the new ordinance substantially alters what occurs if a rental tenant chooses not to exercise that right, inserting one measure that benefits the tenants and one measure that takes away existing rights. 

Current Berkeley law only allows for cash payments to renters if the landlord is going out of the rental business completely. The new ordinance would allow cash payments to all renters who choose not to purchase a condominium at an amount of 2 percent of the sales price of the unit. The City Attorney’s Analysis of the measure notes that “the cash payment under the proposed measure will generally exceed the amount currently payable” under the city’s existing ordinance. 

On the other hand, the new measure gives existing tenants only thirty days from the date they are notified of the proposed conversion to make up their minds and sign an agreement to purchase the unit. Current Berkeley law gives the tenants up to one year to sign such an agreement, under which they can continue to live (and pay rent) in the unit. Given the difficulties of cleaning up credit reports and getting bank approval for loans for home purchase, it seems that the one month requirement would shut many, if not most, of the existing tenants out of the condominium purchase process.