Council Tinkers with Condo Ordinance

By J. Douglas Allen-Taylor
Thursday October 23, 2008 - 09:58:00 AM

The Berkeley City Council went dabbling back in the condominium conversion waters this week, but for the third time this year came up with nothing definitive. The council has now decided to wait until the new year—and the arrival of new faces on the council itself—to revisit the issue. 

At stake is an attempt at tinkering with the city’s complicated existing condominium conversion statute in a way that does not upset the balance between encouraging first-time home ownership in Berkeley, protecting tenants of rental units going condo, and, at the very least, maintaining the number of units in the city’s current stock of affordable rental housing. 

The council thought it had achieved such a balance—if not unanimous approval from all of the various stakeholders—in 2005 when, among other things, it set city fees for converting condos at 12.5 percent of the sale of the unit price. Two things have happened in the intervening three years to change that opinion, however. The city has collected no fees from conversion, leading some to believe that the fees may be too high or that city procedures may be too complicated. In addition, a 2004 California court decision—confirmed on appeal and published in 2005—banned local prohibitions of tenancies-in-common (TICs) as was done in Berkeley’s condominium conversion ordinance. 

A tenancy-in-common is a form of property ownership in which several individuals own shares in the same piece of property. In the context of the condominium conversion ordinance, TICs involve the tenants of individual apartments in a building coming together to jointly own the building. Such TICs are sometimes used as legal steppingstones in which the individual apartments are then legally separated into distinct pieces of property, to be owned separately by individual owners. 

“We didn’t want unlimited TICs,” which would have been the result if the council did nothing following the court decision, Acting City Attorney Zach Cowan explained to the public at Tuesday night’s regular council meeting. So in March, the council directed the staff to review several aspects of the existing condominium conversion ordinance in order to steer tenants away from TICs and towards conversion, including reviewing the mitigation fees. 

Staff presented a first draft of proposed condominium conversion ordinance changes last month, when the council sent it back to work on more modifications, including reducing the 12.5 percent conversion fee to 8 percent, eliminating fee reductions for conversions involving smaller units, and adjusting the definitions by which a prospective condominium owner can receive fee discounts by qualifying as a previous tenant of the unit. 

Tuesday’s council session showed continuing differences between advocates for property owners and renters on the issue, with representatives of the Rent Stabilization Board and the pro-property owner Housing Opportunities for Everyone (HOPE) making competing suggestions for further alterations. 

But while the council held a long discussion on the complicated proposals when it first took a look at the proposals in late September, it gave less attention to the issue on Tuesday, in large part because Mayor Tom Bates said he would honor a request by Councilmember Max Anderson—absent and at a friend’s funeral—that the vote be put off until he could return. Bates set the discussion for the January 27 council agenda. 

Staff representatives said at that time they will present further refinements in the ordinance, including the possible use of the mitigation fees “to assist sitting tenants who are first-time homebuyers to purchase their units from condominium converters.” 

At that point, it will be a significantly different council making the decision. Council will have at least two new members out of nine at that time, with replacements for the late Councilmember Dona Spring and retiring Councilmember Betty Olds to be decided in next month’s general election. In addition, Bates is in a re-election battle with former Berkeley mayor Shirley Dean, and himself could be gone. 

Bates alluded to that re-election fight when he announced that prior to the January meeting, he would sit down with representatives of Berkeley residential property owners and the city’s Rent Stabilization Board and try to work out any remaining differences between the two sides on the proposed ordinance changes.  

Stopping for a moment to think about it, the mayor continued that he would hold the negotiation meeting “if I’m elected” and then added—jokingly—“and if I’m not elected, to heck with it.”