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Housing Policy • September 9, 2005

John Gutierrez's Condo-Conversion Summary

JOHN E. GUTIERREZ

Attorney at law

Business and Real Estate Law

2550 Ninth Street, Suite 202

Berkeley, CA 94710

510/647-0600

joguti@aol.com 

(The information provided below, and in the related presentation by Mr. Gutierrez, is merely a summary of certain general legal principles and laws applicable to or governing condominium projects. This information is intended merely for informational purposes and should not be construed as legal advice regarding any actual or proposed project. This summary is neither comprehensive in its scope or presentation of the principles or laws described below, nor is it all-inclusive of the legal principles or laws that may apply to any specific project. Consultation with a knowledgeable expert is absolutely necessary prior to undertaking a project of the type described in this presentation.) 

 

SUMMARY OF PROPOSED

CITY OF BERKELEY RESIDENTIAL

CONDOMINIUM CONVERSION REGULATIONS

(Berkeley Municipal Code Ch. 21.28)

(as of September 1, 2005)

NOTE: September 20, 2005 is the current scheduled date for the City council’s “first reading” (for adoption) of the proposed regulations summarized below. To become operative law, the regulations must be “read” twice. Such second reading could occur as early as September 27, 2005, or, if the regulations are further amended, at a later date. To inform yourself or to express your views to the city council regarding the amendment and/or adoption of the final regulations, check the city’s website (www.ci.berkeley.ca.us).  

A. GENERAL PROVISIONS.

  1. The proposed regulations summarized below apply to all condominium conversion projects for which owners file a “Request for Selection” AFTER June 17, 2005.
  2. Condominium conversion projects for which owners filed a “Request for Selection” PRIOR TO June 17, 2005 may be eligible for approval under the City’s previous regulations. The City no longer accepts applications for projects under the previous regulations.
 

B. ELIGIBILITY FOR CONVERSION.

  1. Multi-unit properties. All multi-unit residential properties (i.e., owner-occupied (TIC), rental, mixed owner/tenant-occupied, and vacant rental properties) and live-work projects.
  2. Disqualified properties.
    1. Vacated by means of Ellis Act within twenty (20) years prior to applying for conversion.
    2. Vacated (even a single unit) by means of owner-occupancy eviction within ten (10) years prior to applying for conversion.
  3. Annual quota. One hundred 100 units (NOT properties) per year, 50 units every six (6) months.
    1. Exemptions from quota.
      1. Units that are exempted from payment of the full (12.5%) affordable housing mitigation fee (see Section 5(b) below);
      2. Pre-existing inclusionary units (see Section 7  below); and
      3. Co-housing communities.
    2. Selection criteria.
  1. Priority based on percentage of “tenant-purchasers” (i.e., tenants that sign nonbinding “intent to purchase” document (to be drafted by City Manager).
    1. One point for each tenant purchaser, except
    2. Two points for each tenant purchaser resident for 5+ years; and
    3. One point for owner-occupants.
    1. Selection timing.
  2. Initial selection (currently) by 10-28-05.

        ii. Second selection at end of next six-month period (approx. 4-28-06).

  1. Approval criteria.
    1. Compliance with local laws
  1. Zoning law – all units in property legally created (property records review);

        ii. Fire and life-safety laws – smoke detectors, spark arresters, grounded outlets, and stairway hand railings (property inspection); and

        iii. Any other codes found to be violated (property inspection).

    1. Compliance with tentative map conditions of approval (if any); and
    2. Agreement to pay affordable housing mitigation fee (AHF).
  1. Affordable housing fee.
    1. Amount per unit, generally: (Until 10-28-05) - 12.5% of unit sales price or 90% of appraised value at time of sale, whichever is greater.
    2. Exceptions:

      i. 5%.

      1. “Golden duplexes” (50% owner-occupied on 12-31-79 and at application for conversion date), and
      2. Property fully owner-occupied for seven (7) prior to application for conversion.

ii. 0%.

    1. For TIC projects with less than five (5) units continuously owner-occupied since 1-1-95, or
    2. If ALL units within building are made inclusionary units (see Section 7 below).

          iii. Other. Up to 50% credit against AHF due on non-inclusionary units by increasing discounts on inclusionary units (see Section 7 below).

    1. After 10-28-05, AHF to be calculated as the capitalized value of the “increase in the monthly cost of the condominium unit compared to the rental unit for a city-median income tenant” – i.e., a six digit number per unit! – unless the city council elects to extend the 12.5% AHF cap.
    2. Payment due.
  1. At time of unit sale.
      1. If unit owner-occupied at time conversion approved, “sale” occurs when sale or transfer to new owner.

      OR

      ii. (At owner’s election) anytime after conversion approved

          A. AHF based on unit appraised value at time conversion approved, plus CPI increase from approval date to payment date.

  1. Other Fees.
    1. Selection fees (to be determined),
    2. Application fees (currently approximately $6,000 - $8,000, and
    3. Monitoring fees (to be determined).

    7. Inclusionary units.

        a. If 5+ units, 20% of units must be made affordable (for rental or purchase) to low income (up to 80% area median income (AMI) and moderate income (up to 120% AMI) purchasers. Sales prices determined under city’s inclusionary ordinance.

        b. Sale price:

      i. For new inclusionary units - must be 12.5% below market value; and

        ii. For existing inclusionary units– must be 12.5% below restricted sales price under city’s inclusionary ordinance.

    8. Tenant protections.

        1. One-year right of first refusal (from date of DRE final public report (if 5+ units) or date of first offer for sale (if less than 5 units).
        2. Lifetime (nontransferable) leases for ALL non-purchasing tenants (rent increases subject to Rent Stabilization Act).
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