Owner vs. Tenant Occupied

Owner Occupied vs. Tenant Occupied

The occupancy of your building has a significant impact on its value.  A vacant building, or a completely owner occupied building generally has more value than one that is partially or wholly tenant occupied.  This is based on the opportunity a buyer has to recover a unit for their own use, to get market rate rent, or select tenants of their choice, so as to better control a building.  Here are some considerations:

1. A buyer will have to honor any lease term of a tenant and cannot owner evict until the conclusion of the lease.  The new buyer will inherit the tenant with the existing lease terms and tenancy.
2. Only one owner eviction per building is allowed.  If an owner eviction has been performed on the building at any point, that unit is the ‘tainted’ unit and is the only one that can be owner evicted in the future.
3. Owner evictions can be expensive.  Under Proposition H, passed by San Francisco voters in November 2006.  Tenants asked to vacate in an owner-eviction are paid $4,500 per tenant, including children, with an additional $3,000 paid to elderly tenants or children; with a maximum of $22,500 per owner eviction.  This legislation requires payments to tenants for temporary evictions for repairs as well.
4. The value of a building may be based on its ability to provide mortgage relief to an owner-occupier; this can be significant when a tenant is paying below market rate rent.
5. Owner move-in restrictions based on the protected status of a tenant (disabled, elderly, catastrophically ill, or children); eliminates the possibility of recovering a rental unit for owner occupancy.
6. Even if a tenant has given notice to vacate, you cannot rely on the vacancy of the unit until it is empty.  So long as the unit is occupied, it must be represented as having a tenant who is staying, because rent control laws do not allow recovery of a rental unit from a landlord without just cause. There are 14 just causes such as owner move-in eviction, nonpayment of rent, or damaging the unit which can be found in the rent board rules and regulations.
7. In the event an Ellis Act is considered to go out of the rental business and use it for your own use, condominium conversion is not possible in cases where evicted tenants were protected.  Additionally, there are further restrictions if you ever want to re-rent the unit.