Thursday, April 07, 2016

Start-Up Outfit Looks To Act As Middleman Representing Rent Regulated Tenants Paying Below-Market Rates Seeking Lease Buyouts From Their Landlords

In San Francisco, California, Newsweek reports:
  • As San Francisco’s housing shortage gets worse, there’s increasing pressure on tenants living in rent-controlled apartments to vacate so their landlords can start charging a market rate in the rapidly gentrifying city. This pressure often comes in the form of a buyout. Three years ago, for instance, a single mother with kids paid $1,600 per month for a two-bedroom apartment on 18th Street in the increasingly hip Mission neighborhood, where she'd been for 20 years. Her landlord offered her a buyout of $50,000 to leave her rent-controlled apartment, which she accepted. Now the apartment is going for more than $3,200, closer to the market price in the gentrifying neighborhood.

    Prior to March 2015, these buyouts were mainly off the books. Unlike the more notorious evictions allowed by the Ellis Act, a California law that grants landlords rights to evict tenants by removing all units in any building from the rental market, buyouts had less government oversight and shorter time periods to settle. Generally invoked to convert apartments into condominiums in San Francisco, Ellis Act evictions require at least 120 days and a $5,800 compensation per unit.

    But the city of San Francisco intervened last year with new laws requiring that landlords have documented buyouts with tenants leaving rent-controlled units. The hope from rent-control advocates was that the buyout documentation will help hold landlords accountable and accurately measure the displacements.

    But one startup has entered the fray to make some money from the new niche in the ever-evolving and scrutinized San Francisco rental market. RentMasters, which began operating a month ago, hopes to play the middleman between tenant and landlord during these buyout negotiations. The founder believes, in classic Silicon Valley fashion, that there were inefficiencies in this market that the power of technology could help solve.

    “It is quite a complicated and important puzzle in the housing market,” says RentMasters founder Brian Bensch. “The best market for a startup to go after is niche markets that have a problem to solve. Buyouts can and should be a mutual scenario. I’m a big fan of the buyout laws.”

    RentMasters has a streamlined four-step process to help tenants thinking about cashing in on their rent-controlled apartments. First, tenants will get an estimate for how much of a relocation bonus they can earn, based on the neighborhood and the house itself. “As you might expect, landlords in the Tenderloin can’t afford to be as generous as those in Hayes Valley or Russian Hill,” reads the website, referring to San Francisco neighborhoods.

    Then tenants get a free 30-minute consultation. RentMasters, which will charge anywhere from a $99 onetime fee to 20 percent of the buyout, will then negotiate with the landlord for the best buyout price. Once both sides agree to a price, the new buyout laws require a 45-day cooling-off period for the tenant to think it over.

    The average buyout price is around $43,000, according to the San Francisco Chronicle.
    Tenant rights attorneys and nonprofits raised concerns when Newsweek brought RentMasters to their attention. The main one rested with the fact that RentMasters may be practicing law without a law license. “Buyouts are extremely legally complex,” says tenant rights attorney Joseph Tobener. “They are like snowflakes. They are all individual.”

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