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SR-11-A (19) ,/ / . . , I-It CA:RMM:bars070/hpadv city council Meeting 6-26-90 JUN 2 6 1990 11(\3- D'~ Santa Monica, California fJJL 3 mn STAFF REPORT TO: Mayor and city council FROM: City Attorney SUBJECT: Proposed Amendments to Tenant ownership Rights Charter Amendment, Santa Monica city Charter section 2000 et seq. At its May 15, 1990 meeting, the City council requested that certain revisions be made to this office's proposed amendments to the Tenant Ownership Rights Charter Amendment ( "TORCA ") . Additionally, this office again met with Paul DeSantis to discuss the proposed amendments to TORCA. Based on the directions received from the city council and the discussions with Mr. DeSantis, this office offers the following changes to the proposed amendments to TORCA: l. Charter Section 2002 (f) has been modified to provide that an owner shall be considered a cosigning tenant if the owner has continuously resided at the building as his or her principal place of residence for at least six months prior to beginning to solicit the required tenant approval for the TORCA conversion. However, this broadened definition of cosigning tenant shall not be apply if the building has previously been withdrawn from the residential rental business pursuant to the Ellis Act, unless the owners were tenants in the property at the time of the withdrawal. - l - "-h JUN 2 () 1990 JUl 3 199Q . . :2. Charter section 2002 (j) has been modified to provide that an owner shall be deemed an intending to purchase tenant if the owner meets the same requirements discussed above for being a cosigning tenant. 3. Charter section 2004(b) (9) has been modified to provide that no owner shall close the first escrow without completing the repairs and alterations agreed to pursuant to Charter section :2002 (c) (4) unless the owner obtains an extension of time, not to exceed ninety days, from the tenant who is purchasing the unit first to close escrow and the owner posts a bond approved by the Department of Real Estate in an amount sufficient to cover the cost of the work. This section has further been modified to provide that the City's Building Officer can agree to an additional extension of time to complete the repairs and alterations if more time is reasonably required to complete the work. Finally, this section provides that the failure to complete the work in the required time period shall result in a daily penalty of $250.00 for the first day and $100.00 for each day thereafter. No total penalty shall be greater than two times the cost of the repairs and alterations not timely completed, except that the minimum penalty shall be $250.00. 4. In its May 8, 1990 staff report, this office proposed that Charter Section 2002 (k) be added to require an owner to declare in the TORCA application that in obtaining the required tenant signatures, the owner did not offer or agree to buy-out a tenant's right to purchase a uni t in the building. Charter Section 2004(b) (10) has been added to similarly prohibit tenants - 2 - . . from offering or agreeing to release all rights that they have to purchase rental units in the building in return for receiving money or other financial consideration from the owner. 5. The modification to Charter section 2004(a} proposed in the city Attorney's May 15, 1990 staff report has been deleted. This proposed amendment had provided that an owner's threatening to utilize the Ellis Act if the TORCA conversion did not occur would be evidence of coercion. This office now believes that the owner declaration proposed in Charter section 2002(1) when coupled with the general prohibition on coercion in Charter Section 2004{a) will be sufficient to prevent owners from seeking to obtain tenant approval of a TORCA conversion by threatening to utilize the Ellis Act. 6. At the request of the Housing Division, Charter Section 2009 has been amended. A new subsection (c) has been added, which provides that monies derived from the Tenant-participating Conversion Tax can be appropriated by the City council for assisting the City or a nonprofit housing development corporation to purchase units for lease or resale to low, moderate, or middle income households. This change was reviewed by Paul DeSantis and received his approval. 7. This office's proposed modifications to Charter Sections 2001(l), 2002{k), 2002(1}, 2004(b)(2), 2004(b) (7), 2004(b)(8), and 2004(b) (12) contained in its May 8, 1990 and May 15, 1990 staff reports remain unchanged. - 3 - . . RECOMMENDATION It is respectfully recommended that the City Council direct the City Attorney to prepare the necessary resolution to submit the attached proposed amendments to the voters at the November general municipal election. PREPARED BY: Robert M. Myers, city Attorney Barry A. Rosenbaum, Deputy City Attorney - 4 - . . PROPOSED AMENDMENTS TO TORCA Santa Monica City Charter section 2001 is amended to read as follows: SECTION 2001. Definitions. For purposes of this Articler the following words and phrases shall have the following meaning: (a) Applicant. The owner of a building for which a Tenant-Participating Conversion Application is filed. (b) cosiqninq Tenant:. Any tenant agreeing to the conversion by his or her signature on the Tenant-Participating Conversion Application who has personally occupied his or her unit continuously for a period of at least six (6) months prior to the date he or she signs the Tenant-Participating Conversion Application. (c) Disabled PersoD. Any person who is receiving benefits from a Federal, state, or local government, or from a private entity on account of a permanent disability that prevents the person from engaging in regular, fulltime employment. - 1 - . e (d) Intending to Purchase Tenant. Any tenant who has personally occupied his or her unit in the building continuously for a period of at least six (6) months immediately preceding the date the tenant signs a Tenant Intent to Purchase. (e) Limited Equity. Programs subject to the restrictions set forth in the Health and Safety Code Section 33007.5 and other programs which limit, to a similar extent and a similar length of time, the owner's return at resale. For purposes of this Article, shared appreciation equity loans or similar loans shall not be construed to be forms of limited equity. (f) Low and Moderate Income Households. Persons and famil ies whose income does not exceed eighty percent (80%) of the median gross income for Los Angeles County, adjusted for family size as determined by the secretary of Housing and Urban Development and under Section 8(f} (3) of the United states Housing Act of 1937, as amended, or if programs under Section 8 (f) are terminated, eighty percent (80%) of the median gross income determined under the method used by the Secretary prior to such termination. - 2 - . . (g) Kiddie Income Households. Persons and families whose income exceeds eighty percent (80%) but is less than one hundred and twenty percent (120%) of the median gross income for Los Angeles county, adjusted for family size as determined by the Secretary of Housing and Urban Development under Section 8 (f) (3) of the united states Housing Act of 1937, as amended, or if programs under section 8(f} are terminated, more than eighty percent (80%) but less than one hundred twenty percent (120%) of the median gross income determined under the method used by the Secretary prior to such termination. (h) Owner. Building. The owner of a Qualifying ( i) participating Tenant. Any tenant, including both cosigning and non-cosigning tenants, residing in the building at the date of the approval of the Tenant-Participating Conversion Application. (j) price Index. The index for Urban Wage Earners and Clerical Workers, United states city Average, as published by the Uni ted states Bureau of Labor statistics, or - 3 - . . in the event such index is discontinued any comparable index. (k) Tenant Intent to Purchase. A form prepared by the city to comply with state law and which shall be in substantially the following form and substance: STATEMENT OF TENANT INTENT TO PURCHASE This is a Tenant Intent to Purchase form that is used to determine how many tenants want to purchase the apartment units that they currently are renting. Everything that the owner guarantees or promises you in exchange for your signature, including the sales price, is set forth in writing in the Tenant-Participating conversion Application. These promises, including the promise to sell you the unit for the price stated on the form, will be made conditions of the approval of the conversion and the signed form will become public record. Signing this form does not mean that you must buy the unit. It only means that you currently want and intend to buy the unit for - 4 - . . the sales price indicated on the form if you are able to obtain satisfactory financing and if the application is approved. IF, AFTER FINAL APPROVAL OF THE CONVERSION, THE OWNER REFUSES TO SELL THE UNIT AS AGREED OR DEMANDS A HIGHER PRICE, YOU SHOULD IMMEDIATELY CONTACT THE APPROVING ATTORNEY AND THE CITY ATTORNEY. I/We, the. undersigned, as tenant(s) of unit at Santa Monica, California, at the time of filing of the Tenant-Participating Conversion Application of such property, do certify my/our intent to purchase my/our occupied Unit No. I/We have seen and received a copy of the Tenant-Participating Conversion Application which lists the maximum sales prices for all tenant occupied units in this building and other information on the Tenant-Participating Conversion Appl ication to be filed with the city of Santa Monica, and this list indicates that the maximum sales price for my/our unit is to be $ - 5 - . . I/We further understand that this Intent to Purchase Form will be filed with the city for the purpose of establishing the percentage of tenants that may be expected to purchase units pursuant to this Article. I/We declare, under penalty of perjury, that all of my/our statements above are true an correct. (Signed and Separately Dated by Intending to Purchase Tenant(s) and Owner.) (1) Qualifying Building. Any building used for residential rental purposes in the City for which no eviction has occurred pursuant to Government Code Section 7060 et seq. (the Ellis Act) within a five (5) year period prior to the filinq of an Application for Tenant-Participatinq Conversion and for which no eviction has occurred pursuant to section 1806(h) of this Charter (relatinq to eviction for purposes of owner occupancy or occupancy by relative of the owner) within a two (2) year period prior to the filing of an Application for Tenant-Participating Conversion. (m) Senior Citizen. Any person sixty-five (65) years of age or older. - 6 - . . (n) Tenant. authorized tenant residential rental Tenant-participating is being processed. Any person who is an of an owner of a building for which a Conversion Application form of Tenant Ownership. Ownership in the either condominiums, community stock cooperatives, cooperative limited equity stock any other means authorized (o) apartments, associations, cooperatives or under state law. (p) Tenant-Participatinq Conversion. Any conversion to tenant ownership implemented pursuant to this Article. (q) Tenant's Sales Price. The maximum price for each unit as set forth in the Tenant-Participating conversion Application. Santa Monica city Charter Section 2002 shall be amended to read as follows: SECTION 2002. Application for Tenant participating conversion. An application for a Tenant-Participating Conversion shall be complete if it meets the following requirements: - 7 - . . (a) Identifies the building, and its owner, which is the subject of the appl ication and contains a declaration that such building is a qualifying building. (b) Sets forth, for each tenant occupied unit, the following sales information: (1) The maximum sales price for each unit. (2) The minimum down payment for each unit. (3) If seller financing will be offered, the minimum amount to be financed, the maximum rate of interest and the minimum term of the loan offered by the seller. (c) Sets forth, for following common areas, budget information: each unit, maintenance the and (1) The plan for the ass ignment and use of parking spaces. (2) The plan for the use of all common area facilities. ( 3 ) The occupancy and management plans and policies. - 8 - . . (4) A list of all repairs and alterations, if any, which will be performed before the close of the first escrow. (5) The plan for allocating costs and expenses for the building. (6) A prepared monthly maintenance budget based upon actual maintenance expenses for at least the preceding two years plus a reserve fund which states the monthly maintenance assessment for each unit. (7) The procedures for allocation and use of such reserve funds. (d) Contains a declaration with the following information: (1) That there has been a building inspection report of the accessible portions of the entire building, including but not limited to, the roof, walls, floors, heating, air conditioning, plumbing, electrical systems or components of a similar or comparable nature, and recreational facilities of the building prepared by a Building Inspection Service or similar agency within the preceding three (3) months. - 9 - . . (2) That, for each tenant occupied unit, a written statement setting forth any substantial defects or malfunctions identified in the building inspection report regarding the unit and the common areas has been delivered to the unit or a tenant occupying the unit. (3) That, for each tenant occupied unit, a copy of the complete building inspection report has been delivered to the unit or a tenant occupying the unit. (e) Sets ownership for submitted. forth which the the form of tenant application is (f) Is signed by cosigning tenants occupying not less than two-thirds (2/3) of all the residential units in the building. If there is more than one tenant in a unit, the signature of only one tenant shall be required. For purposes of this subsection, an owner of the building shall be deemed a cosigning tenant if: (1) the owner has continuously resided at the buildinq as his or her principal place of residence for at least six months prior to the date the owner - 10 - . . beqan to solicit tenant approval for the TORCA conversion and (2) the building has not previously been withdrawn from the residential rental business pursuant to Government Code section 7060 et seq., unless the owners were tenants in the property at the time of the withdrawal. (g) Identifies the cosigning tenants and the units occupied by such tenants and lists all other tenants known to the owner in the building and the units they occupy. (h) contains a declaration that the signature of each cosigning tenant was obtained only after the delivery, in writing, to such tenant of the information required in Subsections (a) (b) (c) (d) and (e) of this section. (i) Contains a declaration lawful notices have been given application for conversion. that of all the (j) Has attached to the application statements of Tenant Intent to Purchase, signed by Intending to Purchase Tenants occupying not less that fifty percent (50%) of the total number of residential units in the building. If there is more than one - 11 - . . tenant in a unit, the signature of only one tenant shall be required. For purposes of this subsection, an owner of the buildinq shall be deemed an intending to purchase tenant if: (1) the owner has continuously resided at the building as his or her principal place of residence for at least six months prior to the date the owner beqan to solicit tenant approval for the TORCA conversion and (2) the ~uildinq has not previously been withdrawn from the residential rental business pursuant to Government Code section 7060 et seq., unless the owners were tenants in the property at the time of the withdrawal. (k) contains a declaration that in obtaining the signatures of cosigning tenants ~nd intendinq to purchase tenants, the owner nei ther offered nor agreed to pay money or other financial consideration to participatinq tenants if the tenants would release all riqhts that they had to purchase ~ rental unit in the buildinq. (l) contains a declaration that in obtaining tenants and the siqnatures of consiqninq intending to purchase tenants, - 12 - . . nei ther the owner nor the owner's aqent or representative coerced a tenant to sign by threatening that the owner, or any successor thereof, would cease operating the property as residential rental property pursuant to government Code Section 7060 et seq. (lithe Ellis Act") if the proposed conversion of the building pursuant to this Article did not occur. (m) That, for each tenant occupied unit, a Tenant Intent to Purchase has been delivered to the unit or a tenant occupying the unit. Santa Monica City Charter section 2004 shall be amended to read as follows: SECTION 2004. Approval or Denial of Tenant Participating Conversion Application. A Tenant-Participating Conversion Application shall be approved or denied wi thin the time periods set forth in Section 2003 of this Article and in accordance with the following standards: (a) A Tenant-Participating Conversion Application, along with any required tentative subdivision map or tentative parcel map shall be denied if the - 13 - . . Tenant-Participating Conversion Application fails to meet any of the requirements of this Article, was the result of fraud, misrepresentation, or threat or similar coercion, or fails to meet any mandatory requirements of the Subdivision Map Act of the state of California. (b) A Tenant-Participating Conversion Application, along with any required tentative subdivision map or tentative parcel map, shall be approved if it meets the requirements of this Article and shall be subject to the following conditions and no others: (1) The owner must file with the city written consent to each condition imposed in connection with the approval of a Tenant-Participating Conversion Application. The written consent shall be filed prior to the approval of any required final subdivision map or final parcel map, or if no such map is required, within six (6) months from the date of approval of the Tenant-Participating Conversion Application. The filing of such written consent shall constitute an agreement, with the city of Santa Monica and each participating tenant, - 14 - . . binding upon the owner and any successors in interest, to comply with each and every condition imposed in connection with approval of a Tenant-Participating Conversion Application. The city and any participating tenant shall have the right to specific enforcement of this Agreement in addition to any other remedies provided by law. (2) The owner shall offer and continue to offer the exclusive right to purchase each rental unit in the building to the participating tenant thereof upon the terms set forth in the application, without change, for a period of not less than two (2) years from the date of final approval by the California Department of Real Estate or the date the first unit in the building is offered for sale, if no approval by the California Department of Real Estate is required. Unless a participatinq tenant has already provided the owner with written acceptance of the offer, the Tenant's Sale Price may he adjusted at the beginning of the second year according to any change reflected in the Price Index occurring during the preceding year. Upon the written acceptance of the offer by the participating tenant at - 15 - . . any time wi thin the two year period, escrow shall open within thirty (30) days from the written acceptance by the participating tenant. Unless otherwise agreed by the parties, the period of the escrow shall not exceed sixty (60) days. (3) No participating tenant shall at any time after the approval of the Tenant-Participating Conversion Application be evicted for the purpose of occupancy by the owner, occupancy by any relative of the owner, or for demolition of the unit. In the event the participating tenant does not exercise his or her right to purchase within the time period set forth in this Article, the owner may transfer the unit without any price restriction to the participating tenant or any other person. However, in the event such transfer is to someone other than the participating tenant, the transfer shall be expressly made subj ect to the rights of the participating tenant to continue to occupy the unit as provided for in this Article. (4) Each unit shall at all times remain subject to all the terms and conditions of Article XV!II of this Charter, except Section 1803(t}, before, during and - 16 - . . after any Tenant-Participating Conversion. If any unit is rented, the maximum allowable rent for each unit shall be no greater than the maximum allowable rent allowed under Article XVI!! of this Charter. (5) The building may be required to comply only with the applicable laws, including the building, safety, and zoning codes, which were in effect as of the date the building was constructed. No new, additional requirements including, but not limited to, parking, room size, or interior or exterior improvements of any kind, may be imposed as a condition , either directly or indirectly, of the Tenant-Participating Conversion. Notwithstanding the above, the ci ty may impose reasonable health or safety requirements consistent with this Article upon such buildings provided that such requirements uniformly apply to all similar multiresidential structures in the City of Santa Monica, regardless of the form of ownership of the building. (6) Prior to the approval of any required subdivision map or final parcel map for the Tenant-Participating Conversion, or if no such map is required, prior to the - 17 - . . filing of the written consent required by Subdivision (b)(l) of this Section, each participating tenant shall be informed in writing, in a form approved by the city, of his or her rights under this Article. (7) In addition to the protections of Subdivision~ (b)(3) and (b) (4) of this Section: (A) All non-purchasing Participating Tenants who are senior citizens or disabled on the date of filing the Tenant-Participating Conversion Application and who personally occupied a rental unit in the qualifying building continuously for at least six (6) months immediately preceding the date of the filing of Tenant-Participating Conversion Application shall be given the nonassignable right to continue to personally reside in their unit as long as they choose to do so subject only to just cause evictions provided that the eviction is not for the purpose of occupancy by the owner, occupancy by any relative of the owner, or for demolition of the unit. In addition, should the maximum allowable rent provision of Article XVIII of this Charter no longer apply, the rent for each such unit - 18 - . . shall be adjusted annually to allow an increase of no more than the increase in the Price Index plus a reasonable, pro rata share of capital improvements for the buildings common areas or agreed to capital improvements for the unit. within sixty (60) days after the approval of a Tenant-Participating Conversion Application, any senior citizen participating tenant who is entitled to the protections of this Subdivision may designate in writing the name of one person who is entitled to continue living in the rental unit under the same terms as the senior citizen if the senior citizen pre-deceases him or her and if the person designated is residing in the unit at the time of the death of the senior citizen. The person designated by the senior citizen must be a lawful occupant of the unit, at least fifty-five (55) years of age on the date of the filing of the Tenant-Participating Conversion Application, and must have resided in the unit for a continuous period of six months prior to the filing of the Tenant-Participating Conversion Application. - 19 - . . (B) All other non- purchasing Participating Tenants who personally occupied a rental unit in a qualifying building continuously for at least six (6) months immediately preceding the date filing the Tenant-Participating Conversion Application shall be given the nonassignable right to continue to personally reside in their unit subject only to just cause eviction for a period of five (5) years form the date the first unit is offered for sale. No eviction shall be allowed during this time period except for just cause provided the eviction is not for the purpose of occupancy by the owner, occupancy by any relative of the owner, or demol i tion of the unit. In addition, during this time period, should the maximum allowable rent provisions of Article XVIII of this Charter no longer apply, the rent for each unit shall be adjusted annually to allow an increase of no more than the increase in the Price Index plus a reasonable pro rata share of capital improvements for the building's common areas or agreed to capital improvements for the unit. All rights under this Subsection expire upon the termination of shall the - 20 - . . landlord-tenant relationship between the owner and the participating tenant entitled to the protection of this Subsection. For purposes of this Subsection, "Just cause" means one of the reasons set forth in Subdivisions (a) through (g) of section 1806 of this Charter. This Subsection shall be interpreted in accordance with Santa Monica city Attorney Informal Opinion Number 84-57. All amendments to this Subsection are declaratory of existing law. (8) Non-purchasing participatinq Tenants shall not be subject to eviction pursuant to Government Code Section 7060 et seq. ("the Ellis Act"). (9) No owner shall close the first escrow without completing the repairs and alterations aqreed to pursuant to Section 2002(c) (4) of this Article. The time to complete the repairs and alterations may be extended for a period not to exceed ninety (90) days if the tenant purchasinq the first uni t aqrees to the extens ion and the owner provides a bond approved by the California Department of Real Estate in an amount - 21 - . . sufficient to cover the cost of the work yet to be completed. The Building Officer of the City of Santa Monica may authorize a further extension of time to complete the repairs and al terations upon f indinq that the owner has diligently sought to make the repairs durinq the initial extension period and that additional time is reasonably required to complete the work. In addition to any other remedy provided by law, for each consecutive calendar day that an owner fails to complete the repairs and alterations agreed to pursuant to Section ?002(C) (4) in a timely manner, the owner shall be liable to the City in the amount of two hundred and fifty dollars ($250.00) for the first day and one hundred dollars ($100.00) per day for each day thereafter. No penalty imposed under this subsection ~hall exceed two (2) times the cost of the repairs or alterations that were not timely 90mpleted by the owner, but in no event shall the penalty be less than $250.00. (10) Prior to the filing and approval of the Tenant-Participatinq Conversion Application by the Planninq Commission or City Council on appeal, no - 22 - . . participating tenant shall offer or aqree to release all rights that he or she has to purchase a rental unit in the building in return for receiving money or other financial consideration from the owner. (11) The requirements of this Section shall be set forth in the Declaration of Covenants, condi tions, and Restrictions, or equivalent document, and shall specifically name the Participating Tenants in each unit entitled to the benefits and protections of this Article. The city shall review and approve for compliance with this Article the Covenants, Conditions, and Restrictions, or equivalent documents, prior to the approval of any required final subdivision map or final parcel map, or if no such map is required, prior to the filing of the written consent required by Subdivision (b) (I) of this Section. To the extent applicable, the requirements of this Article shall be made a part of the rental agreement with the Participating Tenants. ( 12 ) The owner shall pay Tenant-Participating manner required by Article. Conversion Tax in the the this Section 2008 of - 23 - . . (13) The Declaration of Covenants, Conditions, and Restrictions, or equivalent document, shall contain a non-discrimination clause in substantially the following form: UNo unit owner shall execute or file for record any instrument which imposes a restriction upon the sale, leasing or occupancy of his or her unit on the basis of sex, race, color, religion, ancestry, national origin, age, pregnancy, marital status, family composition, handicap, Acquired Immune Deficiency Syndrome (A.I.D.S.), sexual orientation, or the potential or actual occupancy of minor children. The association shall not discriminate on the basis of sex, race, color, religion, ancestry, national origin, age, pregnancy, marital status, family composition, handicap, Acquired Immune Deficiency Syndrome (A.I.D.S.), sexual orientation, or the potential or actual occupancy of minor children." (14) The approval of a Tenant-Participating Conversion Application shall expire if any required final subdivision map or final parcel map is not approved within the time periods set forth in - 24 - .. . . the Subdivision Map Act of the state of california, or if no such map is required, if the written consent required by Subdivision (b) (l) is not filed within the required time period. Santa Monica City Charter section 2009 is amended to read as follows: SECTION 2009. Use of Tax.. All monies derived from the Tenant-Participating Conversion Tax shall be annually appropriated by the City Council for only the following purposes: (a) In accordance with Section 2000(d} of this Article, to assist Low and Moderate Income Households in Tenant-Participating conversions to purchase or improve their units subject to an affordable repayment plan including interest, keyed to future income increases and gains on resale. Priority shall be given to assisting Low and Moderate Income Households in Limited Equity Tenant-Participating Conversions. For at least the first two (2) years from the receipt of the first payment of the Tenant-Participating Conversion Tax under this Article, a substantial portion of the tax proceeds shall be used for assisting - 25 - " . . Limited Conversions. (b) Up to one-sixth of the revenues derived from Section 2008 may be used to assist Middle Income Households in Tenant-Participating Conversions to purchase or improve their units if the city Council, by five (5) affirmative votes, determines that the needs of Low and Moderate Income Households have been fully satisfied. (c) To assist the city or a nonprofit housing development corporation to purchase units, for which a Tenant Participatinq Conversion Application has been approved, for lease or resale to Low, Moderate, or Middle Income Households, provided that any unit so acquired shall be subject to limited equity resale provisions. (d) To pay for reasonable and Equity Tenant-Participating necessary costs of administration of programs required to meet the purposes of this Section. bar070jhpadv - 26 -