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SR-08-07-1990-7A ~ } ,; L(eL( --0/0 · 7-,4- AU6 7 1990 Santa Monica, California . CjED:PB:DKW:LM PCjcctpc108 council Mtg: August 71 1990 TO: Mayor and city Council FROM: City Staff SUBJECT: Tenant Participating Conversion (TPC) 108 To Allow The Conversion of An Eight unit Apartment Building To Condominiums at 1518 Yale street. It Was Determined That The Planning commission Did Not Have The Authority To Act on The Conversion Due To The Presence of One of The Building's Owners on The Planning commission. INTRODUCTION -r \{ \.0.- ~ rf"- ~p ~ (J c;. ~ I r This report recommends that the City Council approve the proposed eight unit tenant participating conversion subject to the findings and conditions contained herein. BACKGROUND This application for conversion was originally scheduled for the June 6, 1990, Planning Commission public hearing. Prior to the publ ic hear ing , it was determined that since an owner 0 f the building was a member of the Planning Commission, the proposed conversion should be brought before the City Council for public hearing. The City Council is therefore required to hear the subject request, and make the findings and conditions necessary to approve, conditionally approve or deny the subject conversion. This is an application for approval of a Tenant-Participating Conversion (TPC) submitted under the provisions of the Tenant ownership Rights Charter Amendment (TORCA) approved by the voters - 1 - 7-A AUG 7 199D -" . . of the .City of Santa Monica in June 1984. As required by the provisions of TORCA, the public hearing held by the Planning Com- L missionl or City Council, on the TPC application is held simul- taneously with the hearing on the tentative map for the conversion. The subject site contains a two story, eight unit apartment building constructed in August of 1947. There are 4 two bedroom/ one bathroom units, and 4 one bedroom/one bathroom units. The building meets parking standards in effect at the time of the its construction with the provision of 6 parking spaces. The ap- plication for conversion was accepted for filing by the City on February 2, 1990. Under a March 23, 1990 opinion issued by the City Attorney, an apartment building owner who resides in an apartment building of which they are an owner, cannot be considered a "cosigning ten- antI! (a tenant agreeing to the conversion) or an It intending to purchasel! tenant (a tenant who has an intent to purchase their unit) in a tenant participating conversion filed under the provi- sions of TORCA. Owners who are living in their buildings are therefore precluded from voting for a conversion. The subject conversion is the first tenant participating conversion to be reviewed under the aforementioned interpretation, and is adverse- ly impacted by said interpretation. Under Charter section 2001{n), a tenant is defined as "any person who is an authorized tenant of an owner of a residential rental - 2 - . . building for which a Tenant Participating conversion Application has been filed". A cosigning tenant is further defined as "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". Under the city Attor- ney's opinion, an owner of residential property could not be con- sidered a tenant since the owner is not occupying the property under the terms of a rental housing agreement, and is not an au- thorized tenant of the owner. The only exception would be if an "owner" does not actually hold an ownership interest in the prop- erty, but holds an interest in some other entity, such as a cor- poration or partnership, which owns the building. Even under this situation, the owner must demonstrates a landlord/tenant relationship with the corporation or partnership. Under the subject proposal, the owners constitute two of the six tenants agreeing to the conversion, and two of the four tenants agreeing to purchase their units. The title report indicates that Paul Rosenstein, Carol Nolan and Diane Perlov are in fact owners of the 1518 Yale street property. Records supplied by the applicant, however, indicate that rent payments were made to 1518 Yale street Associates, which in turn made the mortgage payments. While the 1518 Yale street Associates is not a formal corporation or partnership, it would appear that a tenant/landlord relation- ship is in existence. - 3 - . . By not allowing the owners of the subject building to act as "cosigning" tenants or "intending to purchase II tenants, the votes needed to process a tenant participating conversion are not met. In processing an application for conversion, the first step is filing a request for submittal appointment with the Planning Di- vision. Preliminary research is conducted by staff, and a formal appointment is scheduled with the applicant. At the submittal meeting, the application is reviewed for conformance with the submittal requirements of Article XX, Section 2002. If all re- quired items are provided, the application is accepted by the city pursuant to section 2003. If there is missing information, the application is not accepted, and an explanation of what is needed is given by staff. The subj ect application for conversion was submitted for staff review and accepted for filing on February 2, 1990. No objection letters were received by the City during the 25 day objection period. The application for subdivision was accepted as complete on April 2, 1990. Section 2004 (a) states that a Tenant Par- ticipating Conversion Application, along with any required sub- division map or tentative parcel map, shall be denied if the Ten- ant Participating Conversion Application fails to the meet the requirements of Article [XX], was the result of fraud, mis- representation, or threat of similar coercion, or fails to meet the requirements of the Subdivision Map Act of the state of Cal- ifornia. Through staff's acceptance of the tenant participating conversion application and tentative tract map, the grounds for - 4 - . . denial of the subject application would be if there were any al- legations of fraud, misrepresentation, ect., or if it is deter- mined that the requisite number of votes were not obtained. The applicant argues that since the tentative tract map is a vesting tract map, then the application for conversion should be reviewed under the Charter amendment as it was interpreted prior to the city Attorney's opinion. Until the March 23, 1990 memorandum from the city Attorney was issued, the city had processed and approved a number of conver- sion projects in which resident owners were considered as I'cosigning tenants" and "intending to purchase" tenants. Research by the applicant I s attorney indicates that there have been 27 projects where owners have been considered as tenants, all of which have been accepted by the city, approved by the Planning commission and with various documents relating to the conversions reviewed and approved by the City Attorney's office. Given this precedent, and the applicant's reliance on it, it would seem to be unfair to apply the new interpretation to proj- ect's submitted prior to City Attorney's March 23, 1990, memoran- dum. One other project, a three unit conversion, would be affected. staff is prepared to enforce the recent City Attorney interpreta- tion of the definition of "tenantll on all applications submitted after March 23, 1990. The owner/signatory issue aside, The City Council, may, however, deny this application ONLY upon a specific - 5 - . . finding that the proposed conversion fails to meet the require- ments of Article XX of the city Charter (TORCA) or the state Sub- division Map Act or is the result of fraud, misrepresentation, or threat or similar coercion. The conversion meets the require- ments of Article xx as they were interpreted at the time of ap- plication submittal, and as such should be approved. This recom- mendation is at variance with the city Attorney's opinion and recommendation on this matter. Should the council wish to apply the City Attorney's opinion to this and the other affected proj- ect, staff will prepare appropriate findings for denial based upon the Council action. with the application of the previous interpretation regarding the owner/tenant issue, staff finds no basis for denial of this ap- plication and therefore recommends approval with the findings and conditions set forth below. If the city Council, however, deter- mines that in this particular situation owners should not be con- sidered tenants, the application must be denied based on the ap- plicant's failure to obtain the required number of votes agreeing to the conversion and intending to purchase. If this is the case, staff will return to the city Council at a later date with negative findings. As the Council knows , it approved revised Charter language for voter consideration which would specifically address the issue of owner/tenant eligibility to sign as a co-signing and intending to purchase tenant. It seems clear that the intent of the Council is to allow projects such as this one to move forward. - 6 - . . Summary Information Number of Total Units 8 units with Cosigning Tenants 6 (75% of total units) 4 (50% of total units) Units with Tenants Signing Intent to Purchase Units with Senior or Disabled Tenants 2 senior citizens Estimate of Conversion Tax $43,300.00 on sale of all units Owner(s) Carol Nolan, Diane Per- lov and Paul Rosenstein Last Hearing Date per Sub. Map Act June 6, 1990 wi ext. of time granted by applicant. The subject building is a Qualifying Building Qualification: Building per Sec. 2001 (1) of Article xx of the city Charter, as declared by the applicant and confirmed by the city Planning Di- vision, the Building and Safety Division and the Rent Control Administration office. objections: No objections to this Tenant-Participating Conver- sion were filed with the city within the 25 day objection period following notification to all building tenants of the Tenant- Participating Conversion Application, nor were any objections received prior to the time of distribution of this report to Planning Commissioners. Additional Information: Additional information may be found in the attached portions of the Tenant-Participating Conversion Ap- plication and Tentative Map Application. - 7 - . . BUDGET/FINANCIAL IMPACT The recommendation presented in this report does not have an immediate budget or fiscal impact. As each unit is sold a conversion tax per Section 2008 of Article xx is due in an amount equal to twelve times the monthly maximum allowable rent for that unit. These taxes will be used to assist low and moderate income households to purchase or improve their units subject to affordable repayment per Section 2009 of Article xx. RECOMMENDATION A Tenant-Participating Conversion, along with any required tenta- tive map, may only be denied if it fails to meet the requirements of Article XX of the City Charter, is the result of fraud, mis- representation, or threat or similar coercion, or fails to meet any mandatory requirement of the Subdivision Map Act. In that this application meets the requirements of Article XX and all mandatory requirements of the state Subdivision Map Act, it is respectfully recommended that Tenant-Participating Conversion 108 and vesting tentative tract map 49372 be approved with the fallowing findings and conditions: Tenant-Participating Conversion Findings 1. This Tenant-Participating Conversion Application meets the requirements of Article XX of the City Charter of the city of Santa Monica along with all mandatory requirements of - 8 - . . the Subdivision Map Act of the State of California. [reference Sec. 2004 (a), Article XX] 2. The Tenant-Participating Conversion Application has been deemed complete and accepted for filing. At the time of filing it met the requirements of section 2002 of Article XX of the City Charter for a complete application. The subject application: (a) Identifies the building, its owner and its tenants and contains a declaration that such building is a Qualify- ing Building, the specific details of which are incor- porated into these findings by reference. (b) Sets forth, for each tenant occupied unit, the follow- ing sales information, which is incorporated into these findings by reference: 1) The maximum sales price for each unit. 2) The minimum down payment for each unit. 3) If seller financing is offered, the minimum amount to be financed, the maximum rate of interest and the minimum term of the loan offered by the seller. (e) Sets forth, for each unit, the following common area, maintenance and budget information, which is incorporated into these findings by reference: 1) The plan for the assignment and use of all parking spaces. - 9 - . . 2) The plan for the use of all common area facilities. 3) The occupancy and management plans and policies. 4) A list of all repairs and alterations, if any, which will be performed before the close of the first escrow. S) 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 the 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 build- ing, including but not limited to, the roof, walls, floors, heating, air conditioning, plumb- ing, electrical systems or components of a simi- lar or comparable nature, and recreational facilities of the building prepared by a Building Inspection service or similar agency within the preceding three (3) months. 2) That, for each tenant occupied unit, a written - 10 - . . statement setting forth any substantial defects or malfunctions identified in the building in- spection 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 forth the form of tenant ownership for which the application is submitted--Condominium. (f) Is signed by cosigning tenants occupying 75% (not less than two-thirds) of all the residential units in the building. (If there is more than one tenant in a unit, the signature of only one tenant is required. ) (g) Identifies the cosigning tenants and the units occu- pied by such tenants and lists all other tenants known to the owner in the building and the uni ts they occupy. (h) contains a declaration that the signature of each cosigning tenant was obtained only after the deliv- ery, in writing, to such tenant of the information required in subsections (a) (b) (c) Cd) and (e) of this Section. - 11 - . . (i) Contains a declaration that all lawful notices have been given of the application for conversion. (j) Has attached to the application statements of Tenant Intent to Purchase, signed by Intending to Purchase Tenants occupying 50% (not less than fifty percent) of the total number of residential units in the building. (If there is more than one tenant in a unit, the signature of only one tenant is required.) (k) That, for each tenant occupied unit, a Tenant Intent to Purchase has been delivered to the unit or a ten- ant occupying the unit. 3. The following procedures have been followed in the pro- cessing of this Tenant-Participating Conversion Application: (a) A Tenant-Participating Conversion Application was accepted for filing by the city and meets the requirements of Section 2002 of Article XX of the City Charter. (b) The Tenant-Participating Conversion Application was filed by the owner on February 2, 1990, not less than forty (40) days prior to the filing of the ap- plication for the tentative sUbdivision/parcel map on March 26, 1990. (c) within five (5) days of the filing of the Tenant- Participating conversion Application, the City sent - 12 - . . notice to every tenant in the building stating that a Tenant-Participating Conversion Application had been filed and that any obj ections thereto may be filed with the city within twenty-five (25) days from the date of the notice. (d) Upon the filing of the application for the required tentative SUbdivision/parcel map, the Tenant- Participating Conversion Application and required map were scheduled for hearing and processed in ac- cordance with the procedures for the processing of subdivision maps. Tentative Map Findings 1. The proposed subdivision, together with its provisions for its design and improvements, is consistent with the ap- plicable general and specific plans as adopted by the city of Santa Monica. [Reference California Governm.ent Code Sec. 66473.5 and Santa Monica Municipal Code Sec. 9362 (a) ] 2 . The owner (s) and each tenant on the subj ect property received copies of this staff report and recommendation at least three days prior to this public hearing. 3. Notification of this hearing has been in conformance with Section 9360 of the Santa Monica Municipal Code. 4 . Each of the tenants of the proposed condominium proj ect has received, pursuant to Government Code section 66452.9, - 13 - . . written notification of intention to convert at least 60 days prior to the filing of the tentative map pursuant to section 66452. Each such tenant, and each person applying for the rental of a unit in such residential real proper- ty, has, or will have, received all applicable notices and rights now or hereafter required by the Subdivision Map Act. Each tenant has received or will receive 1.0 days written notification that an application for a public re- port will be, or has been, submitted to the Department of Real Estate, and that such report will be available on request. The written notices to tenants shall be deemed satisfied if such notices comply with the legal require- ments for service by mail. 5. Each of the tenants of the proposed condominium project has been, or will be, given written notification within 10 days of approval of a final map for the proposed conversion. 6. Each of the tenants of the proposed condominium project has been, or will be, given 180 days written notice of intention to convert prior to any termination of tenancy due to the conversion or proposed conversion. This will not alter or abridge the rights or obligations of the parties in performance of their covenants, including, but not limited by sections 1941, 1941.1. and 1941. 2 of the civil Code, and set forth herein as conditions of approval. - 14 - . . 7. Each of the tenants of the proposed condominium proj ect has been, or will be, given notice of an exclusive right to contract for the purchase of his or her respective unit upon the same terms and conditions that such unit will be initially offered to the general public or terms more favorable to the tenant. The right will run for a period of not less than 90 days from the date of issuance of the subdivision public report pursuant to section 11018.2 of the Business and Professions Code, unless the tenant gives prior written notice of his or her intention not to exer- cise the right. This will not alter or abridge the rights or obligations of the parties set forth herein as condi- tions of approval. 8. This proj ect has been found to be categorically exempt from the California Environmental Quality Act of 1970 and state and local guidelines adopted thereunder. Note: Individual findings required for approval of non-Tenant- Participating Conversions specified in Santa Monica Municipal Code Sec. 9l22F either are inconsistent with or redundant with the requirements of Article XX and therefore are not applicable to or necessary for approval of Tenant-Participating Conversions. Conditions 1. The owner shall agree to each condition imposed in connec- tion with the approval of a Tenant-Participating Conver- sion Application. Written consent shall be filed prior to the approval of the required final parcel/subdivision map - 15 - . . and shall be in a form approved by the City Attorney. The filing of such written consent shall constitute an agree- ment, with the city of Santa Monica and each participating Tenant, binding upon the owner and any successors in interest, to comply with each and every condition imposed in connection with approval of this 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. At the beginning of the second year, the Tenant Sale Price may be adjusted according to any change reflected in the Price Index [as defined in section 2001(j) of Article XX of the city Charter) occurring during the proceeding year. Upon the wri tten acceptance of the offer by the Par- ticipating Tenant at any time within the two year period, escrow shall open within thirty (30) days from the written acceptance by the participating Tenant. Unless otherwise - 16 - . . 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 ap- proval of this Tenant-Participating Conversion Application be evicted for the purpose of occupancy by the owner, oc- cupancy 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, 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 subject to the rights of the Par- ticipating Tenant to continue to occupy the unit as pro- vided for in Article XX of the City Charter. The provi- sions of California Government Code Section 7060 et seq. ("The Ellis Act") shall not be used to evict any non- purchasing participating Tenant. 4. Each unit shall at all times remain subject to all terms and conditions of Article XVIII of the city Charter, ex- cept Section 1803 (t), before, during and 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 Ar- ticle XVIII of the City Charter. - 17 - . . 5. Prior to the approval of the required final parcell subdivision map for the Tenant-Participating Conversion, each participating tenant shall be informed in writing, in a form approved by the city, of his or her rights under Article XX of the City Charter. 6. 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 this qualifying building con- tinuously for at least six (6) months immediately preced- ing the date of the filing of this Tenant-Participating Conversion Application shall have a right without time limitations to occupy their units subject to the provi- sions of Article XVIII of the City Charter and shall be given the non-assignable right to continue to personally reside in their unit as long as they choose to do so sub- ject only to just cause evictions provided that the evic- tion 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 the City Charter no longer apply, the rent for each such unit may be adjusted annually to allow an increase of no more than the increase in the Price Index [as defined in Section 200l(j) of Arti- cle XX of the City Charter] plus a reasonable pro rata share of capital replacements for the buildings's common areas or agreed to capi tal improvements for the unit. - 18 - . . Within sixty (60) days after the approval of this Tenant- Participating Conversion Application, any senior citizen Participating Tenant who is entitled to the protections of this provision 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 predeceases 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 this Tenant-participating Conversion Application. All other non-purchasing Participating Tenants who per- sonally occupied a rental unit in this qualifying building continuously for at least six (6) months immediately pre- ceding the date of filing of this Tenant-Participating Conversion Application shall have a right without time limitations to occupy their units subject to the provi- sions of Article XVIII of the City Charter and 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 from 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 demolition of - 19 - . . the unit. In addition, during this time period, should the maximum allowable rent provisions of Article XVIII of the City Charter no longer apply, the rent for each unit may be adjusted annually to allow an increase of no more than the increase in the Price Index [as defined in Sec- tion 2001 (j) of Article XX of the City Charter] 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 condition shall expire upon the ter- mination of the landlord-tenant relationship between the owner and the participating tenant entitled to the protec- tions of this condition. For purposes of this condition, "just cause" means one of the reasons set forth in subdivisions (a) through (g) of section 1806 of the City Charter. 7. The requirements of these conditions shall be set forth in the Declaration of Covenants, Conditions, and Restric- tions, or equivalent document, and shall specifically name the Participating Tenants in each unit entitled to the benefits and protections of Article XX of the City Charter. The City Attorney shall review and approve for compliance with Article XX the Covenants, Conditions, and Restrictions, or equivalent documents, prior to the ap- proval of the required final parcel/Subdivision map. To the extent applicable, the requirements of Article XX - 20 - . . shall be made a part of the rental agreement with the Par- ticipating Tenants. 8. The owner shall pay the Tenant-Participating Conversion Tax in the manner required by section 2008 of Article XX of the City Charter. The Tenant-Participating Conversion Tax shall be paid by the owne.r to the. Ci ty Treasurer on each Tenant- Participating Conversion unit in an amount equal to twelve (12) times the monthly maximum allowable rent for the unit at the time the tax is due and payable. If there is no monthly maximum allowable rent, the tax shall be computed on the basis of the monthly fair rental value of the unit. The Tenant-Participating Conversion Tax shall be due and payable at the time of approval of the required final parcel/subdivision map. Payment of the tax may be de- ferred until sale of the unit by the owner executing a lien in the form approved by the city. Upon payment of the tax, or upon a determination that a unit is exempt from the tax in accordance with subdivision (d) of section 2008 a release of lien shall be filed by the City with respect to each unit for which the tax has been paid or which has been determined to be exempt from the tax. 9. The Declaration of Covenants, Conditions, and Restric- tions, or equivalent document, shall contain a non- discrimination clause in substantially the fallowing form: - 21 - . . "No unit owner shall execute or file for record any in- strument which imposes a restriction upon the sale, leas- ing or occupancy of his or her unit on the basis of sex, race, color, religion, sexual orientation, ancestry, na- tional origin, age, pregnancy, marital status, family com- position, or the potential or actual occupancy of minor children. The association shall not discriminate on the basis of sex, race, color, religion, sexual orientation, ancestry, national origin, age, pregnancy, marital status, family composition, or the potential or actual occupancy of minor children.1I 10. Approval of the Tenant-participating conversion Applica- tion shall expire if the required final parcel/subdivision map is not approved within the time period set forth in Condition 11. 11. The tentative parcel/subdivision map shall expire 24 months after approval, except as provided in the provi- sions of California Government Code section 66452.6 and Sections 9380-9382 of the Santa Monica Municipal Code. During this time period, the final map shall be presented to the city of Santa Monica for approval. If the tenta- tive map is a vesting tentative map pursuant to California Government Code section 66474.2, the provisions of Santa Monica Municipal Code Section 9325 also shall apply. 12. The applicant shall comply with all requirements set forth in Government code Section 66427.1, including notification - 22 - . . of tenants regarding application for a public report to the Department of Real Estate and notification of tenants regarding approval of a final map for the conversion. 13. The developer/applicant shall provide the Engineering De- partment of the City of Santa Monica with one Dizal Cloth print reproduction and microfilm of each sheet of the final map after recordation. 14. The effective date of this action shall be ten (10) calen- dar days from the date of Planning commission determina- tion or, if appealed per Section 9366 (SMMC), at such time as a final determination is made by the City Council. l5. For information purposes, the following persons are iden- tified in the application as participating tenants: Elizabeth paganelli, Diane Perlov, William Bracken and Michelle Fine, Carmen Vasquez, Carol Nolan and Paul Rosen- stein, and Marcie Adelsohn. ATTACHMENTS: A. Summary Cover Sheet B. Unit/Tenant Info. c. Seller Financing Info. D. Parking Plan E. Summary CC+R1s F. Tenant Notice G. Correspondence (if any) H. Radius Map I. Tract/Parcel Map Prepared by: Larry Miner, Associate Planner D. Kenyon Webster, Principal Planner Paul Berlant, Director of Planning Community and Economic Development Department - 23 -