Are condos in Oakland exempt from Rent Control?

Question

Hi All,I am a newbie here and is interested in investing in Oakland. I am seeking help with the following questions regarding a property i am considering to put an offer:1. Are condominiums in Oakland exempt from Rent adjustment program?I am new to this so not sure how to verify this. I was provided with this by the seller: If you go to the Oakland rent board website you do see that Condos are exempt from rent control, but you can only raise rent every 12 months. http://rapwp.oaklandnet.com/issues/exemptions/2. The property I am looking at has a tenant on month to month base lease and had their yearly rent increase this year. So I assume I cannot increase rent when I buy the property till next year.However, the seller is suggesting that since it is a condo it is not under rent control and a new owner can increase the rent to the market value. However, per the seller, there is an eviction control on condos.I think the property has potential if they current tenant can be evicted. My strategy is to next year increase the rent to the market value so if the tenant cannot afford they leave or if can we will sign a new contract.Can you please all give me some feedback if it is even possible or i am getting into a bad deal. Appreciate your help.Thanks.Thanks,Asm

Arlen Chou · Answer

Account Closed you can just walk in to RAP and speak to somebody or give them a call. Look up Costa Hawkins and it is very clear. However, RAP is pretty much on the side of the renter, so they might hassle you. Others that I have advised this strategy have been successful in getting the certificate... but "your mileage my vary."I am not an attorney so don't take this as legal advice.

Arlen Chou · Answer

Account Closed I own several units in Oakland and deal with RAP quite a bit... If you buy a condo it is exempt from RAP under Costa Hawkins. That does not mean that they won't try to make your life harder... As for raising rents, what you can do and what you should do are 2 different things. If you have the capacity to wait for the 1 year period, I would personally wait. It just takes away a point of potential argument. During your waiting period, I would suggest that you apply for a "certificate of exemption" from RAP. Unfortunately, that process takes a few months, but once you have that certificate then it is crystal clear for everybody that RC does not apply to your property.

Arlen Chou · Answer

@Amit M. interesting article. The certificate of exemption is from RAP and certifies that the property is exempt from the Rent Adjustment Ordinance of Oakland. The certificate basically is RAP stating that it has no jurisdiction over the property itself. It does not keep tenants from trying to take you to court.As for "construed eviction", I think that would be a pretty weak "legal" case against a rate increase to market rents. However, in this atmosphere, people can take you to court over pretty stupid things just for the sake of doing it... So I am sure somebody will take that route sooner or later just to try it.In both of the examples in the article, the LL raised rents substantially past market rents and that speaks to something totally different. I am pretty sure that if the LL had just gone to market rates, this would be a non-issue. At least I hope it would...

Amit M. · Answer

be vewy vewy carefool (sic)...this gets vewy vewy tricky!Read: https://modernluxury.com/san-francisco/story/how-o...Basically It all boils down to how "eviction control" gets defined, and it looks like a watershed case is about to get handed matter.The issue: owner wants to get rid of tenant. Drats I can't just give them a typical 30/60 day notice (eviction control.) okayyyeee, I'll just raise their rent to something crazy, or (a much wiser move) as high as I can possibly justify by comps from CL ads, and hope they won't be able to afford it, or get pissed at a large increase, and just move. Now usually this will work. BUT, the tenant can just move out, smile at you, and turn around, hire a attorney (for free btw) and claim your rent increase amounts to a construed eviction. Per the article, often these cases get settled (read: you pay the tenant $$$ up the ying yang for them to "go away".)* If the impending case above ends up favors tenants, it will make it that much more difficult to raise the rent to change the tenancy. So like I said, be vewy vewy carefool...and I'd definitely talk this over with a competent local RE attorney. * if you read the article above. Benral Heights Deb's is basically laughing all the way to the bank. Even If 30% of her settlement went to the attorney and/or taxes, she probably checked out of the Bay Area, brought a nice home debt free somewhere else, and enjoying a new found semi financial independence. Thanks clueless LL for making my year! (Hint: you don't want to be THAT landlord!)Btw, getting that exemption certificate is nice, but doesn't mean jack regarding the above liability. To be fully unencumbered from rent control, you need to own post 1979 (or whatever the year is for Oakland) built property. Then there is no eviction control either, and you can just terminate the tenancy with a proper 30/60 day notice once their lease ends.

Brian Garlington · Answer

Account ClosedThere are other properties out there my friend so don't get emotionally attached to a potential investment property. You can ask that the property be delivered vacant....but don't count on it. Also, trying to raise the rent to some high number to "force them out" can have lots of bad consequences (starting off on a bad note with your newly acquired tenant can cause them to make your life a living hell whether they stay in the property or not....you'll also have bad kharma which is never a good thing also)

Arnuv H. · Answer

Hi, @Arlen Chou - Is there a way to confirm if it will be possible to get an exempt certificate? I spoke to the seller and he is suggesting that he is giving a deal as he does not want to complicate the sale process by requesting a certificate. He is suggesting to meet an attorney to verify that the property will be eligible for exemption. @Sam Shueh thanks for your reply. Here in the Bay area, the market is very competitive. Buyers often need to waive all contingencies to get a property. I do not think they will entertain that condition. How is the market in Campbell? Thanks for your input.

JingJing He · Answer

What is your end goal? Units in Oakland with tenants are selling at the cheaper price in general for a reason!

Amit M. · Answer

@Arlen Chou the main issue of the case is that if LL loses, then all of a sudden "market rent" gets legislated, and defined at the whim of rent boards, and litigious tenant lawyers. Even if you raise to market, the tenant will likely see that as hostile, so you're exposed to all the headaches above. Definitely an interesting case to watch.

Matt K. · Answer

I would take a long hard look at the numbers, might find the potential hassle isn't worth it. You might also be able to take a more firm stance on asking for certain things because with out them the "potential" deal isn't actually a deal.

Sam Shueh · Answer

Easiest is to get the place vacant as condition of purchase.