Feature

The Implications of the McGoldrick Amendments

by Barbara Herzig

In August 2001, the San Francisco Apartment Association joined other real property groups as plaintiffs in Tom v. City and County of San Francisco, a legal challenge against amendments to the San Francisco Subdivision Code authored by Supervisor Jake McGoldrick. The aim of the prevent the formation of tenancies-in-common in buildings with three or more residential units. On January 11, 2003, the trial court finally entered its order in this case, deciding that the McGoldrick amendments were unconstitutional on two grounds. They violated both the right to privacy.

Effect on Tenancies-in-Common The main purpose of the McGoldrick amendments was to prevent multiple owners from occupying buildings of three or more units by prohibiting tenant-in-common owners from having rights of exclusive occupancy in those buildings. Anticipating a legal challenge, the drafters of the McGoldrick amendments included a provision indicating that as long as any litigation is pending against the legislation, the prohibition on rights of exclusive occupancy is stayed. This means that the prohibition on rights of exclusive occupancy has never gone into effect and that, with the trial court ruling, the prohibition will not go into effect unless and until the trial court decision is appealed and there is a final judgment either in the Court of Appeal or the California Supreme Court. The San Francisco Tenants Union, also a party to the lawsuit, announced that it intends to file an appeal. Should there be an appeal, several years will pass before there is a final decision in the litigation. If the Tenants Union is successful in its appeal, the McGoldrick amendments will impact the formation of new tenancies-in-common and the sale of units in tenancies-in-common at that time. There is nothing improper in selling a tenancy-in-common interest with a right of exclusive occupancy today, but that right of exclusive occupancy may not be valid in the future. Realtors and landlords involved in the formation.

Amendments to Subdivision Code
The McGoldrick amendments also made changes to the condominium conversion sections of the Subdivision Code, two of which were favorable to property owners. First, two-unit buildings occupied for a year by a single owner-occupant were exempt from the lottery. Second, buildings of five or six units were eligible for the condominium lottery when one owner occupied the building for three years prior to the date of the lottery. Unlike the transfer of exclusive rights of occupancy, the McGoldrick amendments to the San Francisco Subdivision Code concerning condominium conversions were not stayed by the legislation itself and have been in effect since August 2001. The effect of the trial court’s order is that on January 11, 2003, the law reverted back to what it was before the McGoldrick amendments were enacted. This means that for a two-unit building to be exempt from the lottery, both units in the building must be occupied by owners for one year. For a building with five or six units to be eligible for the lottery, three units must be occupied by owners for three years prior to the date of the lottery.

There are still some unresolved legal issues with respect to the effect of the McGoldrick amendments on condominium conversions. One question is what law the city should apply to conversion applications that were filed but not approved as of the date the trial court’s order was entered. Another question is whether an appeal will stay the effect of the trial court decision, in which case the more favorable lottery exemption for two-unit buildings and the one owner-occupant lottery rule for five- and six-unit buildings could go into effect once again. However, because of the complex practical, political and legal aspects to these questions, the answers to them are beyond the scope of this article. Landlords, Realtors, and their clients who could be impacted by either of these unresolved legal issues should consult with legal counsel.

Reprinted courtesy of the San Francisco Association of Realtor’s Advantage newsletter.