By Payam Nejad |
San Francisco’s Community Opportunity to Purchase Act (COPA) went into effect September 3, 2019. COPA applies to all buildings with three or more residential rental units, regardless of other uses on the same lot. It gives qualified nonprofits (QNPs) the right of first offer, and/or the right of first refusal to purchase certain properties offered for sale in the City.
There are 16 QNPs now. Their mission is to prevent tenant displacement and promote the creation and preservation of affordable rental housing. What this ordinance means for our business is that when we sign a listing agreement, we must first offer the property to the QNPs. The QNPs have five days to express interest. If none do, then we can proceed with our marketing plan. If a QNP expresses interest, then they have another 25 days to present an offer. The Seller may accept, counter, or reject the offer. If the QNP and Seller do not go into contract with each other the Seller can then go to the open market.
Once an offer from the open market is received that the Seller would like to accept, the Seller must offer to Sell the Building on the same terms and conditions to any QNP eligible for the Right of First Refusal. The QNPs with the Right of First Refusal are the ones that expressed interest during the first five days of being noticed that the building has been listed for sale.
If the QNP(s) can’t match the market offer, then the Seller may proceed with the market Buyer. If there is a material change to the property, disclosures, or financials or if a Buyer asks for a credit the Seller must then present all QNPs with this new offer, and the Right of First Refusal process is renewed.
When a QNP puts a building under contract the tenants need to provide answers to a questionnaire during their due diligence period so the QNP can apply for financing from the City. There is a point system to the questionnaire and the tenants’ household income and employment are considered. The tenants would not be protected under San Francisco Rent Control if a QNP buys the building. The affordability formula for COPA purchased properties states that the average of all rent and utilities paid by all residential tenants must not exceed the amount that is equal to 30% of 80% of Area Median Income, as adjusted for household size. QNPs have the sole responsibility to ensure that such average is maintained for a building purchased under COPA. Gross household income of any new tenants in the building will not exceed 120% of Area Median Income, as adjusted for household size. Some tenant’s rents would be higher if a QNP owned their building.
Please feel free to contact the DL Team or visit this link to the City’s website for more details about this
ordinance: https://www.sf.gov/information/community-opportunity-purchase-act-copa