“Coppa” with two “p’s “ is a delicious dried pork salume of Italy and Corsica. “COPA” is a new SF law that requires owners of buildings with three or more residential units to give a right of first offer and a right of first refusal to a designated set of non-profits before they can sell their building to a third party. If a seller fails to comply with the statutory requirements, they may well feel that they’ve been through the COPA meat-grinder. Penalties can include disgorgement of profits and a fine equal to 10% of the sale price they received.
COPA (for “Community Opportunity to Purchase Act”) is intended to aid non-profits that are active in efforts to preserve affordable housing. The rationale behind the Act appears to be that by providing qualified non-profits a first and second shot at buying a building subject to the Act, more buildings will come under the control of these non-profits who are then required to keep low-rent tenancies in place “in perpetuity.” However, there’s no requirement that sellers accept below-market rate offers from the non-profits; no additional mechanism for getting more money to the non-profits so that they can compete with market-rate offers; and no proof that a market-rate sale to a private party necessarily results in evictions or rental increases anyway. Indeed, the City has enacted numerous laws over the decades to make it increasingly hard for owners of multi-tenant buildings to increase rents (for buildings constructed before June 1979) and to permit owner move-in evictions. Buyers are already willing to pay a premium for two-unit buildings because, for the moment at least, they are not subject to San Francisco’s condo conversion moratorium whereas buildings with three or more units are. This legislation, I suspect, will only increase the delta. Perhaps that’s the point: by burdening buildings of three or more units with this additional legislative hurdle to sale, they’re making them more affordable for non-profits to potentially buy.
That kind of reasoning seems like a stretch to me. More likely, in my view, this will result in extra fees for attorneys who have to guide sellers of these buildings through a potential minefield. I have not researched this but I suspect the reason why non-profits are not buying up more buildings to “preserve” low-rental housing is not because they’re not aware of them being for sale but because they simply can’t compete with for-profit buyers. This legislation does nothing to change that.
Anyone who needs more information should start with the Mayor’s Program Rules, available here. The next step should be to consult with a qualified real estate attorney.
As always, your questions, comments and referrals are much appreciated!