Earlier this month, the City of San Francisco implemented the first iteration of its Community Opportunity to Purchase Act, which gives six qualified non-profits the right of first offer and/or first refusal in transactions of multi-family residential properties (defined as containing 3 or more residential rental units). We’ve prepared the following guide to help you better understand what this new law is all about and how to comply.
What is the intention of COPA?
According to the Mayor’s Office of Housing and Community Development (MOHCD), COPA was created “for the purpose of creating and/or preserving affordable rental housing” by giving qualified non-profits priority in purchasing multi-family residential properties that come on the market. These non-profits agree to retain all existing lease terms, maintain the building as rent-restricted affordable housing in perpetuity, abide by just cause for eviction laws, and ensure that average rent plus utilities does not exceed 30% of 80% of the median income for the area (adjusted for household size) and not rent to any new tenants whose income exceeds 120% of that median.
What properties does COPA apply to?
Any property with 3 or more residential rental units in San Francisco is now required to follow the steps outlined in the new law when listing a property for sale. This includes vacant lots that are entitled to the development of at least 3 residential units by right, but not those that would require a conditional use approval or variance to develop 3 or more units. Also of note, only lawful units are considered in the calculation of the 3 or more units.
What must I do to comply with COPA?
If you are selling a property that meets the criteria above, you must first present your listing to the qualified non-profits (QNPs) before listing it anywhere else. The QNPs have 5 days to express interest. If they do not express any interest, you may proceed as usual to a public listing.
If one or more QNPs do express interest within 5 days, you must then provide them with disclosures and give them up to 25 days to submit offers. If they do not submit offers within this time frame, you may proceed as usual.
If you do receive an offer within 25 days, you can either accept or reject that offer. Accepted offers are then given 60 days to close escrow. If you choose to reject the offer from a QNP, you can then proceed to offer the property to the market, however, you must then notify the QNPs of any market offers received and give them the opportunity to match that market offer before proceeding. If they are able to match it, the QNP gets priority and is given 60 days to close escrow. If they do not match the market offer, you may proceed to complete the sale with the market buyer.
In all cases, within 15 days of closing, you will need to self-certify with MOHCD that you followed the process correctly via signed declaration.
Where can I find a list of the Qualified Non-Profits?
MOHCD publishes a list on their website here: https://sfmohcd.org/community-opportunity-purchase-act-copa
Qualification is valid for 3 years unless suspended or revoked for failure to comply. New non-profits will be given an opportunity to apply once per year.
How are Qualified Non-Profits Funded? How many COPA-sanctioned sales to QNPs are expected?
In most cases, interested QNPs will be seeking funding for such purchases directly from the MOHCD. A specific budget for such purchases has not been declared by MOHCD but is expected to be in the $40-$90 million range for the near future.