A Subsequent Owner Is Liable for Prior Owner's Violations of Rent Control Ordinance By Danielle Gensch and Brendan Macaulay
January 21, 2009 Prospective owners and, in the current foreclosure climate, financial institutions should be aware of Baychester Shopping Center, Inc. v. San Francisco Residential Rent Stabilization and Arbitration Board , 165 Cal.App.4th 1000 (2008). In a case arising out of the San Francisco rent control ordinance, a court held a current owner of an apartment building liable for rent overpayments relating back to the ownership period of a prior owner. Although certain details of the case are unique to the San Francisco rent control ordinance, purchasers should perform due diligence on rent control and inclusionary housing ordinances and negotiate for adequate representations and, if necessary, post-closing security on such representations. The Case In late 2005, Baychester Shopping Center (Baychester) contracted to buy a 9 unit residential apartment building. In October 2005, a tenant, who had lived there since 1991, filed a claim with the San Francisco Residential Rent Stabilization and Arbitration Board (Board). The tenant claimed that his rent had increased more than was allowed under San Francisco's rent control ordinance, which is administered by the Board. In December 2005, Baychester closed on its purchase of the building. In February 2006, an administrative judge determined that the tenant had been overcharged and ordered Baychester to repay the tenant. Baychester appealed, first to the Board, then to the San Francisco Superior Court and finally to the California Court of Appeals. CLICK HERE TO CONTINUE |
