San Francisco almost always looks the other way regarding these 'illegal' units. Many of them are in plain sight and the rent/tenancy control laws still apply. I would guess the unit must have been a serious health/safety hazard for them to do anything.
Which actually makes sense if you think about it--if it was an instant eviction it would be very valuable to the landlord. They can rent and take your money for years and whenever they want to get rid of you and flip the property they report the unit and boom you are gone without any rights.
What would make even more sense is very severe fines to the landlord for renting illegal units. Something like a multiple of all the rent they have ever collected on it.
Actually, a prospective tenant probably has no idea if the unit is "illegal" or not. It is an apartment for rent and there is a line going out the door, so don't ask any annoying questions.
I can understand the confusion because I once interned for a midwestern city's planning department. There if someone built an unapproved apartment above their garage, the city would hit them like a ton of bricks.
In San Francisco, it is not like that, and these so-called "illegal" units are enshrined by law and practice in many respects. As a tenant, you have nearly all the same rights as a legal unit, so this would probably not figure into your evaluation.
Yes, according to the article there is a long standing "don't ask, don't tell" policy. But it does say that when they are reported, the city takes serious action. And it sounds like it was a health hazard the way she was living.
The owner seemed to be caught in the middle of two incompatible laws: 1) You can't have that person living there. 2) You can't make that person leave.
My guess is that the owners were well aware of the situation when they purchased the property. The owners stated that they were warned by "pretty much everyone" not to purchase the property, and the fact that the property came with someone living in it should be a pretty big red flag. For those that have been around SF long enough, it's easy enough to recognize when someone is playing the 'sf housing regulatory lottery'. The basic gist of the game is as follows:
Step 1 - Buy a property that is impacted by certain regulatory constraints (which depresses it's market value heavily).
Step 2 - If you are cheap, sit, wait, and pray that natural forces relive you of the regulatory burden (or make life a living hell for your existing tenant in an attempt to get them to move out). If you have some money, actively spend it to rid your property of regulatory constraints.
Step 3 - Once unburdened (or partially relived) of said constraints, sell the property and profit handsomely.
This game is primarily played with rent controlled units and TICs. The owners in question bought property on the cheap, evicted an old disabled lady who is now homeless, and made bank. Sure, the lady was a piece of work herself, but let's not pretend these owners were saints, they knew what the endgame was all along.
I don't think the owners are saints... but they get way more sympathy than that rotten tenant. We don't know what they thought the end game would be. It sounds like to me that they were willing to keep the tenant but then started to see she was a nightmare. I have no doubt they knew the unit was illegal. But once it got to the point that they were required to take action to do something to fix the situation... they were promptly met with incompatible laws that would not allow them to do what they were ordered to do. Also... $500 a month is not really "bank" in the context of this $1.4M house that was purchased by two families (that lived in it for 10 years). And they gave her over 2 years worth of rent back in a relocation settlement.
They could have insisted that the original seller fix the violation/evict the tenant before the sale of the unit. This of course would mean a much higher sales price (or no sale), so they didn't. They could have reported the illegal unit to the DBI at anytime in the 10 years that they lived there. Instead they waited until they were basically ready to move out and sell the property.
They were probably hoping that the tenant would eventually move out on her own so that they could either re-rent the unit for a much higher price, or bring the unit up to code and re-sell it. They didn't let her live there for 10 years because they were being nice, they did it because they were hoping to avoid the messy and expensive legal issues that they eventually had to deal with. Regardless they walked away with ~$770K from the appreciation of their property, so not sure why they deserve any sympathy. As far as investments go, they hit a home run.
The problem was someone filed a complaint. Like any bureaucracy, once you put something down on paper they have to do something. If she hadn't been such a difficult person to get along with she'd still be living there.
The article states that, but it is semi-official policy to let these units be. I think that if you made some random complaint about your neighbor's mother-in-law unit, you would likely not get any action from the city. Therefore the complaint must have been fairly serious (or the developer pulled some strings).
