Chapter 21.40 — CONVERSIONS OF RENTAL HOUSING TO CONDOMINIUMS AND

OTHER COMMUNITY HOUSING PROJECTS

Sections:

(a) The purposes of this chapter are:

(1) To seek a reasonable balance of rental and ownership housing in the city in a variety of individual choices of tenure, type, price, and location of housing;

(2) To protect the supply of multi-family rental housing;

(3) To protect the supply of rental housing for low and moderate income persons and families;

(4) To reduce and avoid displacement of tenants, particularly senior citizens and families with school-age children, who may be required to move from the community due to a shortage of replacement rental housing;

(5) In the event of a conversion, to assure that purchasers have adequate information on the physical conditions of the structure and that the structure meets adequate health and safety standards;

(6) In the event of a conversion, to give priority for purchase of units to existing tenants;

(7) To meet the goals of the comprehensive plan, including the below-market-rate programs.

(Ord. 3295 § 1 (part), 1981: Ord. 3157 § 1 (part), 1979)

(a) For the purposes of this chapter, the following definitions are adopted:

(1) "Community housing" and "community housing project" mean and include the following:

(A) "Community apartment," which means a project in which an undivided interest in the land is coupled with the right of exclusive occupancy of any apartment thereon;

(B) "Condominium," which means an estate in real property consisting of an undivided interest in common in a portion of a parcel of real property together with a separate interest in space in a residential building on such real property;

(C) "Planned development," which means a real estate development having either or both of the following features:

(i) Any contiguous or noncontiguous lots, parcels or areas owned in common by the owners of the separately owned lots, parcels or areas consisting of areas or facilities the beneficial use and enjoyment of which is reserved to some or all of the owners of separately owned lots, parcels or areas.

(ii) Any power exists to enforce any obligation in connection with membership in the owners association, or any obligation pertaining to the beneficial use and enjoyment of any portion of, or any interest in, either the separately or commonly owned lots, parcels or areas by means of a levy or assessment which may become a lien upon the separately owned lots, parcels or areas of defaulting owners or members, which said lien may be foreclosed in any manner provided by law for the foreclosure of mortgages or deeds of trust, with or without a power of sale;

(D) "Stock cooperative," which means a corporation which is formed or availed of primarily for the purpose of holding title, either in fee simple or for a term of years, to improved real property, if all or substantially all of the shareholders of such corporation receive a right of exclusive occupancy in a portion of the real property, title to which is held by the corporation, which right of occupancy is transferable only concurrently with the transfer of the share or shares of stock or membership certificate in the corporation held by the person having such right of occupancy. The term "stock cooperative" does not include a limited-equity housing cooperative as defined in California Business and Professions Code Section 11003.4;

(E) Such other forms of ownership in which a parcel or parcels of real property, including all structures thereon, are wholly or partially rented or leased for residential purposes and are proposed to be divided, as land or air space, into three or more parcels, units or rights of exclusive occupancy.

(2) "Conversion" means a change, including a proposed change, in the type of ownership of a parcel or parcels of land, together with the existing structures, from a rental housing complex to a community housing project, regardless of whether substantial improvements have been made to such structures.

(3) "DRE report" means the final subdivision public report issued by the California Department of Real Estate pursuant to Section 11018.2 of the California Business and Professions Code.

(4) "Rental housing complex" means a structure or structures containing at least three rental units on the same parcel or adjoining parcels of property.

(5) "Rental unit" means an element of a rental housing complex designed to be rented to one family independently.

(6) "Tenant" means a person who enters into a written or oral lease or rental agreement with the owner, or owner's agent, of a rental housing complex. "Tenant" does not include a subtenant or sublessee.

(7) "Unit" means the element of a community housing project which is to be exclusively owned or occupied individually, and not in common with the owners of other elements of the project.

(8) "Vacancy deficiency" means the number of vacant rental units needed to raise the vacancy rate to three percent.

(9) "Vacancy rate" means the number of rental units being offered for rent or lease in the city of Palo Alto, shown as a percentage of the total number of rental units both being offered and actually under a rental or lease agreement

(10) "Vacancy surplus" means the number of rental units being offered for rent or lease in excess of the three-percent vacancy rate.

(Ord. 3295 § 1 (part), 1981: Ord. 3157 § 1 (part), 1979)

All conversions involving a change in the type of ownership of three or more rental units are subject to the provisions of this chapter. Nothing in this chapter shall be interpreted to exempt any conversion from the operation of any other chapter under this title or from the requirements of any other statute, ordinance, or regulation.

(Ord. 3295 § l (part), 1981: Ord. 3157 § l (part), 1979)

In April and November of each year, the director of planning and community environment shall determine from the city utility meter records the vacancy rate and the vacancy surplus, if any, within the city limits. New market-priced rental units available to the general public, for which a certificate of use and occupancy has been issued since the last vacancy survey, shall be added on a unit-for-unit basis either to reduce the vacancy deficiency or to increase the vacancy surplus.

(Ord. 3295 § 1 (part), 1981: Ord. 3157 § 1 (part), 1979)

(a) No application for consideration of a tentative or preliminary parcel map for a subdivision to be created from a conversion may be filed with the city unless there is a vacancy surplus as of the most recent determination pursuant to this chapter.

(1) When there is a vacancy surplus as of the most recent determination pursuant to this chapter, an application for consideration of a tentative or preliminary parcel map for a subdivision to be created from a conversion may be filed with the director of planning and community environment if the number of lots, units or rights of exclusive occupancy in such proposed conversion does not exceed the vacancy surplus by more than forty percent.

(b) An application for consideration of a tentative or preliminary parcel map for a conversion may be filed, regardless of whether a vacancy surplus exists, if both of the following conditions are met:

(1) One below-market-rate rental unit must be provided for every two non-below-market-rate units to be converted.

(A) The below-market-rate unit(s) must be of comparable size and condition (prior to any rehabilitation done for purposes of conversion) to the non-below-market-rate units to be converted;

(B) For the purposes of this section, a below-market-rate rental unit is a unit provided within the city for permanent low and moderate income rental housing in accordance with either the city's below-market-rate program, the city's rental housing acquisition program, or such similar program expressly approved by the city council as being in accord with the city's comprehensive plan's goals and objectives for low and moderate rental income, and which the city, or its designee, is willing and able to accept. The provision of low and moderate income housing in accordance with this subsection shall satisfy the city's below-market-rate requirement for subdivisions set forth in Housing Program 17 of the comprehensive plan, and as thereafter may be amended. And:

(2) The tenants of at least two-thirds of the rental units in the rental housing complex consent to convert the rental housing complex to a community housing project in accordance with the following provisions:

(A) Each rental unit (including any units subject to the tentative or preliminary parcel map which are to be provided to the city as below-market- rate units pursuant to Section 21.40.050(b)(1) above) is entitled to one consent and such consent must be signed under penalty of perjury by all tenants of the rental unit;

(B) The following units shall not be eligible to sign consent forms:

(i) A rental unit in which the tenants do not all agree to consent to the conversion or do not all sign the consent form;

(ii) A rental unit in which one or more of the tenants has not resided in the rental housing complex for at least one year before signing the consent form;

(iii) A rental unit occupied by a tenant employed by or related to the owner or manager of the rental housing complex or to the applicant for the conversion;

(iv) A rental unit which is vacant on the date the consent forms are sent to tenants or which is vacated between that date and the last date for returning signed consent forms to the applicant for conversion.

(C) The following consent form shall be used by the applicant for conversion in calculating the number of consenting units:

CONSENT FORM FOR PROPOSED CONVERSION TO COMMUNITY HOUSING

[Specify Type]:

THIS CONSENT IS IRREVOCABLE

ADDRESS:

The units in the rental housing complex at the above address may be converted to [specify type of community housing] if the tenants of at least two-thirds of the units in the rental housing complex consent to the conversion. The applicant for conversion is [name] [address].

DECLARATIONS

I and each of the signatories below represent all of the tenants in possession of unit ____. I am not employed by or related to the owner or manager of the rental housing complex or to the applicant for conversion. I irrevocably consent to the conversion. I declare under penalty of perjury that the representations made herein are true and correct.

(print name) ______________________________

signature __________________________________

length of continuous tenancy in rental housing complex___________________

date________________

(print name) ______________________________

signature __________________________________

length of continuous tenancy in rental housing complex___________________

date________________

(print name) ______________________________

signature __________________________________

length of continuous tenancy in rental housing complex___________________

date________________

(D) The city must be notified on the date consent forms are first given to tenants, and the consent forms must be signed no later than ninety days from the date the consent forms are first given to the tenants;

(E) Notice to Prospective Tenants. No rental unit in a rental housing complex shall be leased or rented to any person after the consent forms are first given to tenants unless said person has been notified of the proposed conversion immediately prior to the acceptance of any rent or deposit from the prospective tenant in the following written form:

NOTICE TO PROSPECTIVE TENANT

This rental housing complex is in the process of obtaining the consent of its tenants to convert the complex to a community housing project. If you become a tenant, if two-thirds of the rental units consent to conversion and if the conversion application is approved by the city council, the unit you are considering leasing or renting will be offered to you for purchase; if you do not desire to purchase the unit, you will be offered an extended lease. As a new tenant, you will be ineligible to sign a consent form.

(Ord. 3295 § 1 (part), 1981: Ord. 3157 § 1 (part), 1979).

(a) A tentative map, preliminary parcel map, final map or parcel map for a subdivision to be created from a conversion shall not be approved or recommended for approval unless such map is consistent with the purposes and requirements of state law, the Palo Alto comprehensive plan, this title, this chapter, and unless all of the following conditions are or will be met:

(1) Tenant Protections.

(A) Application Timely. If the applicant for conversion procures tenant consents pursuant to Section21.40.050(b)(2) above, the tentative or preliminary parcel map for conversion must be received by the city within sixty days of the last date on which the signed consent forms may be returned to the applicant for conversion.

(B) Notice to Tenants in Accordance with Government Code Sections 66452.9 and 66427.1. The applicant for conversion shall give notice in the following form to each tenant of the rental housing complex at least sixty days prior to the filing of the tentative or preliminary parcel map:

To the occupants of

---

[address]

The owner(s) of this building, at ____________ plans to file an application with the City of Palo Alto to convert this building to a [specify community housing project]. You shall be given notice of each hearing for which notice is required pursuant to Sections 66451.3 and 66452.5 of the Government Code, and you have the right to appear and the right to be heard at any such hearing.

(date) ______________________________

(signature of owner) ________________________________

Attached to this notice must be an explanation of all tenant protections required by this Section21.40.060(a)(1).

(C) Right of First Refusal. Each of the tenants of the proposed community housing project has been or will be given notice of an exclusive right to contract for the purchase of their respective rental units upon the same terms and conditions that such units will be initially offered to the general public or terms more favorable to the tenant. Each of the tenants who was a tenant on the date of the completed conversion application shall be given such a right to purchase upon the terms and conditions, if any, quoted to the tenants and set forth in the subdivision application. Such rights to purchase shall run for a period of not less than ninety days from the date of issuance of the DRE report, unless the tenant gives prior written notice of his or her intention not to exercise the right.

(D) Extension of Leases. Tenants in the proposed community housing project on the date of recordation of the final map for said project have been provided assurances that they will have the opportunity to remain in their respective rental units after conversion as tenants under extended leases. Such extended leases shall be subject to the following provisions:

(i) Any tenant who has reached or will reach the age of sixty years at the end of the calendar year in which that tenant's unit is offered for sale shall be offered a lifetime lease to his or her rental unit.

(ii) Any tenant who does not qualify for a lifetime lease pursuant to subsection (a)(1)(D)(i) above shall be offered a ten-year lease to his or her rental unit.

(iii) Any lease(s) offered pursuant to subsections (a)(1)(D)(i) or (ii) above must:

a. Be circulated to all tenants at least sixty days before the consent forms are required to be returned to the applicant for conversion, if the applicant for conversion procures tenant consents pursuant to Section 21.40.050(b)(2) above;

b. Restrict the rent on each unit to the monthly rent charged two years prior to the date the conversion application is received by the city, with increases in the monthly rent for each ensuing year after such date not to exceed seventy-five percent of the preceding years increase in the Consumer Price Index for the San Francisco Bay Area for All Urban Consumers (all items), as published by the Bureau of Labor Statistics, United States Department of Labor, or any other standard recognized cost-of-living index which is published by the United States Government in lieu of the index;

c. Be subject to any "just cause" eviction ordinance adopted by the city;

d. Not be subordinated to the CC & R's adopted by the community housing project with regard to tenants' rights and tenants' financial obligations

or other liabilities;

e. Be recorded by the applicant for conversion in the Santa Clara County recorder's office.

(iv) The applicant for conversion, upon the request of the tenants of at least one-third of all the rental units, must pay the standard hourly fees for an attorney selected by those tenants to represent them in negotiating the terms of the lease(s) offered pursuant to subsections (a)(1)(D)(i) and/or (ii) above, provided that such expenses may not exceed the fees for more than forty hours.

(v) The city's rental housing mediation task force shall be available to mediate any disputes arising from any lease(s) offered pursuant to subsections (a)(1)(D)(i) or (ii) above.

(vi) In the event that a tenant or tenants in a unit held by the city or its designee as below-market-rate rental housing pursuant to Section 21.40.050(b) is eligible to receive any available rental-housing assistance payments, such tenant or tenants may choose to enter into a lease providing for such rental-housing assistance payments in lieu of the extended lease required by this section.

(E) Termination of Tenancy by Developer. Each of the tenants of the proposed community housing project who does not choose to purchase his or her respective rental unit or does not choose to enter into an extended lease pursuant to Section 21.40.060(a)(1)(D) above must have been given one hundred eighty days' written notice of intention to convert prior to termination of tenancy due to the conversion or proposed conversion. The provisions of this subsection shall not deter or abridge the rights or obligations of the parties in performance of their covenants, including but not limited to the provision of services, payment of rent, or the obligations imposed by Sections 1941, 1941.1 and 1941.2 of the Civil Code.

notice of intention to convert prior to termination of tenancy due to the conversion or proposed conversion. The provisions of this subsection shall not deter or abridge the rights or obligations of the parties in performance of their covenants, including but not limited to the provision of services, payment of rent, or the obligations imposed by Sections 1941, 1941.1 and 1941.2 of the Civil Code.

(F) Termination of Tenancy by Tenant. The applicant for conversion shall permit a tenant to terminate any lease or rental agreement without any penalty whatsoever after notice has been given of the intention to convert the tenant's rental unit to a community housing project in accordance with Section 21.40.060(a)(1)(B) above, if such tenant notifies the applicant for conversion in writing thirty days in advance of such termination. Such right to terminate shall expire if the application for conversion is denied.

(G) Notice to Prospective Tenants in Accordance with Government Code Section 66452.8.

(i) Commencing on a date not less than sixty days prior to the filing of a tentative or preliminary parcel map, the applicant for conversion or his or her agent shall give notice of such filing to each person applying after such date for rental of a unit of the subject property immediately prior to the acceptance of any rent or deposit from the prospective tenant.

(ii) The notice shall be as follows:

To the prospective occupant(s) of

---

[address]

The owner(s) of this building, at (address), has filed or plans to file an application with the City of Palo Alto to convert this building to a [specify community housing project]. No units may be sold in this building unless the conversion is approved by the City of Palo Alto and until after a public report is issued by the Department of Real Estate. If you become a tenant of this building, you shall be given notice of each hearing for which notice is required pursuant to Sections 66451.3 and 66452.5 of the Government Code, and you have the right to appear and the right to be heard at any such hearing. In addition, if you become a tenant, if two-thirds of the rental units have consented to conversion and if the conversion application is approved by the City Council, the unit you rent will be offered to you for purchase; if you do not desire to purchase the unit, you will be offered an extended lease in accordance with Chapter 21.40 of the Palo Alto Municipal Code.

(signature of owner or owner's agent) ______________________________

(dated) ______________________________

I have received this notice on: (date) ______________________________

(prospective tenant's signature) ______________________________

(H) Remodeling. Repairs and/or remodeling proposed to be made in connection with the conversion shall not be performed without the tenant's consent during the ninety-day period from the date of issuance of the DRE report. If repairs and/or remodeling of the unit require the tenant's temporary relocation, the applicant for conversion must assume all moving costs and rent for comparable replacement housing for the tenant who is displaced on a temporary basis.

in connection with the conversion shall not be performed without the tenant's consent during the ninety-day period from the date of issuance of the DRE report. If repairs and/or remodeling of the unit require the tenant's temporary relocation, the applicant for conversion must assume all moving costs and rent for comparable replacement housing for the tenant who is displaced on a temporary basis.

(I) Engineer's Report. In order to assist the tenants in their decisions whether to purchase their units upon conversion, the applicant for conversion must send a copy of the property report and structural pest report required pursuant to Section 21.40.060(a)(2)(B)(i) and (ii) to all tenants on or before the date of issuance of the DRE report.

(J) Notice of Compliance with State Law. The applicant for conversion must provide written evidence of compliance with Government Code Section 66427.1.

(2) Buyer Protections.

(A) Age Discrimination. No community housing project shall prohibit sales of units to persons with children unless it is determined by the director of planning and community environment upon review of a preliminary parcel map or the city council upon review of a tentative map that from the time of its development, the project was designed and built for the exclusive occupancy of persons sixty years of age or older.

(B) Certificate of Use and Occupancy. Prior to the sale or occupancy of any units which have been converted to community housing, a certificate of use and occupancy for community housing shall be obtained from the chief building official pursuant to Chapter 16.38 and subject to the following additional requirements:

(i) The applicant for conversion shall submit a property report describing the condition and useful life of the roof, foundations, mechanical, electrical, plumbing and structural elements of all existing buildings and structures. Such report shall be prepared by a registered civil or structural engineer, or a licensed general building contractor or general engineering contractor.

(ii) The applicant for conversion shall submit a structural pest report. Such report shall be prepared by a licensed structural pest-control operator pursuant to Section 8516 of the Business and Professions Code, relating to written reports on the absence or presence of wood-destroying pests or organisms.

(iii) The consumption of gas and electricity within each dwelling unit shall be separately metered so that the unit owner can be separately billed for each utility. A water shut-off valve shall be provided for each unit. The requirements of this subsection may be waived where the chief building official finds that such would not be practical.

(iv) All permanent mechanical equipment, including domestic appliances, which are determined by the chief building official to be a source or

potential source of vibration or noise, shall be shock-mounted, isolated from the floor and ceiling, or otherwise installed in a manner approved by the chief building official to lessen the transmission of vibration and noise.

(v) The wall and floor/ceiling assemblies between dwelling units shall conform to the sound-performance criteria of Title 25 of the California Administrative Code.

(vi) Accessible attics shall be insulated to meet the energy conservation requirements of Title 24 of the California Administrative Code.

(vii) Electrical control panels shall be provided in accessible locations controlling the entire service to each unit.

(viii) The wall and floor/ceiling assemblies between dwelling units shall meet one-hour fire-resistive construction as specified in the latest edition of the Uniform Building Code.

(ix) Smoke detectors approved by the fire prevention division shall be provided in each unit.

(x) Any multiple-unit building three stories or more in height or containing more than fifteen dwelling units shall have an approved fire alarm system as specified in the Fire Prevention Code.

(3) Below-Market-Rate Requirement. In conversions of ten or more rental units, not less than ten percent of the units in the community housing project shall be provided for sale to the city for permanent low and moderate income housing in accordance with either the city's below-market-rate program, the city's rental housing acquisition program, or such similar program expressly approved by the city council as being in accord with the city's comprehensive plan's goals and objectives for low and moderate income housing. The provision of such low and moderate income housing in accordance with this subsection shall be in compliance with the city's below-market-rate requirement for subdivisions set forth in Housing Program 17 of the comprehensive plan, and as thereafter may be amended. This section shall be considered fulfilled if the applicant for a conversion meets the condition set forth in Section 21.40.050(b).

(Ord. 3295 § 1 (part), 1981: Ord. 3157 § 1 (part), 1979)

(a) In addition to the other requirements of this title, an application for approval of a tentative or preliminary parcel map for a conversion shall be accompanied by the following information:

(1) Age and length of occupancy of every tenant including children, in the rental housing complex on the date of the conversion application;

(2) Current rents for each unit and the date and amount of all rental increases within the two years prior to the date the conversion application is received;

(3) The approximate proposed sales price of each unit and the pro forma budget proposed for submission to the real estate commissioner or a similar estimate of projected annual operating and maintenance fees or assessments; and

(4) A statement of any repairs or improvements proposed to be completed prior to the sale of units, along with a time schedule therefor;

(5) A statement of proposed tree and landscaping removal and/or planting, if any;

(6) A parking plan, including the total number of spaces actually provided, the total number of covered and uncovered spaces, and the location and number of guest parking spaces;

(7) A report describing the building's utilities, storage space and laundry facilities;

(8) Any other information which, in the opinion of the director of planning and community environment, will assist the city in determining whether the proposed conversion is consistent with the purposes of this chapter and the comprehensive plan.

(Ord. 3295 § 1 (part), 1981)

(a) Withdrawal. If a tentative or preliminary parcel map for a subdivision to be created from a conversion is withdrawn before city council review, a map for said subdivision cannot be submitted again for one year after the date of withdrawal.

(b) Expiration. If a tentative or preliminary parcel map for a subdivision to be created from a conversion which has been approved or conditionally approved by the city council expires, pursuant to Government Code Section 66452.6, a map for said subdivision cannot be submitted again for one year after the date of expiration.

(c) Denial. If a tentative or preliminary parcel map for a subdivision to be created from a conversion is denied by the city council, a map for said subdivision cannot be submitted for one year after the date of denial.

(d) Sale. All rental units approved for conversion shall be offered for sale within two years of the issuance of the DRE report.

(Ord. 3295 § 1 (part), 1981)

If any provision or clause of this chapter or the application thereof to any person or circumstance is held to be unconstitutional or to be otherwise invalid by any court of competent jurisdiction, such invalidity shall not affect other chapter provisions, and clauses of this chapter are declared to be severable.

(Ord. 3295 § 1 (part), 1981)