Berkeley Condo Conversion
Berkeley Condominium Conversions
Updated March 25, 2016
What is the maximum number of rental units that the City of Berkeley may approve for condominium conversion?
For all condominium conversion applications submitted after January 1, 2009, no more than 100 rental units per year may be approved for condominium conversion, community apartments or stock cooperative units. If the number of units approved for conversion in a given year is less than 100, the number for the following year is increased by the difference but not to exceed 200.
There are two types of units not included in the 100-unit quota:
- Below market rate units, also known as inclusionary units; and
- Two, three and four unit properties with owner-occupied units eligible for a mitigation fee cap of 5% or less. A mitigation fee is a payment made by the owner(s) to the City of Berkeley for the right to convert to condominiums. The City of Berkeley collects the mitigation fee and uses it to fund affordable housing projects.
Can the City of Berkeley prevent an owner from selling units at TICs?
No. The Court of Appeal has held that cities cannot restrict TICs in any way.
Can a landlord evict a tenant in Berkeley and then convert to condominiums?
There is a ten-year bar to condominium conversion following an Ellis eviction, an owner move-in eviction, a relative move-in eviction, or a demolition eviction.
There is a five-year bar to condominium conversion following a no-fault eviction, a constructive eviction, a tenant bringing a lawsuit for wrongful eviction or constructive eviction, or a constructive eviction by rent increase of more than 10%.
What special protections do tenants have following a condominium conversion in Berkeley?
No tenant may be evicted for an owner move-in eviction or relative move-in eviction, as long as the unit remains the tenant’s principal place of residence.
If the unit is sold, the tenant must be offered a lifetime lease with rent ceiling protections consistent with the Berkeley Rent Ordinance.
All tenants must be given the exclusive right to purchase their unit. The offer must be held open for one year.
To reduce the mitigation fee, a landlord can agree to limit future rent increases to less than 65% of the increase in the CPI for the Bay Area. This is optional only.
How is the Berkeley affordable housing mitigation fee calculated?
The formula for calculating this fee is as follows:
- First determine the annual cost of occupying a unit as a condominium by adding monthly mortgage payments, taxes, homeowners’ association fees, and multiplying the sum by 12.
- Calculate the annual rental cost using the monthly rent of the unit at the time of application for conversion and multiplying by 12. If the unit is owner occupied or has not been rented in the last 12 months, the rent of a comparable unit nearby may be used in substitute.
- The condominium ownership costs of the unit less the rental costs shall then be divided by the current fixed mortgage rate set by the Federal Housing Administration to determine the fee.
How is the mitigation fee is amended after the sale of a converted unit?
If a converted unit is sold, then the mitigation fee is based on the actual sale price rather than the cost of occupying a unit. If the City deems the sale price to be unreasonably low, the seller must support the price with a credible appraisal performed by a Certified Residential Appraiser. If the appraisal is within 10 percent of the actual sales price, the cost of the appraisal shall be deducted from the total mitigation fee amount owed to the city.