Court Hands Tenants Massive Victory in TIC Battle

At its most basic level, the ruling means that 12 people who thought they’d been evicted will no longer have to leave their homes. Mitchell declared their evictions void, leaving the tenants of Francisco Street ecstatic after a year-long fight against a group of real estate speculators who tried to invoke the Ellis Act and force them into moving elsewhere.

“It’s great – that’s all I can say,” said Damon Jenkins, a 16-year tenant at the Francisco Street apartments. “They broke the law, and now they’re going to pay for it.”

The law they broke will have far greater ramifications than just Jenkins and his neighbors. Mitchell’s ruling essentially declared real estate speculation as currently practiced on buildings with 5 or more units as incompatible with state law.

Previously, speculators avoided obtaining public reports from the DRE. A rigorous procedure, these reports make buyers reveal the details of their financing, as well as often forcing them into fronting massive sums of money to ensure that future buyers are protected if other buyers default on their mortgages.

Tenderloin Housing Clinic lawyers Steve Collier and Dean Preston, however, argued that avoiding obtaining these public reports represented unfair business practices. Collier and Preston pointed to the Subdivided Lands Acts, which expressly states that those who purchase buildings and divide them up with then intent to resell them must obtain such reports.

Mitchell agreed, and her decision will likely halt speculator evictions of tenants from larger buildings for the foreseeable future. North Beach in particular will benefit, as a group of speculators there have been buying up buildings, evicting tenants, and converting units to condos at an alarming rate.

The ruling not only reinstates the tenancies of Francisco Street tenants; it also places an injunction on these speculators from trying to market any of their other buildings where they illegally created TICs. At least half a dozen large buildings will be affected by this decision.

“The court’s ruling today is a major victory for tenants being evicted by real estate speculators in large buildings,” said Preston.

The ruling comes at a particularly important time for tenants, as realtors and banks have increasingly expressed interest in converting large buildings into TICs. Because the DRE could require speculators to put large amounts of money in escrow for each unit, the amount required to be fronted would likely prove prohibitive for any speculators wishing to go after such large buildings.