Landlord troubles: rich San Franciscans in uproar after their private street is sold

Julia Carrie Wong in San Francisco
Updated

Residents in the highly exclusive Presidio Terrace neighborhood got a surprise taste of the city’s infamous housing woes after a private road was sold at auction

A home in the Presidio Terrace. The neighborhood is one of San Francisco’s most expensive and exclusive.
A home in the Presidio Terrace. The neighborhood is one of San Francisco’s most expensive and exclusive. Photograph: Marcio Jose Sanchez/AP

For most San Franciscans accustomed to being at the whims of speculators in a soaring real estate market, the arrival of a new landlord is a near certain harbinger of bad news.

But the residents of Presidio Terrace are not most San Franciscans, and it’s highly unlikely that they’ll be crafting desperate Facebook messages seeking an affordable room to rent in Oakland (dog friendly pleeeeease), making plans to move to Los Angeles or living in a box.

Still, in May of this year, the owners of 35 of San Francisco’s most exclusive and expensive homes became aware of a decidedly undesirable development: they no longer owned their private street.

Two upstart real estate investors from San Jose, Tina Lam and Michael Cheng, had snapped up the street, the sidewalks and the landscaped islands of Presidio Terrace at a public auction of tax-defaulted properties in April 2015. The pair shelled out $90,582.50 for the plot, and they’re how exploring ways to earn a return on that investment.

One option? Charging residents to park on the street they thought they owned.

“We could charge a reasonable rent on it,” Cheng told the San Francisco Chronicle, which first reported on the street’s sale. (Parking spaces in the neighborhood are currently renting for about $350 per month on Craigslist.)

They could also sell the street back to the Presidio Terrace homeowner’s association (HOA), presumably at a substantial markup.

“They are definitely looking to make this into a profit-making piece of land,” said Scott Emblidge, an attorney representing the HOA. “How would you like it if somebody bought your backyard in a tax sale? Maybe they’d make it a nice backyard, but that wouldn’t make you happy.”

The residents of San Francisco’s Presidio Terrace have long employed a number of tactics to keep undesirables out. Until 1948, a restrictive covenant prohibited the sale or lease of any of the street’s 35 houses to “any persons other than those of the Caucasian or white race”. The private street still boasts an imposing set of gates and round-the-clock security guards. And the homes’ multimillion-dollar price tags ensure that only the wealthiest have any reason to be on the oval block in the first place.

A construction workers stands in front of the Presidio Terrace, a gated community in San Francisco.
A construction workers stands in front of the Presidio Terrace, a gated community in San Francisco. Photograph: Marcio Jose Sanchez/AP

But a mixup over a mailing address and the failure to pay an annual tax bill of less than $14 have resulted in the homeowners’ current conundrum.

Unlike the vast majority of San Francisco streets, Presidio Terrace is private. Residents, via their HOA, are responsible for paying for the street’s maintenance and, as with any other private property, tax.

The HOA stopped paying that tax many years ago, however, and in 2015 the city’s tax collector placed the property into default. That set the stage for the auction and the San Jose couple’s windfall.

The HOA claims that the tax went unpaid not out of any desire to avoid payment (or inability to come up with the cash), but because the city was sending the bill to the address of an accountant who had not worked for them since the 1980s. They also fault the city for failing to send a notice of the default to any of the homeowners or their association.

They are asking the city’s board of supervisors to intervene on their behalf and rescind the auction, a process allowed for by state law. They’ve also filed a lawsuit against Lam and the city. If the board of supervisors fails to rescind the sale – a vote is tentatively scheduled for October – the association will turn to the courts, said Emblidge.

“I’m very optimistic that the city officials want to see a reasonable end to this, and a reasonable end is to rescind the sale and put things back the way they were,” Emblidge said. “The same thing that happened here could happen to anybody, poor or rich, that happens to have a parcel like this. The issue isn’t really a rich versus poor situation. It’s what should have to happen before someone can sell my property.”