Tenants may be familiar with the fear of their homes being sold out from under them. But what if, instead of your home, it was your whole street?
Residents of San Francisco’s high-end Presidio Terrace neighborhood were shocked to discover that their entire street, including sidewalks, common spaces, and parking spots had been sold to an investor for a mere $90,000.
Luxury and Privilege
Presidio Terrace is one of San Francisco’s wealthiest neighborhoods; and ownership of one of its opulent homes is an exclusive privilege. Homes on the street go for many millions of dollars, and potential owners must adhere to strict guidelines to maintain a residence.
For years, the street itself, one of the few privately owned streets in the Bay Area, has been owned by the Presidio Terrace homeowners association. Essentially, the street was owned by the residents themselves.
But in 2015, the street was purchased, without the knowledge or consent of the residents of Presidio Terrace. How could such a thing happen? How could the purchase go unnoticed by the homeowners association for two years? Let’s unpack it.
A Real Estate Steal
Considering the worth of the properties lining Presidio Terrace, the purchase price of the street is an outrageous steal.
The investors, husband and wife team Tina Lam and Michael Cheng, purchased the street at auction back in 2015, after the city placed the street in tax default earlier that same year. The minimum bid was an astonishing $1,054.24.
For two years, Lam and Cheng quietly owned the property, with no one living on the street being any wiser. Then, in May of 2017, they contacted the residents through an intermediary to ask if they had any interest in buying back their street.
The residents of Presidio Terrace responded by filing a lawsuit, alleging that the sale of the street was invalid to begin with, so no, they would not be buying it back, thank you very much.
What’s at Stake
There are a little over 200 private streets in San Franciso, most of them are alleys or access roads. Few, if any, have the wealth and prestige of Presidio Terrace.
By owning the road, the HOA assumes responsibility for maintenance, but has the ability to do pretty much as they will in terms of exclusivity.
An outside owner throws a wrench into that entire system.
The investor here is looking to turn a profit in the same way a profit is turned when someone’s selling real estate notes idea turns into action. The most obvious way would be to sell the street, either back to the residents or to another investor. And while mortgage note buyers don’t tend to buy streets, Lam and Cheng would be unlikely to find any shortage of potential buyers.
They might also consider charging for the use of the street. The investors here don’t own the properties or homes lining Presidio Terrace, but they do own the over 100 curbside parking spaces. It wouldn’t be inconceivable to charge residents for the ability to park on the road (parking spaces in the area can go for upward of $350/month).
An Unpaid Tax Bill?
This entire messy business rests on a $14/year tax bill that went unpaid.
For 30 years.
How could the homeowners association have let this slip? Obviously, they are not hard-up for the $14 annual tax, so what happened?
The HOA alleges that the city has sent the tax bill to the wrong address – one belonging to the HOA’s former accountant – for the past 30 years. The HOA further alleges that the city was aware the accountant retired in the 1980’s and didn’t ask for new information. They allege further that none of this is even the point because the city didn’t tell them they hadn’t paid the tax bill.
If this explanation sounds shaky, you aren’t the only one who thinks so. The city has fired back that it is the responsibility of the HOA to ensure the city has the proper contact information, and how on earth could the HOA have missed the fact that they hadn’t paid their bill in three decades?
The Future of Presidio Terrace
So what’s next for this contested street?
The residents of Presidio Terrace have filed suit against the city, asking for the sale to be overturned due to lack of notice over their unpaid bill. There is a possible case here, but again, their argument may be moot if responsibility for providing contact information lay with them in the first place.
The HOA is also requesting that the sellers be prohibited from finding another buyer for the street while the suit is being settled. A new buyer would render the entire argument dead.
The city is taking a look at the claims and should be deciding soon whether to overturn the sale or not. Should they continue on to court, it is unlikely that the court would find in favor of the residents of Presidio Terrace.
It’s an odd thing for something like tax default to take up this much room in the spotlight, but the story has turned into something of a Robin Hood tale, with the residents of Presidio Terrace cast as Prince John, thinking the rules simply don’t apply to the wealthiest among us. The Robin Hood in the story, though with motives far less altruistic, are the investors, Tina Lam and Michael Cheng, who supports see as scrappy underdogs who simply took advantage of a good deal.
And on a more philosophical level, perhaps supporters of the investors see it as a personification of the American Dream, and the promise that the very wealthy are not shielded from the tax code or personal responsibility, even behind their expensive and exclusive neighborhood walls.