Unauthorized Dwelling Unit Blues

Under current law, San Francisco homeowners whose property includes an Unauthorized Dwelling Unit, or UDU, have few good options. A UDU is defined in San Francisco Planning Code Section 317(b)(13) as one or more rooms within a building that have been used, without the benefit of a permit, as a separate and distinct living or sleeping space independent from other Residential Units on the property. Any property owner with a UDU should make themselves aware of the host of rules regarding these units, and have a strategy for navigating the minefield of potential issues.

Background on Unauthorized Dwelling Unit (UDU)

According to the Planning Code, the City has “no definitive information on the number of dwelling units that have been added to existing residential buildings without the benefit of a permit, but unofficial estimates indicate that as many as 30,000 to 40,000 such dwelling units exist as of 2013.” Most UDUs are not unpermitted shacks on empty parcels. They’re a product of San Francisco’s unique history. A mid-century housing boom led to a sprawling of single-family homes with open (and convertible) first floor space. Often found in single-dwelling zoning districts, owners could build these out for additional living space for themselves (or the eponymous “in-law” for whom these spaces were eventually named for). They just couldn’t have their own cooking facilities and separate entrances, as this would exceed neighborhood density limits. Given San Francisco’s notorious permitting process, and its famous aversion to adding new housing, it is not surprising much of this work was done without the City’s permission. While homeowners once may have seen the benefit of having a renter in their homes, this landscape began to change when the City adopted rent and eviction controls in 1979. Single-family homes are generally exempt from local rent controls under state law. However, while the City considers the extra units to be “illegal” for permitting purposes, the UDUs are counted as “units” for purposes of rent control. In other words, the City considers a single-family home with a UDU to be a multi-unit rental property that no longer enjoys the state law exemption to local rent control.

Until fairly recently, property owners had the option of removing a renter from a UDU by merging the UDU back into the rest of the home. Pursuant to San Francisco Administrative Code Section 37.9(a)(10), a landlord who obtained the permits to remove illegal unit could terminate the occupants’ tenancies upon providing the renter with 60-day notice and statutory relocation payments. This all changed, however, when San Francisco amended its Planning Code to require conditional use authorization for the removal of a UDU. Now, when the Planning Department receives a permit application, City planners use a process to identify whether the applicant seeks to remove a UDU, by looking at whether the applicant seeks to remove certain features that allow the space to operate as a separate unit, including the removal of doors, a full bathroom, a kitchen, a wet bar, or the addition of a staircase.

If the planner determines that the applicant is seeking to remove a UDU, the permit application will be routed to the Planning Commission, who will decide at a public hearing whether the merger shall go forward. Thus, what was once an over-the-counter permit is now subject to San Francisco’s discretionary political process. The intent of these new requirements certainly seems designed to limit property owners’ ability to remove UDUs. However, in making its decision on whether to allow the removal, the Planning Commission is required to weigh factors such as whether the cost to legalize instead is reasonable, whether legalizing the unit is financially feasible, and whether doing so would amount to a financial hardship for the homeowner.

While the City has made it more difficult to remove UDUs, they at the same time attempt to make it easier for an owner to legalize them. The City has a process in which they allow owners to legalize one UDU per property, and in doing, waive planning review fees and have the discretion to waive certain rear yard, parking, open space, density, and light and air requirements.

Despite the City’s efforts to “incentivize” UDU legalization, it is still a bad outcome for many homeowners. The cost of legalization can be extremely expensive, and many homeowners simply do not want the extra unit in their home, regardless of whether it is being rented out or not. Moreover, when a UDU is occupied by a renter, the landlord is required to pay the renter relocation fees while the unit undergoes the expensive legalization process, and then is required to allow the renter to return when the work is done at their previous rent-controlled rent—which in many cases is far below market value.

Many property owners facing this predicament have no choice but to utilize the Ellis Act in order to restore what was once their single-family home. The Ellis Act is a State law that allows landlords to exit the rental market by removing all tenants from a property. However, while the Ellis Act will allow a single-family homeowner to remove non-family members from their homes, it may not prevent the City from forcing the homeowner to legalize the unit—even if that unit will just sit empty. (This is still an open legal question: whether the City can require an owner to obtain the permits and perform the expensive work of adding what is essentially an additional rental unit within their home, when the landlord has invoked to Ellis Act to stop becoming a landlord.) On the other hand, a landlord who has Ellis Acted on their property may have an advantage if they wish to remove the UDU. Under Planning Code Section 317, Conditional use authorization will not be required for removal of a UDU “if the Zoning Administrator has determined in writing that the unit cannot be legalized under any applicable provision of this Code.” Under Planning Code Section 207.3, the Department shall not approve an application for legalization if any tenant has been evicted from the unit for no-fault evictions—which includes Ellis Act evictions. In other words, According to San Francisco’s own rules, a UDU from which a renter was removed pursuant to the Ellis Act, would be ineligible for legalization.

Property owners in San Francisco should, under no circumstances, construct a UDU on their properties. Doing so violates San Francisco Building and Planning Codes, and puts them at the mercy of a number of state and local laws. If, like many homeowners, you already have a UDU on your property, you should become educated about the rules regarding these units, and develop a strategy for how to resolve the problem.

Contact a Real Estate Litigation Lawyer Today

If you have questions about removing or legalizing a UDU at your property, you should contact Andrew R. Catterall at Zacks & Freedman, PC for guidance. Contact us at your convenience to request a consultation.

Neither this website nor this post are intended to create an attorney-client relationship.