SEC. 1397. CERTIFICATION OF EXEMPT CONVERSIONS.

(a) The conversion of a stock cooperative, as defined in Section 11003.2 of the Business and Professions Code, to a condominium, as defined in Section 783 of the Civil Code, is exempt from the provisions of this Code, including, but not limited to, any annual limitation imposed on the number of conversions to condominiums set forth in Section 1396, upon issuance of a Certificate of Exemption pursuant to this Section, but only if the following requirements are met:

(1) At least 51 percent of the units in the cooperative were occupied by stockholders of the cooperative on January 1, 1981, or individually owned by stockholders of the cooperative on January 1, 1981. As used in this paragraph a cooperative unit is "individually owned" if and only if the stockholder of such unit owns or partially owns an interest in no more than one unit in the cooperative; and

(2) No more that 25 percent of the shares of the cooperative were owned by any one person, as defined in Section 17, including an incorporator or director of the cooperative, on January 1, 1981.

(b) In addition to notice requirements hereafter provided, each tenant of a unit in a stock cooperative that is converting to condominiums shall have the nontransferable right (i) to contract for the purchase of the unit upon the same terms and conditions that such unit will be initially offered to the general public or on terms more favorable to the tenant, which right shall run for a period of not less than 90 days from the date of issuance of the subdivision public report pursuant to Business and Professions Code Section 11018.2 where the building to be converted consists of five or more units, or from the date of issuance of a Certificate of Exemption in the case where the building to be converted consists of four units or less; or (ii) to receive moving expenses, up to a maximum of $1,000, which right shall extend for 120 days from the date of issuance of a Certificate of Exemption; or (iii) to enter into a one-year lease of the unit; or (iv) as to tenants aged 62 years or older or permanently disabled, to enter into a lease under the terms and conditions set forth in Section 1391(c) of this Code.

(c) Applications for a Certificate of Exemption shall be filed with the Department of Public Works and shall contain the following information, based on a declaration under penalty of perjury executed by the applicant that the information provided is, to the best of the applicant's knowledge, correct:

(1) A copy of a report of residential record ("3-R Report") obtained from the Bureau of Building Inspection showing the type of building and the number of units;

(2) The name and mailing address of the occupant of each unit;

(3) Identification of any occupant who is a tenant; for purposes of this Section, a "tenant" is a person other than a shareholder of the stock cooperative who rents or leases a unit in a stock cooperative;

(4) Verification under penalty of perjury by each non-tenant occupant of a unit that he or she is one of the share owners of a stock cooperative, along with documentary proof of that status in a form acceptable to the Director.

(5) Information showing that the applicant meets the requirements for exemption under Section 66412(h)(1) and (2) of the SMA.

(6) Certification that the applicant has provided written notice to every tenant of (i) the applicant's intent to convert to condominiums; and (ii) the applicant's intent to seek the exemption provided herein; and (iii) the rights afforded tenants of stock cooperatives that convert to condominiums pursuant to this Section. The applicant shall also submit a copy of the notice provided to the tenants and the date that it was so provided.

(7) Certification that the applicant (i) will give, prior to issuance of the Certificate of Exemption, written notice to each person applying for rental of a unit in the building of the tenant rights described in Subsection (4), which notice shall be given prior to acceptance of any rent or deposit from the prospective tenant; and (ii) will give written notice to all tenants that an application for a public report has been submitted to the Department of Real Estate at least 10 days before its submission where the building to be converted consists of five or more units; and (iii) will not terminate any tenancy because of a conversion or proposed conversion without 180 days' written notice to the tenant. Failure to comply with Subsection (i) of this Section will make the applicant subject to payment to the tenant of moving expenses and rent as provided in Government Code Section 66452.8.

The applicant shall also provide stamped envelopes addressed to the occupant of every unit in the stock cooperative. Such stamped and self-addressed envelopes shall be furnished to the Department of Public Works at the time of the filing of the application for a Certificate of Exemption.

(d) The Director shall determine whether the applicant has met the requirements for exemption set forth in Section 66412(h)(1) and (2) of the SMA and whether a parcel or final map was approved by the Legislative Body of the City and County of San Francisco. If it is determined that these requirements are not met or that a parcel or final map was so approved, the Director shall deny the application.

(e) If the Director determines that an application meets all the requirements described in Subsection (c), that officer shall take the following action:

(i) If the applicant has certified that no tenants reside in any of the units, a notice shall be sent to each occupant of the building setting forth the rights of tenants of stock cooperatives that convert to condominiums and stating that the Department intends to issue the applicant a Certificate of Exemption for conversion to condominiums on the grounds that the applicant meets the requirements of Section 66412(h) of the SMA and that no tenants are occupying any of the units in the building. It shall also state that the Certificate of Exemption will be issued within 30 days if no request is made for a hearing to dispute the validity of that action. Upon receipt of a written request, the Director or a designee shall conduct a hearing, after providing notice to the applicant and all occupants of the units, in order to determine whether the Certificate of Exemption should be issued and whether tenant rights have been provided as required herein. If no request for a hearing is made within 30 days of the mailing of such notice, the Director shall issue the Certificate of Exemption.

(ii) If the applicant has certified that one or more tenants occupy any unit in the building, the Director shall set a date by which the applicant must comply with the requirements of this Section governing tenant rights, which date shall be not less than 60 days from the date that the applicant notified the tenants of the intent to convert and of the rights afforded to such tenants, and shall provide written notice of that date to the applicant and each occupant of the building.

(f) On or after the date set by the Director for compliance by the applicant with the requirements regarding tenant rights, the applicant shall provide the Department of Public Works with respect to each tenant one of the following:

(i) A contract executed by every owner of the building and the tenant giving the tenant the right to purchase the unit on the terms set forth above in Subsection (b)(i); or

(ii) Written certification by the tenant that the tenant has received money for moving expenses or, in the alternative, a contract between the owner(s) of the building and the tenant in which the owner(s) agree to pay the tenant's moving expenses (which contract may contain a provision that the right to such expenses shall expire after 120 days from the date of issuance of the Certificate of Exemption); or

(iii) A lease executed between the owner(s) of the building and the tenant for either one year or, as to elderly or disabled tenants, on the terms set forth in Section 1391(c) of this Code; or

(iv) A statement by the applicant that the tenant has been offered each of the tenant rights set forth in this subsection, but has failed to exercise any of those rights.

In every contract and lease entered into pursuant to this Section, every owner of the building shall expressly waive the right to assert as a defense to any legal action brought by a tenant for violation of the contract or lease the claim that the contract is unenforceable because it was not based on consideration provided by the tenant.

(g) If the applicant has complied with the requirements of this Section governing tenant rights, the Director shall issue the Certificate of Exemption; provided, however, that if any tenant or occupant of the building disputes the validity of that action on the grounds that tenant rights have not been provided as required herein, the Director of a designee shall conduct a hearing, after providing notice to the applicant and the occupant of each unit, in order to determine whether all such rights have been provided. The Certificate of Exemption shall not be issued unless the Director makes the determination that such rights have been provided.

(h) All decisions of the director made pursuant to this Section are final administrative determinations.

(i) A subdivider, having applied for and been granted a Certificate of Exemption under this Section 1397 and Section 66412(h) of SMA may elect to file a parcel or final map for recordation, in which case such parcel or final map shall be filed with the Department of Public Works for the sole purpose of recordation. Unless the subdivider requests approval of such data by the County Surveyor, it shall bear a certificate on the title sheet of the map, signed by the County Surveyor, certifying that this map is filed under provisions of the Certificate of Exemption procedure for the sole purpose of recordation, and that approval of the technical and engineering data shown thereon is not implied. Such parcel or final map shall be signed by all parties having any record title interest in the real property subdivided. If the map is not signed by all of the stockholders, the person or persons signing shall produce evidence satisfactory to the Director that they are authorized to sign on behalf of the stock cooperative.

(j) A fee of $500 shall be charged for investigating and processing an application for Certificate of Exemption for converting a stock cooperative consisting of four units or less to condominiums and all other costs incidental thereto.

A fee of $800 shall be charged for investigating and processing an application for Certificate of Exemption for converting a stock cooperative consisting of five units or more to condominiums and all other costs incidental thereto.

(k) A fee of $200 shall be charged for processing and filing a parcel or final map, excluding any recordation fee charged by the Office of the Recorder; provided, however, that if the subdivider requests approval of the technical and engineering data shown on a parcel or final map, the fee shall be the same as that charged for the processing and filing of a condominium map.

(l) Fees charged under Subsections (j) and (k) above shall be payable to the Department of Public Works and shall be paid at the time of filing the application for Certificate of Exemption, or at the time of filing the parcel or final map, whichever is applicable. Said fees shall be nonrefundable.

(m) Funds received under Subsections (j) and (k) above shall be deposited in the Subdivision Fund created by Section 1315(c) of this Code and shall be governed by the provisions specified therein.

(n) Section 1315(b) of this Code shall be applicable to the payment of fees under Section 1397 of said Code as well.