I heard San Francisco’s condominium conversion lottery system has been changed. How does the new system work?
Under the old system, 200 apartments (or about 55 buildings) per year were selected in a series of lottery drawings. The first drawing, called "Pool A", selected 100 apartments from among buildings that had previously entered and lost the condo lottery three or more times. Each of these buildings got one Pool A ticket regardless of the number of years it had entered. The second drawing, "Pool B" which selected another 100 apartments, was open to all buildings including first-time entrants. Each building got a number of Pool B tickets equal to the number of years it had participated in the lottery, up to a maximum of five tickets. After all of the winning buildings had been selected, the drawing continued and buildings were placed on the "Standby List" in the order drawn. The Standby List buildings were permitted to convert only if winning buildings subsequently failed to submit applications by the deadline (usually July 31) or were found to be ineligible for conversion. The old system was amended in 2004 to provide that buildings from which certain elderly, disabled or catastrophically ill tenants were evicted after November 16, 2004 would be eligible for only 25 of the 200 conversions.
In recent of years, the odds of winning the condominium conversion lottery had fallen sharply. The likelihood of selection in the 2005 condo lottery ranged from approximately 3% for first-time entrants, to approximately 38% for buildings that had participated five or more times. Moreover, most buildings' chances of winning were dropping from year to year even as their ticket allotment increased. For example, a building that entered for the second time in 2004 had about an 8% chance of having one of its two tickets chosen; the same building, entering for the third time in 2005, had only a 6% chance of having one of its three tickets chosen. The odds were dropping even more precipitously for buildings that had reached their maximum allotment of five "Pool B" tickets.
The new condominium conversion lottery system will not change either the rules governing eligibility to enter the condominium lottery or the number of apartments selected annually for conversion. Instead, the system will increase the preference shown for buildings that have previously entered and lost, theoretically guaranteeing that any building that continues to enter the lottery will eventually win.
The new system will continue the practice of dividing the drawing into a "Pool A" and a "Pool B", each selecting 100 apartments for conversion. For the Pool A selection, buildings that have previously entered and lost the condo lottery three or more times will be grouped according to the number of years they have entered. Thus all buildings that have previously entered and lost six times will be considered "Class 6", buildings that have entered and lost five times will be considered "Class 5", and so forth. If the number of apartments in the most senior Class is less than 100, all of the buildings in that Class will automatically qualify for conversion. The unused Pool A places will then be available for the next most senior Class. For example, if the total number of apartments in the senior Class is 32, 68 places will be available for the next Class. When the number of apartments in a particular Class exceeds the number of places remaining in Pool A, a lottery drawing will select the winning buildings from that Class. The Pool A selection will then be completed.
Unsuccessful Pool A buildings, and buildings that are not eligible for Pool A, will then participate in Pool B. Each building will get a number of Pool B tickets equal to the number of years it has participated in the lottery. Unlike the old lottery system, the new system will not place a ceiling on the number of Pool B tickets a building can obtain. The practice of maintaining a "Standby List" will continue under the new lottery system, but placement on the list will be determined by building Class, and ranking within each Class will be determined by a separate lottery drawing to be held for each Class. Buildings where certain elderly, disabled or catastrophically ill tenants have been evicted since January 1, 2000 cannot participate in the Pool A drawing. Buildings from which certain elderly, disabled or catastrophically ill tenants were evicted after November 16, 2004 will continue to be eligible for only 25 places in the Pool B drawing.
About the Author
D. Andrew Sirkin is a recognized expert in fractional ownership and other co-ownD. Andrew Sirkin is a recognized expert in fractional ownership and other co-ownership arrangements including shared vacation homes, TICs, equity sharing, co-housing, and legal subdivisions such as condominiums. His practice areas include transaction planning, offering materials, co-ownership agreements and CC&Rs, entity formations, regulatory approvals, fractional lending and mediation. From offices in San Francisco California, Evergreen Colorado, and Paris France, he has worked on projects all over the World, including most U.S. States, as well as Italy, France, Spain, Portugal, Ireland, Argentina, Nicaragua, Costa Rica, Panama, Dominican Republic, Nicaragua, Belize and Mexico. Since 1985, he has prepared fractional ownership documentation for over 6,000 clients. He is an accredited instructor with the California Department of Real Estate, and frequently conducts co-ownership workshops for attorneys, real estate agents, corporations, and prospective home buyers. Andy is the co-author of The Condominium Bluebook, published annually by Piedmont Press, and The Equity Sharing Manual, first published by John Wiley and Sons in November 1994 (order the book). He has written numerous articles on related topics, including "Fractional Ownership" and "Questions and Answers on Tenancy In Common", all of which are available at www.andysirkin.com. Mr. Sirkin can be contacted via email at DASirkin@earthlink.net. Mr. Sirkin can be reached by telephone at 415-738-8545.
