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- For RSO units, LAMC section 151.31 requires LAHD's disclosure notice of tenant rights, dated and signed by both sides, before you make any buyout offer.
- The agreement is written in the tenant's primary language, with the 30-day cancellation statement in bold type above the tenant's signature.
- You file the signed notice and the agreement with LAHD within 60 days. An agreement that misses a requirement can be cancelled by the tenant at any time.
- Offering money to vacate without the written notice of rights is harassment under the City's Tenant Anti-Harassment Ordinance.
What counts as a buyout
A buyout agreement is a written agreement in which a landlord pays a tenant money, or gives other consideration, to move out of an RSO unit voluntarily. LAHD calls these cash for keys agreements, and the City added the rules for them to the RSO through Ordinance No. 184673. The rules sit in LAMC section 151.31, the Tenant Buyout Notification Program, which LAHD describes as a program to regulate, monitor and enforce voluntary vacancies that happen under buyout agreements.
Two things follow from that definition. The program is written for RSO units, so check each unit in LAHD's RSO property search before you plan anything. And a buyout is voluntary. The tenant does not have to accept an offer, and LAHD's guidance says a landlord may not retaliate against a tenant who turns one down.
The steps, in order
- Confirm the unit is under the RSO.
- Before you make any offer, give the tenant LAHD's disclosure notice of RSO rights. You and the tenant both date and sign it.
- Leave room for advice. LAHD's guidance says the tenant has the right to consult an attorney, a legal agency or LAHD before deciding whether to accept.
- Negotiate the payment and the move-out date.
- Put the agreement in writing in the tenant's primary language. Above the tenant's signature line, in at least 12-point bold type, it must state that the tenant may cancel it any time up to 30 days after all parties sign, without obligation or penalty.
- Sign it. The 30 days run from the point when every party has signed.
- File copies of the signed disclosure notice and the agreement with LAHD within 60 days of signing. LAHD accepts them online through an Angeleno Account.
The disclosure notice is LAHD's form, not a letter you write. Download the current version from LAHD's buyout program page each time rather than reusing a copy saved from an earlier deal.
The 30-day window and your sale
The tenant can cancel for any reason during the 30 days after everyone signs. If the agreement or the process did not meet the ordinance, the tenant can cancel for any reason at any time. For a seller, the second rule is the one to plan around, because one missed requirement can leave an agreement open long after you thought it was settled.
Line the buyouts up against the sale calendar:
- A correctly done buyout signed well before you list will have cleared its 30 days before a buyer starts due diligence.
- A buyout signed during escrow may still be inside its 30 days at closing. The buyer would take the building with that open, so disclose it and expect the buyer to account for it.
- Any unit you ask a buyer to pay for as vacant should be vacant before closing, with the 30 days over and the LAHD filing made.
Give the buyer copies of every buyout agreement, disclosure notice and LAHD filing in the building. A careful buyer will ask for them, because an agreement that missed a requirement can still be cancelled by the tenant.
What happens if the rules are not followed
The ordinance gives a tenant several remedies, and the City's anti-harassment law adds more:
- The tenant can cancel the agreement for any reason, at any time, without obligation or penalty.
- A violation can be raised as an affirmative defense in an unlawful detainer case.
- The tenant can sue under section 151.31 for damages and a $500 penalty.
- The City's Tenant Anti-Harassment Ordinance lists offering a tenant payment to vacate, without written notice of their rights under the buyout program, as harassment. A tenant who wins under that ordinance is awarded civil penalties of $2,000 to $10,000 per violation, plus three times compensatory damages and attorney's fees.
After the tenant moves out
LAHD's program treats a move-out under a buyout agreement as a voluntary vacancy, and LAHD's rent bulletin lets an owner set a new rent for the next tenant after a voluntary vacancy. That is why a completed buyout can change what a buyer will pay for a unit. The unit stays under the RSO, so the new rent becomes the base for future annual increases.
That rule has limits. After an owner or family occupancy eviction, for example, the next tenant's rent is not decontrolled. Know how each unit in the building became vacant before a buyer asks, because the answer decides what rent the buyer can charge.
LAHD also publishes the relocation amounts a tenant would receive in a no-fault eviction on its relocation assistance page. The amount depends on whether the tenant is an eligible or a qualified tenant, how long they have lived in the unit and their income, and a qualified tenant is one who, on the date the notice is served, is 62 or older, is disabled, or has one or more minor dependent children. A tenant weighing your offer can look those figures up, and so can you.