The first conversion of an apartment building under Santa Monica's amended City Charter should become final Tuesday when the building's sale is expected to close.
The conversion, to a limited-equity cooperative--one in which units' resale values are restricted--will end a seven-year struggle over rent increases and maintenance at Cloverfield Gardens, tenants and landlords say.
Conversion is "good for the landlords, who (were not) realizing a profit, and good for the tenants," said Nancy Hall, president of the complex's cooperative board of directors.
Joseph Baur, who bought the complex for $1.6 million with several partners in 1978, said he was glad to get rid of the building, which he called a "headache."
"It has been too much of a hassle, and this was a fair offer," he said.
Including Cloverfield Gardens, the city staff has received 26 conversion applications covering 260 units--the others all to condominiums. Nineteen applications covering 115 units have passed the Planning Commission, but only Cloverfield Gardens also has been approved by the City Council.
Co-operative conversions, unlike those for condominiums, do not require additional review because no subdivision of property is required. Subdivision maps must be drawn up for condominium conversions and approved by city, county and, in some cases, state agencies.
The conversion initiative passed by voters in 1984 amends the City Charter to allow tenants to buy their units, while protecting the rights of non-participating renters.
Paul DeSantis, a co-author of the conversion amendment, said that when landlords see that applications can survive the costly and time-consuming process, more may become interested in converting their buildings.
DeSantis said conversions offer landlords a profitable way to leave the city and its rent law, which requires landlords to justify increases before the city Rent Control Board.
The conversion initiative was written and supported by members of both the renter's rights movement and the citys' landlords.
Under it, elderly and disabled tenants receive lifetime leases with guaranteed rent limits if rent controls are terminated by conversion.
The initiative also includes a 6% tax to be paid by the seller that will be used to establish a fund to lend money to low- and moderate-income renters who want to buy their units.
The Cloverfield Gardens tenants will buy the 62-unit complex for $2.2 million.
Each tenant will be able to join the limited-equity cooperative for a down payment of $750, plus an average of $460 a month, said Gary Squier, the executive director of Community Corp. of Santa Monica, the nonprofit development agency that is coordinating the conversion.
The payments will average $60 per month above current rents for one-bedroom apartments and $70 more for two-bedroom units, Squier said. The tenants also can use outstanding security deposits toward their down payments.
Community Corp. will buy and rehabilitate the complex at 1959 Cloverfield Blvd. using a $1.1-million city loan and a $1.7-million bank loan. The agency will use the $600,000 above the purchase price to make repairs before the tenants assume ownership.
Because most of the units qualify as low- and moderate-income housing under city guidelines, the complex is receiving funds from the Citywide Housing Acquisition and Rehabilitation Program. Part of the loan will be repaid through the tax on conversions established by the initiative.
About a dozen units also will be subsidized through federal housing funds, Squier said.
Forty-one of the building's 62 households signed an intent-to-purchase agreement, said Joan Akins, a city planning department analyst. Under the law, two-thirds of a building's tenants must approve the idea of the conversion, then at least half of them must sign an intent to purchase.
Tenants who do not buy their units are given a two-year option to buy at the same price and are allowed to remain under rent control, Akins said.
Prompted by attempted rent increases and other actions, Cloverfield Gardens tenants formed their own association shortly after Baur and his partners bought the building. Nine-year tenant Vivian Linder said the conversion will be the end to a "real struggle" with the landlords.
Cooperative President Hall said the landlords victimized tenants by trying to raise rents beyond control levels and by neglecting the building.
Baur said no major repairs have been completed because the city's rent control law is "overkill" and has destroyed his plans to rehabilitate the complex because he could not raise rents enough to cover repair costs.
Baur sued the Rent Control Board twice to fight for increases. In 1980, he was denied a 26% increase by the city hearing examiner and rent board, but was granted a 12% increase in Santa Monica Municipal Court. The increase was granted because it had been negotiated between the tenants and landlords before rent control, Baur said.
Baur again was denied an increase in 1983. The case was brought to Santa Monica Superior Court in 1984 where Judge Raymond Choate ruled against him.
An appeal is scheduled to begin Oct. 27, but Baur said he plans to drop it once the building sale is final.
In 1980, one tenant was granted a rent decrease for the landlords' failure to supply hot water and for a moisture problem that resulted in a mildewed carpet. Hearing examiner Raymond Correio concluded that while the landlords quickly repaired minor problems in the complex they ignored vital deficiencies.