PEYMAN PAKDEL AND HIS WIFE, SIMA are the kind of neighbors most people want.
Peyman is an engineer who worked his way up to become part-owner of a small manufacturing company. Sima is a dentist with a family practice. Peyman and Sima are both immigrants. They raised their three children in Northwest Ohio.
In 2009, the Pakdels used their savings to buy a unit in a small condo building in San Francisco. They had friends in the Bay Area and planned eventually to retire there. In the meantime, they rented their unit to a young tenant.
They were living the American dream—years of hard work bringing them close to the future they imagined for themselves.
But then San Francisco changed the permitting laws for condos like the Pakdels’, forcing them to offer a lifetime lease to their tenant.
The retirement home the Pakdels planned for would no longer be possible—unless they took the City of San Francisco to court.
A home in Russian Hill
PEYMAN HAS BEEN working 12-hour days for the past 20 years. He usually gets to work at 5 a.m. and doesn’t get much down time during the day. “It’s been my life with very little vacation or time off,” Peyman says. He and Sima want to retire to San Francisco while they’re still lucky enough to be healthy. “We’re getting pretty close to the end of our road in terms of physical ability and being able to enjoy life,” he says.
San Francisco’s Russian Hill neighborhood is known for its beauty. Jack Kerouac used to live there; so did Governor Gavin Newsom. It is home to the San Francisco Art Institute and was the setting for Steve McQueen’s car chase scene in Bullitt. For Peyman and Sima, Russian Hill seemed like an ideal place for a retirement home.
The unit they purchased in 2009 was one of six carved out of a 1913 home in Russian Hill. It was a Tenancy in Common building: Unlike in a standard condo building, where each owner owns a specific unit, tenants in common each own a share of the whole building.
But the Pakdels and the other owners were interested in converting to a traditional condo building at the earliest opportunity. As part of their purchase agreement, the Pakdels had to agree to cooperate with the co-owners’ efforts to convert. At the time, converting a Tenancy in Common building to a condo building was a relatively simple process in San Francisco, though the permitting process could take a long time. Two hundred applications were granted every year under a city lottery system.
The Pakdels and the other owners worked with the city to begin the conversion process. But not yet ready to retire, and still living in Ohio, the Pakdels rented their unit to a tenant. It was a mistake.
Forced to offer a lifetime lease
IN 2013, the City of San Francisco passed a new ordinance that converted the city’s lottery process for condo conversions to a new process that required each unit owner to pay $20,000. Also—incredibly—any owners who were renting their unit to a tenant would have to offer their tenant a lifetime lease.
Why would the city force homeowners to allow tenants to remain in their units permanently? The city claimed the bizarre new requirement was necessary to prevent a mass displacement of tenants as buildings converted to condos. But the move may actually have been something of a salvo in the ongoing cold war between renters and property owners in the city. San Francisco has some of the strongest tenant protections in the country and anti-landlord sentiments are common. (“I can’t take being an SF landlord any longer,” one landlord blogged anonymously in 2014. “I’ve suddenly become a bad word in this town.”)
To Peyman, the new lifetime lease requirement was absurd. “I understand the concern about evictions,” he says. But he and his wife had never evicted anyone. They had only one property in San Francisco and had always intended to eventually move into it.
“It’s just hard to believe that such an ordinance can be written by really intelligent people,” he says. “It really shocks the conscience when you read through this document.”
As justification for the new rules, the city cited a report it had commissioned on the economic impact of condo conversions. Peyman tracked down the report, which wasn’t easy to find.
“This report is really a piece of art,” Peyman says. “You have to be completely insane by any measure to define this report a plausible scientific report that a city should rely on. It’s completely cooked up to justify the $20,000 fee for conversion.” The report didn’t include any analysis of the economic impact of mandatory lifetime leases, which, Peyman points out, would certainly decrease property values.
“When you have somebody else living in your apartment for their entire life, what is the word for that agreement really?” Peyman asks.
Perhaps aware that the lifetime lease requirement was unconstitutional, the city included a so-called “poison pill” in the ordinance intended to prevent legal challenges. If any owner sued to challenge the lifetime lease, the city would immediately halt all condo conversions for buildings with even a single tenant. San Francisco even sent a notice to all the landlords potentially affected by the new policy that included the Pakdels’ name and address.
The Pakdels were outraged. Their purchase agreement required them to cooperate with condo conversion efforts. Now, because of San Francisco’s ordinance, cooperating meant agreeing to pay the city thousands of dollars, offering a lifetime lease to their tenant, and accepting the city’s trumped-up justifications.
“When I was studying this, my blood was boiling,” Peyman says. “Because how in the world in the United States can such a thing happen?”
There was no way out of it. When their building began the process of converting to condos in 2015, the Pakdels were forced to offer their tenant a lifetime lease.
Fighting back
“IT WAS VERY DEVASTATING,” Peyman says. “And there were many nights that I couldn’t sleep.”
The Pakdels asked the city to either excuse them from the lifetime lease or compensate them fairly. The city refused.
“Nobody goes against the City of San Francisco,” Peyman says.
He asked other property owners in San Francisco for advice. “They said, basically, this city is going to fight tooth and nail on anything,” he says. “So you’re never going to succeed on a land case against the City of San Francisco. But I felt so violated that I had to do something.”
In 2017, despite the poison pill in the ordinance, the Pakdels filed a lawsuit against the City of San Francisco in federal district court. They argued the city had violated their Fifth Amendment rights. By forcing the Pakdels to allow their tenant to remain in the property permanently, the city had effectively taken their property without just compensation. The Pakdels’ complaint relied on precedents set by two Pacific Legal Foundation victories: Nollan v. California Coastal Commission (1987) and Koontz v. St. Johns Water Management District (2013).
But the district court dismissed the Pakdels’ case on the grounds that it wasn’t “ripe” for review because the Pakdels hadn’t exhausted the city’s administrative processes or filed in state court first.
That’s when PLF joined the Pakdels’ case. Working alongside the Pakdels’ private attorneys, PLF brought an appeal to the Ninth Circuit Court. Unfortunately, in a March 2020 decision, the Ninth Circuit agreed with the district court.
But meanwhile, PLF had won a significant U.S. Supreme Court victory in a different case: Knick v. Township of Scott (2019). In the Knick opinion, the Court held that property owners can bring takings claims to federal court without first having to exhaust state remedies “because the violation is complete at the time of the taking.”
Bolstered by this new precedent in Knick, PLF brought the Pakdels’ case to the Supreme Court. In its June 28, 2021, decision, and PLF’s 14th Supreme Court victory, the Court reversed the lower courts’ rulings and, citing Knick, held that the Pakdels had a right to bring their takings claim against San Francisco to federal court.
“In this case,” the Court wrote in its 9-0 decision, “there is no question about the city’s position: Petitioners must ‘execute the lifetime lease’ or face an ‘enforcement action.’ And there is no question that the government’s ‘definitive position on the issue [has] inflict[ed] an actual, concrete injury’ of requiring petitioners to choose between surrendering possession of their property or facing the wrath of the government.”
Now the courts must consider the Pakdels’ argument that San Francisco violated their Fifth Amendment rights when it forced them to lease their property to their tenant for life.
“The Pakdels will finally have their day in court, as they deserve,” notes PLF attorney Jeffrey McCoy.
A violation of basic rights
IT’S BEEN EIGHT years since San Francisco passed the ordinance that destroyed the Pakdels’ plans for their Russian Hill retirement home.
Their case is far from over. “There’s a long way ahead of us,” Peyman says. And the peaceful retirement they imagined in picturesque Russian Hill may be a lost cause.
“Even, at this point, if we do not reach our conclusion—which is being able to live in that place—I’m very grateful for PLF,” Peyman says. He believes the case will help other people. “We can show to ordinary citizens of this city that you really need to stand up for your rights,” he says.
And he believes that the courts will finally see how unfairly San Francisco treated the Pakdels.
“If we could show to the court what the city has done in the process of coming up with this ordinance, I do not think there’s any reasonable minds in the United States that can side with the city,” Peyman says.
After all these years, Peyman still seems genuinely puzzled by San Francisco’s actions. How could one of America’s most popular cities force property owners to lease their home permanently against their will?
“It’s a violation of basic rights in housing,” Peyman says.
He points out that San Francisco is a city that prides itself on liberal ideas. If you believe in liberty and the pursuit of happiness when it comes to social issues, he argues, you should know those same rights also encompass the home.
