What happens when you buy a San Francisco street (incognito) what would Henry George say?

by on August 9, 2017 at 2:32 am in Current Affairs, Economics, Law | Permalink

Thanks to a little-noticed auction sale, a South Bay couple are the proud owners of one of the most exclusive streets in San Francisco — and they’re looking for ways to make their purchase pay.

Tina Lam and Michael Cheng snatched up Presidio Terrace — the block-long, private oval street lined by 35 megamillion-dollar mansions — for $90,000 and change in a city-run auction stemming from an unpaid tax bill. They outlasted several other bidders.

Now they’re looking to cash in — maybe by charging the residents of those mansions to park on their own private street.

Here is the full story, via Mike Tamada and Elmar Nubbemeyer.

1 mulp August 9, 2017 at 4:04 am

Property taxes should be much higher than $14 no the property has sold since prop 13 and the price of the property has been stepped up.

2 prior_test3 August 9, 2017 at 4:37 am

Well, that is a switch from someone like Til Hazel selling a private road to the state. Fair Lakes Parkway, among others. This article talks about the Fairfax Center Parkway, but memory suggests that Hazel owned a number of roads in that development – https://www.washingtonpost.com/archive/local/1986/10/17/after-decade-of-dispute-springfield-bypass-segment-to-open/5a4fbee0-5874-4973-bd2c-c1cae2f216c9/

Who maintains the roads now can be seen here – http://www.fairfaxcounty.gov/news2/new-map-shows-who-maintains-roads-in-fairfax-county/

I also have memories, having lived off Rt. 50 in Chantilly in that time frame, of how Hazel would block the road when attempting to get what he wanted from local/state government – which was basically being paid for the road he built for his personal profit seeking purposes. Or his grand vision to make the world a much better place, depending on who is writing the tale, of course. (There was also a private extension of Nutley running next to the Pan Am Shopping Center that also involved a similar style of dispute, but I believe it was not owned by Hazel, with the owner lacking Hazel’s various legal and political skills.)

3 Ray Lopez August 9, 2017 at 5:02 am

Yawn, old as the hills. I recall certain state senators buying up residential land in Arlington VA and then zoning it commercial back in the 1960s. Scandalous but routine. As for Hazel, he became, along with Jack Herrity *, if memory serves, part of the Board of Supervisors for Fairfax County. One hand washes the other and they both wash the face. DC btw is into ‘private roads’ more so than other places. At one time I think the Dulles Airport access road was owned by an Australian toll road operator.

*Bonus trivia: old Jack has a Wikipedia page: https://en.wikipedia.org/wiki/Jack_Herrity (“In May 1994, the 62-year-old Herrity received a heart transplant from a 55-year-old woman”)

4 prior_test3 August 9, 2017 at 5:19 am

Not only as old as the hills, but the sort of thing that Til Hazel used GMU to promote and cherish. Which is always amusing, as noted for example from this excerpt from GMU’s own history regarding its Law School, and the wonderful mixing of GMU, the GMU Foundation, and making money off federal taxpayers – ‘On November 28, 1978 the George Mason University Foundation acquired eleven acres of land and a single building: the twenty-five year-old former department store belonging to the International School of Law in the Virginia Square section of Arlington. … The George Mason University Foundation later sold approximately half of the land on the western side of the parcel to the Federal Government for nearly five times the amount it paid for the entire property. On it the Federal Deposit Insurance Corporation built its L. William Seidman Center.’ http://ahistoryofmason.gmu.edu/exhibits/show/prominence/contents/arlington

Such useful sleight of hand likely impressed later, carpetbagger style donors to the GMU Foundation’s fold. Say what you will about Til Hazel, he was a local boy who made a lot of money bulldozering thousands of acres of trees while creating the much better world that is today’s Fairfax County, home of a significant fraction of the federal government’s and federal contractor’s (well paid) managers.
GMU has been providing proof of how public choice economics works long before attracting its first public choice economist to take advantage of the largesse of the taxpayers of the Commonwealth of Virginia.

5 Ray Lopez August 9, 2017 at 12:47 pm

Right you are prior_test3, and, since my parents got rich from DC real estate, we’re all for it: (legal) graft, (legal) corruption, (legal) making money off federal taxpayers, whatever it takes to keep us in the 1%. At one point, Ballston metro land was back in the 1980s owned by…Donald Regan. Yes, Reagan’s US Secretary of the Treasury. And we were interested in that same undeveloped parcel, but he got it first. Needless to say it’s a skyscraper now (I think Goldman Sachs’ building is on it).

Bonus trivia: the Baltimore owners of the “Hecht” department stores, longtime DC staples back in the 50s to 80s, were tax scofflaws. They got into numerous tax disputes with the IRS. Don’t know how it worked out, whether they won or not.

6 Thelonious_Nick August 9, 2017 at 11:36 am

I hate to indulge p_a3’s GMU fixation, but I would like to clear up a couple points in his post.

What p_a3 refers as the “Fairfax Center Parkway” is actually called the Fairfax County Parkway, and was only recently completed, now running from I-95 to Route 7, as originally planned. I didn’t realize it was originally a part of the Fair Lakes development–that is interesting.

The Nutley Road extension next to the Pan Am shopping center was a service road owned by the shopping center that gradually became a commuter cut-through after the Nutley Metro station opened. The county negotiated its purchase from the shopping center and repaved/ expanded it. I don’t believe there was any particular “dispute” involved.

7 seb August 9, 2017 at 4:48 am
8 Ray Lopez August 9, 2017 at 4:51 am

Yawn. Like in cyber-squatting of trademarks (popular in Hong Kong too), where some troll registers “Coca-Cola” and waits to sell it back to the genuine US corporation, this sale will be rescinded since in the USA this is not popular (contrary to Hong Kong, where it’s actually legal). That said, you have to watch out for real estate liens. We’ve had some placed on our property when tenants moved out, and the local utility companies could not collect. Bad form, but it happens. Liens are the lazy way that people use to extort and/or get paid for dubious contracts from many years ago. Actually, not to tip my hand, I have an arguably good claim to certain real estate that now is part of the University of Chicago (long story) because of a bad/fictitious sale in the chain of title to that land to some of my relatives. I should, consistent with free market principles, sue that school to get the land back, and see how they react. Probably they will run crying to the state legislature for relief, or point to some illiberal law that cuts off my claim… I wonder what is the statute of limitations for bad title in Illinois? Illinois is into real estate title insurance big time for some reason. Time to Google “Statute of Frauds”.

9 athEIst August 10, 2017 at 3:22 pm

Wouldn’t you make a claim to the title insurance company?

10 Cyrus August 9, 2017 at 6:01 am

There’s clearly a missed policy opportunity here. Public motive requirements should include posting notice at the physical location about to be foreclosed on.

11 Cyrus August 9, 2017 at 6:02 am

Motive -> notice.

12 prior_test3 August 9, 2017 at 6:18 am

This was not a foreclosure as such, and as noted in the article – ‘The residents say the city had an obligation to post a notice in Presidio Terrace notifying neighbors of the pending auction back in 2015 — something that “would have been simple and inexpensive for the city to accomplish.”

Treasurer-Tax Collector Jose Cisneros’ office says the city did what the law requires.

“Ninety-nine percent of property owners in San Francisco know what they need to do, and they pay their taxes on time — and they keep their mailing address up to date,” said spokeswoman Amanda Fried.

“There is nothing that our office can do” about the sale now, she added.

Fried said that as far as she knows, the Board of Supervisors “has never done a hearing of rescission” — and that because it’s been more than two years since Cheng and Lam bought the property, it could be tough to overturn the sale now.’

Do notice that final line – the property owners were still unaware of what had happened two years later. Generally, lazy stupidity on the part of a property owner is not a valid legal defense in tax matters. And such public lazy stupidity, being unaware that they had not been the property owners for two years, just makes their protestations even more ridiculous. Property ownership entails legal rights and obligations – ignoring the obligations of property ownership leads to losing one’s legal right to owning that property.

13 Cyrus August 9, 2017 at 6:52 am

Observation that everything was legal is completely compatible with the normative opinion that the law in this case could be improved.

14 prior_test3 August 9, 2017 at 7:13 am

Sure, but such a change won’t get the former owners their private street back.

And when it comes to taxes, the government rarely feels the need to bend over backwards to ensure compliance. That is one of the major differences (depending on state and other factors) concerning foreclosure, which generally involves property changing hands due to a failure to pay a private debt, with the government merely involved to ensure that laws are properly followed.

The government itself, however, following the law, is entitled to take whatever measures it wishes to ensure that public debts are properly paid. This can include, in the case of fraud involving taxes, imprisoning someone. Telling the government you were unaware of the taxes you had not paid tends to be an extremely weak excuse, and is extremely unlikely to cause the government to reverse course. Especially if it takes you 2 years to even notice you are no longer a property owner. Including not having attempted to the pay an owner’s properly due taxes.

15 bellisaurius August 9, 2017 at 8:18 am

Bet the law required a newspaper notice, which of course, no one reads.

16 Evans_KY August 9, 2017 at 6:22 am

Line the street with tiny homes for the homeless.

17 Mark Thorson August 9, 2017 at 9:27 am

Ha! Moving in the homeless, of which SF has an abundant supply, is the way to extort money from the neighbors. Just bring in a few stinky ones to set up tents along the sidewalk for a few days or weeks. That will bring the neighbors to the negotiating table. Let me see, how many square feet is this property?

18 Thiago Ribeiro August 9, 2017 at 7:06 am

So that is it? In America, everything is always at sale. Even streets and people’s souls.

19 The Other Jim August 9, 2017 at 8:34 am

I got $2300 for my soul, through eBay to some Brazilian dude. I had to deliver it in person. You should visit there some time.

20 Thiago Ribeiro August 9, 2017 at 11:52 am

I know the country as if it were my right hand.

21 John Thacker August 9, 2017 at 11:33 am

Eh, most roads are public. This one was private entirely so that the neighborhood could put up a gate and have a guard– something that is, in my experience, certainly more common in Brazil than in the US, where gated communities are relatively rare and appear (but I could be wrong) to be on the decline after an increase in the 80s and 90s. (It somewhat lags changes in the crime rate.)

22 Thiago Ribeiro August 9, 2017 at 11:53 am

It is different, people can do whatever they do at their property, but we would never allow a street to be taken by moneyed interests.

23 John Thacker August 9, 2017 at 4:04 pm

But it is their property, same as the gated communities in Brazil. The collective group of houses all owned the sidewalks and road leading to their houses from the rest of the city, but that road didn’t exist before the houses were built and it didn’t go through the neighborhood or connect anyway. They just owned it together and neglected to pay property taxes.

Are you suggesting that the gated communities of Brazil get to hide behind walls and armed guards, but get Brazil to pay for all the road and sidewalk maintenance for their private property that no one else can access? What an even better deal for the moneyed interests of Brazil.

24 Thiago Ribeiro August 9, 2017 at 5:15 pm

It is completly different. Gated communities are private properties, they are like an apartment complex, just bigger. I was raised at an apartment, it was private property as a farm would be. Gated communities are just bigger and more horizontal.

25 rayward August 9, 2017 at 7:09 am

I assume the private street is subject to easements for ingress and egress and parking granted to the owners of the adjacent properties, so the new owner of the street likely would not have the right to deny use of the street by the owners of the adjacent properties. I also assume that the easement comes with a burden, namely paying for the upkeep of the street and taxes assessed on it. The new owner of the street has a right to collect the taxes assessed on the street from the owners of the adjacent properties, but likely not “rent” or other charges for the use of the street. Could the new owner of the street terminate the right of access (i.e., the easement) for failure of the owners of the adjacent properties to pay the taxes? The most interesting tidbit in the newspaper article is that there are 181 such private streets in San Francisco. Why aren’t these dedicated public rights of way? Are these private streets gated so the public cannot use them? I don’t recall seeing lots of gated streets in San Francisco.

26 dbp August 9, 2017 at 8:22 am

The article indicated that the community is gated and guarded. If the couple wanted to encourage the homeowners’ association to buy back the road, they could complain that the guard is trespassing and leave the community ungated and unguarded.

Could there be a cause of action against the title search firms if any of the homes had been sold over the decades of non-taxpaying on the common areas?

27 JWatts August 9, 2017 at 8:29 am

Or, as mentioned in the article, they could start leasing out parking spots.

28 Hazel Meade August 9, 2017 at 9:34 am

I suspect the rich people on the street have driveways and garages. Maybe they could lease parking for when they have parties. Perhaps a valet service.

29 OldCurmudgeon August 9, 2017 at 9:57 am

Presumably, they could lease to the general public. How much does monthly parking cost in that general area?

30 Hazel Meade August 9, 2017 at 11:18 am

It’s a gated community. The general public would have trouble getting to the parking spot.

31 JWatts August 9, 2017 at 12:03 pm

“It’s a gated community. The general public would have trouble getting to the parking spot.”

I imagine the gate only exists at the discretion of the new owners of the street. So, if they want to open up access to the general public, they could. I would speculate that they instead would much rather have the existing home owners buy them out instead.

32 Joey Joe August 9, 2017 at 4:53 pm

|“It’s a gated community. The general public would have trouble getting to the parking spot.”

Then the owner of the street parking lots will require the easement from the owner of the gate to let his business patrons enter and exit.

33 JWatts August 9, 2017 at 8:51 am

File this under: San Francisco – A Comedy of Errors.

34 dearieme August 9, 2017 at 9:49 am

The owners of the street could presumably sue the owners of the houses for blocking the street with their gates.

35 Dan Lavatan-Jeltz August 9, 2017 at 11:47 am

No, they can just remove the gates. I would give serious consideration to paying 90k to remove the gates to my neighborhood.

36 JWatts August 9, 2017 at 12:04 pm

“No, they can just remove the gates.”

Couldn’t they get a legal injunction against closing the gates, since the gates are blocking their street.

37 Victoria Wilson August 9, 2017 at 12:53 pm

Seems like proof enough that although any good can be privatized, there are some that are best suited to the economic and legal structure which support public goods. Now can we rid ourselves of the ‘non-excludable and non-rival’ definition of a public good with the dusty old lighthouse as the ultimate example?

38 Joey Joe August 9, 2017 at 4:55 pm

It was a private street in the first place, co-owned by the community. The HOA failed to pay real estate tax on it. A tax lien sale happened and someone bought it.

39 Victoria Wilson August 9, 2017 at 8:35 pm

If the residents along the road had the choice between their present situation and the road being owned by the city, which do you think they would prefer?

40 Jon August 10, 2017 at 1:06 am

Several commenters are missing that they own more than the street they own all of the common areas previously owned by the homeowner’s association.

That includes the guard house, roads, walkways, and HOA structures.

41 The Objective Historian August 11, 2017 at 11:02 am

So, can they charge to use the roads to the houses or is there an easement? If it’s just parking and the guard house they can charge for, it’s something, but I wonder really how much.

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