Wealthy San Francisco residents lose private street over tax bill

image source, Google
image captionThe street, palm trees, and pathways of the elite Presidio Terrace now belong to someone else

Residents of a San Francisco private street where homes sell for millions of dollars have had the street itself bought from under them.

Presidio Terrace is now owned by two investors, Tina Lam and Michael Cheng, who snapped up the private road for about $90,000 (£69,039, €76,203).

The street - parking, pathways and all - was sold by the city over a $14-a-year tax which went unpaid for decades.

Wealthy residents say they knew nothing about the sale until it was done.

The result is that residents no longer own the road, pavements, trees, or any of the common land - and might have to pay its new owners for parking.

The terrace, an oval-shaped private compound, is seen as one of the expensive city's most prestigious addresses.

How does buying a road work?

Like other US municipalities, the City of San Francisco regularly auctions off properties that owners have failed to pay taxes on.

According to the city's website, San Francisco advises bidders that all sales are final and so they must thoroughly inspect the property for any damage and consult local zoning rules.

Because maintenance is the duty of owners, privately owned roads can save money for cities.

However, some cities discourage the practice, out of concern that private owners might at some point require taxpayer dollars to keep roadways functioning.

Owners become legally liable for any accident or injury that occurs due to lax upkeep, such as not clearing snow or repairing potholes.

Number 24, recently for sale, was listed at $6.5m. Number 26, an "exceptional residence" on the southern slope, was listed for $14.5m.

"Among San Francisco's many prestigious communities, there are few that offer the privilege of privacy amid the magnificence of nature," reads the blurb on one property ad.

The agency was keen to point out that "stone privacy walls and a round-the-clock security guard provide peace of mind".

image source, Google

But despite the affluence of the neighbourhood, it didn't pay its taxes - and so the city sold it at auction for defaulting on a $944 tax debt.

The auction took place in 2015, the San Francisco Chronicle reported, but residents didn't know about it - it took place in an online auction among a mix of properties.

"We just got lucky," Mr Cheng told the newspaper. He and Ms Lam outbid dozens of others to buy the street without seeing it - and are deciding what to do with their investment.

"We could charge a reasonable rent on it," he said of the 120 lucrative parking spaces that they now own. But some residents believe their new landlords may be looking to sell the street back - at a profit - to the locals who believe they should still own it.

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In a twist, the street is now owned by two investors of Asian origin - despite originally being governed by a "racial covenant" which prevented anyone except Caucasian whites buying property there (a provision made illegal decades ago). Mr Cheng is originally from Taiwan, and Ms Lam from Hong Kong.

Mr Cheng told the Mercury News newspaper that he was considering building a home for himself and Ms Lam on the street, if land use rules allow it.

But now, homeowners are asking the city to reverse the sale, portraying the deal as a money-making ploy - one the residents had not heard of until May, almost two years after the auction.

Scott Emblidge, a lawyer for the homeowners' association, claimed the street is "owned and controlled by the association" in a letter to city authorities.

"The association was shocked. The property management firm was not aware of any sale or of any taxes owed," he said.

"It is hard to understand why anyone would buy this property for any amount. But perhaps the explanation is provided by Ms Lam's subsequent attempt to get the association to 'buy back' their property from her," it said.

The document also lays out an explanation for how the bizarre turn of events occurred, citing information gleaned from the tax collector's office.

The small tax bill for the common area was sent "for many years" to an address at Kearny Street in the city - an address apparently unknown to any of Presidio Terrace's inhabitants or property managers, Mr Emblidge wrote.

Since the bills were never received, no-one paid them. And no notice of an impending sale was posted on the street or delivered to any resident, he said.

He argued the sale was unlawful, and requested a hearing to rescind the sale.

But speaking to the San Francisco Chronicle, a spokeswoman for the tax office said everything had been above board.

"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," she told the paper.

Ms Lam, meanwhile, denied any intent to exploit the residents, and said the pair are in no hurry to sell up.

"I really just wanted to own something in San Francisco because of my affinity for the city," she said.

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