02:02 - Source: CNN
Couple buys upscale San Francisco street

Story highlights

The private street went up for auction after local homeowner's association failed to pay tax bill

New owners say they're still deciding what to do with their purchase

San Francisco CNN  — 

San Francisco is already known for its sky-high real estate, but the Presidio Terrace neighborhood deserves to be in a category of its own. Recent real estate listings show home prices ranging from more than $5 million to $15 million.

Which is why the news that a San Jose couple purchased a private street here, first reported by the San Francisco Chronicle, came as such a surprise this week.

Reporters and photographers flooded the neighborhood on Tuesday, snapping pictures of the multimillion-dollar mansions and trying to get reaction from neighbors. Most said they wished to remain silent or anonymous over the brewing controversy.

One homeowner joked that there was such a big media presence in the neighborhood, Donald Trump must not be making enough news. Others expressed bewilderment that someone might try to profit off what they see as an unfortunate bureaucratic snafu.

Residents in Presidio Terrace have filed suit against the city.

The controversy stems form the failure of the Presidio Terrace homeowner’s association to pay property taxes for its “common area,” which includes its sidewalks, palm trees and circular drive. In a lawsuit filed against the city of San Francisco, the association says the bills were mailed to an accountant who hadn’t worked for the association since the 1980s.

By all accounts, it was a paltry sum – $14 a year – that the association says it would have paid had it received the bills. Overtime, the unpaid debt grew to $994.

The three decades of delinquency prompted the city to auction the parcel of land to the highest bidder. But the association says it was never notified of the action, another reason it says the sale should be invalidated.

“This isn’t about choosing not to pay property taxes; residents of Presidio Terrace pay their individual property taxes each year,” the homeowners association said. “Tax bills for the common area were sent to the wrong address and no notice of delinquency or the sale was made to any residents of Presidio Terrace. This is purely an oversight that needs to be corrected and we are working with the city to correct this unfortunate situation.”

For the moment, the city seems to be holding firm.

“State law is very strict. If people don’t pay their property taxes for five years, we must offer it up for auction,” Amanda Fried, a spokeswoman for the city’s treasurer and tax collector, told CNN affiliate KGO-TV.

Michael Cheng and his wife, Tina Lam, put in the winning bid of $90,000 in April 2015.

Pressed to explain their motives, the couple is now taking a defiant position, as neighbors worry the couple could seek to profit by charging homeowners to park in front of their own homes.

“If you don’t pay your property tax for 30 years, you should call the city and find out what happened,” Cheng said in a phone conversation on Tuesday.

A couple bought the common areas of the neighborhood for $90,000.

Even so, he said he has made no demands of the residents and that the couple is trying to figure out what to do with their purchase.

“We haven’t demanded anything out of these super wealthy residents. Our goal is just to hold onto it. We’re hoping to be good neighbors with them,” he said.

In its lawsuit, the homeowners association claims it only learned of the sale in May – nearly two years after the auction took place – when the couple contacted the association to ask whether it would want to buy back the property.

Acknowledging there is no precedent for such a case, the San Francisco Board of Supervisors will discuss the controversy at a meeting next month. It could decide to hold a hearing and revoke the sale.

For now, it appears the neighbors and what you might call their “street landlord” won’t be sitting down for coffee anytime soon.

CNN’s Rosalina Nieves in Los Angeles contributed to this report.