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

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City officials vote to return street to its homeowners association

The HOA didn't pay tax bill because it was sent to wrong address

San Francisco CNN —  

For most people, failing to pay property taxes and trying to blame it on the city is a losing battle.

But the dispute over Presidio Terrace, a private street in one of San Francisco’s swankiest neighborhoods, is no ordinary one.

The real estate drama unfolded earlier this year, when residents of the upscale drive learned that their homeowners association no longer owned the street – and hadn’t for two years – due to decades of unpaid property taxes.

By all accounts, it was a paltry sum – a $14-a-year bill for the “common area” that included its sidewalks, palm trees and the circular drive. The association said it would have paid the tax, had it received the bills, but it didn’t – they were mailed to an accountant who hadn’t worked for the association since the 1980s.

After three decades of delinquency, the debt grew and the street was auctioned off by the city. A San Jose couple, Michael Cheng and his wife, Tina Lam, snapped it up for $90,000 in 2015.

That was a bargain – considering the homes on Presidio Terrace are worth $5 million to $15 million.

The homeowners association said it learned of the sale in May – nearly two years after the auction took place – when the couple got in touch to ask whether it would want to buy back the property.

A couple bought the common areas of the neighborhood for $90,000.
Dan Simon/CNN
A couple bought the common areas of the neighborhood for $90,000.

In response, the homeowners association filed a lawsuit and took the matter to the San Francisco Board of Supervisors, urging them to overturn the sale.

On Tuesday, the supervisors voted 7-4 to rescind the sale to the couple, which would return the street to the homeowners.

The city’s tax and treasurer’s office didn’t properly notify residents nor did it make a reasonable effort, Matt Dorsey, the association’s spokesman, told CNN affiliate KGO.

“It could have been posted. They could have been trying harder to find the proper address – using a telephone,” he said.

Mark Farrell, a member of the Board of Supervisors who represents the district, said in a statement that he was proud that seven of his colleagues “voted against allowing these speculators to get away with purchasing a neighborhood street and attempting to extort San Francisco residents that I represent into a quick $1 million payday.”

When asked about their motives in August, Cheng told CNN that they had made no demands of the Presidio Terrace residents.

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

With 35 homes, manicured lawns and palm trees, the circular, gated street is an exclusive enclave. Sen. Dianne Feinstein and House Democratic leader Nancy Pelosi previously had homes there.

Feinstein voiced support for the homeowners in an October letter to the Board of Supervisors.

Residents on Presidio Terrace filed a suit against the city.
Dan Simon/CNN
Residents on Presidio Terrace filed a suit against the city.

“My own family’s time as Presidio Terrace residents lends a measure of personal perspective to a dispute involving many of our friends and former neighbors,” she wrote. But she added that her personal connection wasn’t the reason she wrote the letter.

“In the United States of America, no one should lose property at the hands of the government without knowing about it,” she wrote.

The saga over Presidio Terrace riveted San Francisco as it pressed on hot button issues such as real estate, class and fairness.

“This stinks of entitlement, unless of course you hold hearings for every homeowner or group who has their property auctioned off for non-payment of taxes,” one resident wrote to the Board of Supervisors before the hearing.

The attorney for Cheng and Lam echoed similar sentiments.

“Does that mean when you live on one of the most exclusive streets in San Francisco, and you are wealthy and you’re politically connected, you get a different system of government than the rest of us?” Shep Kopp asked, according to KGO.

CNN’s Dan Simon contributed to this report.