The couple that paid $90,000 for a private street in San Francisco say they had to return it because the rich and powerful get their way in this city
- A couple bought one of the most exclusive streets in San Francisco for $90,000.
- Residents were outraged when they learned of the sale in 2015, and sued the city and the couple. City leaders voted to reverse the sale last November.
- Now, the couple is fighting to win their street back.
- Michael Cheng, the buyer, tells Business Insider that he and his wife lost Presidio Terrace because the wealthy get their way in San Francisco.
Michael Cheng and Tina Lam couldn't afford to live on Presidio Terrace, one of the most exclusive private streets in San Francisco. But they could buy the sidewalks for $90,000.
In 2015, the couple from San Jose, California, quietly bought the street, its common area, and the shrubbery that lines the cul-de-sac in an online auction, without the knowledge of the wealthy homeowners who live there. The city put Presidio Terrace up for sale after the homeowners' association failed to pay property taxes on the street for more than a decade.
But the homeowners railed against the city for allowing Cheng and Lam to scoop the street out from underneath them without notice. Their district supervisor, Mark Farrell, who was sworn in as interim mayor last month, called the couple "bottom-feeding pirates" in a public hearing.
Last November, the San Francisco Board of Supervisors voted 7-4 to overturn the sale.
Cheng, a real estate investor, told Business Insider that the decision was unsurprising.
"The most obvious interpretation I have is these are probably the richest residents of SF, with supervisors who like to have wealthy donors," Cheng said in a recent interview.
He and his wife believe that they lost ownership of the street, which they bought legally, because its residents are wealthy and politically connected. The law doesn't apply to them, he said.
The couple didn't know what Presidio Terrace was when they bought it
For at least 17 years, the city's treasurer and tax collection office mailed tax forms to the address of a now-deceased bookkeeper, who worked for the homeowners' association before retiring in the 1980s. Over the years, the $14 annual property tax went unpaid by the people who live on Presidio Terrace. (San Francisco taxes the private street as a separate parcel from the homes on it.) The bill racked up hundreds of dollars in penalties and interest.
In 2015, the city listed Presidio Terrace, along with 389 parcels, on the auction block.
When Cheng bid on the parcel now associated with Presidio Terrace, he had no idea what he'd gotten himself into. The self-employed real estate investor is in the habit of betting tens of thousands of dollars on land that goes for sale online in the Bay Area. Some parcels are zoned for building residential housing, which Cheng could turn around and sell at a profit, while others are underwater.
These parcels are represented in the online auction system as a series of letters and numbers. Cheng only knew looking at the parcel associated with Presidio Terrace that it was situated in a nice part of town. Over the course of three days, other investors placed higher and higher bids.
"I figured they knew something I didn't," Cheng said. His final offer: $90,100.
About six months went by before Cheng learned that he was the new owner of a gated community street. In the city's assessor-recorder's office, he dug up a document that laid out the rules of the neighborhood. It described a parcel that contained the sidewalk, "decorative islands," and the street itself, which Cheng confirmed was his.
Cheng said he and his wife did not attempt to enter the street, because they didn't want to push their luck.
"Once we found out what it was - the historical significance of it - we felt like this is really worth keeping. In life, you can have money. But having something of significance is meaningful. This kind of property doesn't come along very often in a lifetime," Cheng said.
Presidio Terrace isn't open to the public. A stone wall surrounds most of the development, and a private security guard stands watch at the entrance. The street's enhanced security and isolated location has attracted some of the wealthiest and most powerful politicians in California over the years, including Sen. Diane Feinstein and House Minority Leader Nancy Pelosi. The homeowners' association has reigned over the street since 1905.
The median home value in the Presidio Heights neighborhood tops $4.8 million, according to real estate site Zillow - more than four times the median home value for San Francisco.
Residents were furious about the sale
Though they may be well-connected, the residents of Presidio Terrace were not made aware of their street's sale until May 2016, when a title-search company working on behalf of Cheng and Lam contacted the homeowners' association to see if it was interested in buying back the land.
Cheng has since said that was done in error.
Residents began a full-blown effort to reclaim the street. They hired attorneys, sued the city and the couple, and requested a hearing before the Board of Supervisors to overturn the sale.
Cheng and Lam met with supervisors from nearly every district before the hearing last November. Cheng, who came to the US from Taiwan when he was eight years old and has lived in California most of his life, said in conversations with some supervisors, including Farrell, they were told they would probably lose because they are outsiders from Silicon Valley.
Cheng also remembers being told that the city should have made more of an effort to notify residents of the unpaid taxes before it listed Presidio Terrace for sale. "It's like, OK. Sounds good, except that I've never heard of that for anyone else who wasn't super rich," Cheng said.
Farrell did not immediately respond to a request for comment.
Presidio Terrace was one of several hundred parcels (mostly vacant lots) that hit the auction block in 2015, according to the San Francisco Office of the Treasurer and Tax Collector's office. Cheng said that during his research, he discovered two of those parcels were private streets like Presidio Terrace: one in the Balboa Park neighborhood and the other in the Outer Richmond.
Both parcels sold in less affluent neighborhoods. "Nobody cared," Cheng said.
Documents from the treasurer's office that Cheng provided to Business Insider showed these two parcels exist and sold through public auction in 2015. The treasurer's office denied his claim in a statement: "To our knowledge there were no other private streets sold in 2015."
Cheng believes the outcome of the hearing shows that a different standard of government applies if you are rich and politically connected in San Francisco.
"The wealthy is demonstrating ... they do control the laws. They have politicians in their back pockets. They can do whatever they want," Cheng said.
Now, the couple is the city suing to win their street back. Attorneys for the couple filed a lawsuit against the city with the San Francisco Superior Court in January. The couple also launched a GoFundMe page to raise $50,000 for their legal defense. They raised $3,300 in one month.
A letter sat on top of a pile of papers that Cheng brought to our interview. It was fan mail from a resident of the San Francisco Bay Area, urging Cheng and Lam not to give up the fight.
"We feel like it's about more than just the street. We're standing up for the law," Cheng said.