Two years ago, an investor scooped up one of the swankiest private streets in San Francisco after its wealthy owners failed to pay property taxes for years, a sale that city leaders reversed Tuesday.
The city's Board of Supervisors voted 7-4 to rescind the 2015 sale of Presidio Terrace to a software manager for $90,000.
By taking up the issue, officials sparked criticism that the city is not as fair and equitable as it claims, but a playground for the rich who don't have to play by the same rules as everyone else. San Francisco has some of the most exorbitant property prices in the country and has become increasingly unaffordable for many people.
But those who live on Presidio Terrace said the city should never have sold their street without properly notifying them. They said the annual tax bills of $14 and auction notice were being sent to an outdated address.
City Treasurer Jose Cisneros says the association representing some three dozen homeowners was responsible for updating its address and should have paid its taxes on time. He backs new owner Tina Lam, a Silicon Valley software manager who bought the street, sidewalks and common areas for $90,000 in 2015.
Lam along with Michael Cheng toured their new property for the first time this year even though they bought it at auction back in 2015. They waited a year until they thought the statute of limitations had run on objections to the sale.
"When we’re two and a half years out, we didn’t expect this would be brought up," Cheng said.
Supervisor Mark Farrell released a statement, saying in part: "As a matter of policy, I am proud of my seven colleagues who 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. I am shocked that four of my colleagues sided with these out-of-town speculators."
The oval-shaped street in upscale Presidio Heights is lined with leafy palms, lush landscaping and multimillion-dollar mansions. Previous residents of the gated neighborhood include U.S. Rep. Nancy Pelosi and U.S. Sen. Dianne Feinstein, who wrote a letter that accused the city of bureaucratic bungling.
The issue is unprecedented in San Francisco, although supervisors in other California counties have reversed sales as allowed under state law.
Homeowners learned about the sale earlier this year and petitioned the board for a hearing.
The issue gave at least one supervisor voting pains. Aaron Peskin said he would side with the new owner in a "hot second" if he could because of the way the association has behaved. However, he said that the homeowners make a reasonable argument that government should not take property without better notice.
Still, he was annoyed by Feinstein's letter.
"That was another damning piece of evidence to vote with the buyer, who bought it fair and square," Peskin said.
It marks the second time the association has defaulted, but it won back the street in 1985 after paying up.
Amanda Fried, a spokeswoman for the treasurer, said the group has not paid taxes since 2000, which is as far back as records go. In 2015, the office posted for auction a lot that owed less than $1,000 in back taxes, penalties and other charges.
Fried said the office sent certified notices to nearly 1,500 addresses that properties were being auctioned off and more than half were returned as undeliverable, including for Presidio Terrace. Homeowners say at that point, the treasurer's office was required to do more to notify them that their property was for sale.
"It's a constitutional issue," said Matt Dorsey, spokesman for the homeowners association. "If the process of that sale was constitutionally impermissible, it settles the question. It should not have been sold."
Michael Kirkpatrick, an attorney with national consumer-rights organization Public Citizen who won a similar case before the U.S. Supreme Court in 2006, supported the homeowners. The court held that when a notice of a sale is returned undelivered, the government needs to strive further to alert property owners before selling.
Shepard Kopp, attorney for the new owner, argued in a scathing court brief that San Francisco should not give politically connected homeowners an out for failing to do what is expected of every other property owner in the city: pay their taxes on time.
He said the Supreme Court case might not apply because it involved a house and not vacant land. And before the vote, he was confident the supervisors would side with his clients.
"When people learn that this isn't the first time the homeowners association didn't pay taxes and lost title to the street, there's not a whole lot of sympathy for them after that," Kopp said.
NBC Bay Area's Mark Matthews contributed to this report.