fee from tenants in occupancy as of November 1 of each year. The fee for the 2008-09 tax year is $29.00

per apartment/home/condominium unit and $14.50 per residential hotel unit. The amounts that may be

passed through to tenants for that year are $14.50 per apartment/home/condominium unit and $7.25 per

residential hotel unit. Owner-occupied units are exempt from the fee unless there are tenants residing in the

owner´s unit. To avoid receiving a bill for the fee for an owner-occupied unit, a homeowner´s exemption

must be on file with the county assessor´s office. Please call that office at 415-554-5542 or 415-554-5599

for details.

The manner in which the Rent Ordinance fee may be passed through to tenants and collected is described

by the Rent Board as follows:

• "Section 37A.6 of the Administrative Code allows the landlord to recover 50% of the Rent Board fee

from the tenant by deducting it from the security deposit interest payment due to the tenant each

year. If there is no security deposit held by the landlord, then the landlord may bill the tenant

directly. Landlords who pay the security deposit interest annually may bill for the Rent Board fee

separately rather than deducting it from the interest payment owed.

• "Landlords may ?bank´ the Rent Board fee since November 1999 and collect it in a later year. This

means that a landlord does not have to collect the fee in the year that it was due, but is entitled to

collect the Rent Board fee in later years if they so desire. Banking only applies to fees assessed from

November 1999 on. A list of prior Rent Board fees since 1999 is available at the Rent Board's office

and on our web site at www.sfgov.org/rentboard.

• "The billing statement must specifically state the fee amount owed by the tenant for each year and the

amount, if any, of security deposit interest due the tenant for each year owing. The bill should also

state that the purpose of the fee is to fund the Rent Board, and that the fee is due and payable within

30 days of the date of the bill.

• "Please note that a tenant´s failure to pay the Rent Board fee is not a just cause for eviction. The

landlord will have to go to Small Claims Court in order to collect the fee."

The Rent Ordinance fee is subject to change by the Board of Supervisors. For further information, contact

the San Francisco Residential Rent Stabilization and Arbitration Board at 415-252-4600 or visit the board´s

web site at www.sfgov.org/rentboard. Additionally, buyers and sellers are urged to review and discuss any

questions they may have with a qualified real estate attorney or certified public accountant knowledgeable

regarding San Francisco business, real estate and tax issues. Real estate brokers are not qualified to give

opinions in this regard.

DISPUTE RESOLUTION AND DAMAGES

Despite efforts that may be made to avoid them, disputes can sometimes arise in connection with real

property sale and purchase transactions. If a dispute involves a significant issue and the parties are unwilling

to come to an agreement concerning how it should be resolved, the filing of a lawsuit may seem to be the

only remedy available.

In order to provide buyers and sellers of real property with a less formalized and often less costly form of

dispute resolution, many real property sale and purchase contracts contain optional or mandatory mediation

and/or arbitration provisions. Mandatory mediation clauses often provide that if a party fails or refuses to

mediate, that party loses the right to later obtain its attorney´s fees in an arbitration or court proceeding.

Only a qualified attorney is competent to give legal advice regarding the advantages and disadvantages of

mediation and arbitration.

Rev. 01/01/09 Page 18 of 53

Mediation is a non-binding process by which the parties to a dispute come together with a professionally

trained and experienced mediator who assists them in attempting to resolve their dispute by negotiating a

mutually acceptable settlement. The result of a successful mediation is a written settlement agreement which,

when properly prepared and signed by all the parties to the dispute, should be legally enforceable. The

settlement agreement is a document that should be reviewed by a qualified real estate attorney since its scope

can affect important legal rights. If mediation is unsuccessful, the parties are left to pursue other forms of

dispute resolution, such as arbitration or litigation.

The cost of mediation can vary depending on the mediator selected and the amount of time allocated for the

mediation. Mediation fees can be as little as a few hundred dollars, divided equally between the parties, or

they can involve an initial filing fee of several hundred dollars plus a substantial hourly fee for the mediator.

Arbitration is a binding process by which the parties to a dispute (either by themselves or through their

attorneys) submit the dispute to a neutral arbitrator for resolution. A binding agreement to submit disputes

to arbitration is effected when both the buyer and the seller initial the "Arbitration of Disputes" provision

contained in most residential real property sale and purchase contracts. By agreeing to arbitrate disputes, the

parties give up their right to have the dispute litigated in a court of law before a jury. Once the decision of

an arbitrator is rendered, it generally is not appealable and is immediately subject to full legal enforcement.

The disputes subject to arbitration include only those arising out of matters described in the "Arbitration of

Disputes" provision of the residential purchase contract. Further, under most purchase contracts, the

brokers are not obligated to arbitrate any of these described matters. Buyers and sellers should read this

provision carefully to determine which types of actions are included. Buyers and sellers are urged to consult

with a qualified real estate attorney before initialing the "Arbitration of Disputes" provision of any purchase

contract. The legal profession is divided concerning the relative merits of a jury trial as opposed to alternative

forms of dispute resolution, such as arbitration. Buyers and sellers are urged to give careful consideration to

the consequences of giving up their rights to a jury trial before electing to arbitrate instead.

Whenever a buyer fails to perform a material obligation agreed to in a real property sale and purchase

contract, the buyer is deemed to have breached the contract. Most residential purchase contracts contain a

provision which allows the buyer and the seller to agree in advance on the maximum amount of damages

(so-called "liquidated damages") a seller may recover through litigation if the contract is breached by the

buyer. This limit is usually three percent (3%) of the purchase price.

For the liquidated damages provision of a purchase contract to become effective, it must be initialed by both

the buyer and the seller. For any increased deposits to be subject to the provision, a separate, statutory

liquidated damages form also must be signed.

Initialing or signing a liquidated damages provision or form is not a guarantee that the seller will recover

liquidated damages. If the buyer disputes the provision, the seller still must prove in a court of law or in

arbitration, among other things, that the contract was breached by the buyer. And even if the seller proves a

breach, the buyer still can seek a return of the funds, or some portion of them, by challenging the

"reasonableness" of the amount. Thus, for example, if within six months after the buyer defaults the seller

can sell the property to another party for the same amount, the buyer may be entitled to a return of the

deposit less any offsets for the seller´s carrying costs (e.g., interest on loans secured by the property, etc.).

Generally, the liquidated damages provision in most residential purchase contracts, when initialed by both

the buyer and the seller, has no effect on the damages the buyer may recover from the seller if the seller

breaches the contract. Buyers and sellers are urged to discuss any questions they may have regarding

Rev. 01/01/09 Page 19 of 53

liquidated damages provisions with a qualified real estate attorney. Real estate brokers are not qualified to

give opinions in this regard.

SIZE AND LOCATION OF REAL PROPERTY

Representations sometimes are made by the seller or in marketing materials, the multiple listing service or in

property tax records concerning the square footage of the improvements on and/or the lot size of the real

property being purchased. Such representations should be considered approximations only. It also should

be understood that generally any representations regarding square footage or lot size made by the broker are

often based on information obtained from the seller, such as old appraisal reports, or from public property

tax records and that the accuracy of the information provided is unverified and not reliable. Brokers do not

independently verify the square footage and/or lot size of properties they list and/or sell. If a buyer requires

accurate square footage information, he or she should have the improvements measured by a qualified

appraiser or other professional before removing any inspection contingencies. Similarly, if a buyer requires

accurate lot size information, the buyer should have the property surveyed by a professional surveyor before

removing any inspection contingencies.

Existing fences, walls, trees and other naturally occurring or man-made barriers or markers may or may not

define the legal boundary lines of real property. Fences and the like may appear to be on a property but

actually be located on an adjacent property (and hence "encroach") or vice versa. Additionally, public right of

way easements with accompanying rights to use a property may be recorded but not identified in a title

report, marked by a sign posted on the property or actually known to the seller or brokers.

Buyers should understand that, without a survey, a typical title insurance policy will not cover such matters

as "discrepancies, conflicts in boundary lines, shortage in area, encroachments, or any other facts which a

correct survey would disclose and which are not shown by the public records." Further, they should

understand that real estate brokers do not independently verify the boundary lines of properties they list

and/or sell or search the public records in that regard. Accordingly, if boundary lines are material in any way

to the value or desirability of a given property or the buyer´s decision to purchase or the purchase price, the

buyer should have the property surveyed by a professional surveyor before removing any inspection

contingencies to determine the correct boundary lines of the property and the existence and extent of any

encroachments.

AUTHORIZED USE OF PROPERTY AND CODE COMPLIANCE

Certain municipalities, including the City and County of San Francisco, require sellers of real property to

provide buyers with copies of various public reports, prior to close of escrow, for the purpose of making

buyers aware of the restrictions which apply to the use of the real property being purchased.

In some instances, such as with government "affordable housing" programs, no such public reports are

required. Instead, the buyer must look at other documents for restrictions relating to the use of the property,

including any additional encumbrances of record on the property (in the case of properties participating in

certain affordable housing programs) or the original subdivision map (in the case of certain condominium

projects), and/or the preliminary title report from the title company. But the preliminary title report may

Rev. 01/01/09 Page 20 of 53

not always identify the subject restrictions and if the seller is deceased, for example, his or her executor may

not know of the restrictions and disclose them.

Properties also can be subject to various government-imposed special use restrictions, variances and

occupancy limitations, and/or other zoning laws. These restrictions and limitations may be subject to change

and buyers should not assume that they will remain the same after they purchase a specific property.

Buyers should not assume that the apparent use of a property is the use authorized by law, or that the

information contained in a public report is necessarily accurate. It is their responsibility to contact the zoning

administrator of the Department of City Planning at 415-558-6350 or other responsible governmental

office to confirm the authorized use of the property and whether the property is subject to any special use

permits, etc., and, if so, the duration of those permits.

Further, it is the buyer´s responsibility to carefully review preliminary title reports and any recorded

documents that may contain any governmental restrictions on use or resale of the property, including but

not limited to restrictions limiting the amount of the purchase price or allowable income for a future buyer.

If the intended use of the property being purchased is different than the current use (such as using

residential property for mixed or commercial use), it is the buyer´s responsibility to conduct appropriate

investigations to determine whether the intended use will be permitted. Buyers should complete any such

investigation before removing any inspection contingencies in the purchase contract for the property being

purchased.

Buyers should engage a qualified real estate attorney for assistance in this regard. Brokers, under the law,

generally are not obligated to inspect public records.

Prior to the transfer of residential real property, many municipalities, including the City and County of San

Francisco, require the seller or the seller´s broker to obtain and deliver to the buyer a report of residential

building record ("3R" report) prepared by the code enforcement agency for the jurisdiction in which the

property is located. The report sets forth the existing authorized occupancy or use of the property, as well as

other information, including permits issued for construction on the property. It does not warrant that any

repairs or alterations made to the property comply with applicable code requirements. And, it excludes any

plumbing or electrical permits which have been issued.

Buyers of residential real property in San Francisco should be aware that the information contained in "3R"

reports may not be accurate for various reasons and must be verified before it can be relied upon. The errors

vary and may include, without limitation, incorrect references to the number of dwelling units allowed,

whether permits were ever obtained and, if so, whether the work was duly completed and approved after

necessary inspections. Perhaps worse yet, on occasion, the reports erroneously state that information is

"unknown."

Real estate brokers, under the law, generally are not under an obligation to confirm the accuracy of

information contained in public records, including "3R" reports. For that reason, it is the buyer´s

responsibility to investigate the completeness and accuracy of such reports and make informed decisions

based on their investigations. If advice is required in this regard, buyers should engage a qualified contractor,

architect or other professional. Questions regarding the report can be directed to the San Francisco

Department of Building Inspection at 415-558-6081.

Buyers should satisfy themselves as to the information contained in the "3R" report before removing any

inspection contingencies in their sale and purchase contract.

Rev. 01/01/09 Page 21 of 53

Buyers are advised that any real property may contain rooms, additions and/or alterations for which

appropriate building permits and certificates of completion were not obtained. Such rooms, additions

and/or alterations may be non-conforming and it may not be possible to legalize them because of zoning

and/or code restrictions. Real estate brokers, under the law, generally are not under an obligation to inspect

public records. For this reason, they are not generally in a position to know whether rooms, additions

and/or alterations have been made to the property without permits. In many cases, even the current owner

cannot provide reliable information regarding these matters, particularly where the improvements or

alterations were made before the current owner purchased the property. Consequently, buyers are urged to

investigate possible nonconforming improvements and/or alterations

and to seek the advice of a qualified

contractor, architect or other professional before removing any inspection contingencies.

Buyers should be aware that if local code enforcement agencies discover the existence of rooms, additions

and/or alterations for which permits were not obtained, they may assess penalties against the current owner

and require such improvements and/or alterations to be closed off, removed or made to comply with current

code requirements.

Certain local ordinances and State statutes require residential real property to be retrofitted with various

devices and/or improvements before it can be sold. If any such ordinance or statute requires the installation

of smoke detectors, impact hazard glazing, water conservation devices or other devices and/or improvements,

it is customary for the cost of the retrofitting work to be assumed by the seller. If the retrofitting work must

be inspected by city or county agencies or other professionals, it is the seller´s responsibility to arrange for

the required inspections and to obtain any required compliance reports and give appropriate notification(s)

to the buyer and/or required governmental agencies. Notwithstanding the foregoing, if any laws require the

installation of automatic fire extinguishing equipment at the property, it is customary for the cost of such

equipment and its installation to be borne by the buyer.

Real property located in common interest subdivisions, commonly known as condominiums, typically is

subject to certain covenants, conditions and restrictions (CC&Rs). The CC&Rs, which impose limitations

on the use of property, are administered by a HOA. Such associations usually collect dues from property

owners residing in these areas to provide funds to maintain so-called "common areas." By law, such

associations generally must provide buyers of properties within their jurisdictions with certain documents, as

well as any addenda, amendments or revisions thereto, including but not limited to:

• CC&Rs;

• Bylaws;

• Articles of incorporation (if the HOA is incorporated);

• Rules and regulations and other governing documents;

• Statement of residency restriction based on age (if applicable);

Rev. 01/01/09 Page 22 of 53

• Statement of assessments and fees, including any unpaid charges which may become a lien against

the property;

• Most recent financial statement distributed, as required by law, including a pro forma operating

budget and a reserves study;

• Lien assessment and enforcement policy statement;

• Summary of HOA insurance coverages;

• Summary of any notices of unresolved violations of the governing documents by the seller;

• Preliminary list of defects for any construction defect lawsuit or if the case settled a list of the defects

that will be corrected or replaced, a good faith estimate as to when the corrections or replacements

will occur and the status of any claimed defects that are not on the correction or replacement list, and

• A copy of the latest information regarding any construction defect settlements including the status of

any repairs and related matters.

Buyers should not release any contingencies until they are fully satisfied regarding all information obtained

from their investigation of a condominium unit, the "common area" and the HOA. Particular attention

should be given to the financial statement provided by the HOA to determine the adequacy of reserves for

repairs and replacements. It also is strongly advised that buyers both review the insurance policies of the

HOA to determine whether it is adequate to cover any and all risks of loss, and request information and

documents regarding any past or pending lawsuits, SB 800 proceeding or settlements pertaining to the

common areas or physical condition of the property. And, finally, it is suggested that buyers review all

minutes of the HOA that can be obtained from the seller, or otherwise, as they may provide information

regarding the physical condition of the property or other matters of importance. Buyers may find a

publication by the California Department of Real Estate entitled "Living in a California Common Interest

Development" of interest. It can be found at the DRE web site (www.dre.ca.gov). Any questions concerning

the aforementioned documents and information should be referred to a qualified real estate attorney.

Tenancy-in-common ("TIC") is a form of real property ownership where two or more persons are owners of

undivided interests in the property. Typically, TICs are formed when two or more persons purchase a

multi-unit residential rental building for the purpose of individually occupying each unit as a primary

residence.

Unlike condominiums, residential real property owned as a TIC generally is not subdivided. For that

reason, there is no ownership of a particular unit as is the case with a condominium. Instead, with TIC

ownership there usually is an unrecorded written agreement signed by all of the co-owners that assigns the

exclusive use and occupancy of a particular part of the property, commonly known by a unit number or

Rev. 01/01/09 Page 23 of 53

address, to a particular owner. If there is no such agreement in place, each co-owner can occupy any area in

the real property.

All forms of co-ownership involve the risks of sharing the use of a property with others and relying on them

to fulfill their obligations to each other. Owners of TIC interests share major obligations such as mortgages,

property taxes, and building maintenance and management. If an owner of a TIC interest fails to make a

monthly payment due to unemployment, divorce or other reason and a mortgage default results, the lender

could foreclose on the entire property. This could lead to all of the other owners losing their residences and

possibly their equity. Judgment liens and bankruptcies of a TIC owner also can lead to the lender´s

declaring a default on the loan secured by the entire property. Careful attention should be given to reserve

accounts and other measures designed to address such matters. The best way to minimize these risks is by a

well-drafted TIC agreement.

Loans for the sale and refinancing of residential real property owned as a TIC can be more costly and

difficult than for condominiums, which can affect the value and desirability of a TIC interest. This is due,

among other things, to the risk to the lender that one TIC owner may default and the other TIC owners may

not be able to satisfy the shared debt.

It is strongly recommended that tenants-in-common have a clear, comprehensive and updated written TIC

agreement signed by each of the co-owners setting forth the rights and liabilities of the parties, including,

but not limited to, the following: financial obligations of the co-owners, use of the property, management of

the property, repairs, decision-making procedures, the action to be taken in the event of a co-owner´s default,

death, divorce, bankruptcy or incapacity, sale of a concurrent owner´s interest, and dispute resolution.

Buyers should be wary of older TICs that may be operating under agreements that do not address all

important issues and thus should be amended, revised or replaced.

Before entering into TIC ownership, buyers are urged to consult with a qualified real estate attorney

knowledgeable regarding San Francisco real property issues to review all aspects of the TIC, including, but

not limited to, all existing or proposed agreements, the background and qualifications of potential and actual

co-owners, the management of the TIC property, the existence of any reserve accounts, whether the

individual interests of co-owners can later be sold and, if so, whether there are any rights of first refusal or

other requirements, the existence and extent of any rights to inspect the condition of the property, the type of

financing available, whether the real property is capable of being converted into condominiums, the potential

cost of conversion and whether the property as a whole can be sold.

Buyers should be aware that because TICs represent undivided interests in real property, they may be

harder to sell and finance than other properties and their value may be adversely affected. (Please see

The San Francisco Association of REALTORS® publishes a special disclosure form for TIC transactions.

The form is entitled, "Tenancy-in-Common (TIC) Disclosure." Buyers and sellers are urged to review this

disclosure before entering into any transaction involving a TIC interest.

The California Coastal Commission was created by the voters in 1972 for the purpose of preserving and

providing public access to the California coastline. The jurisdiction of the commission extends to all real

property located within a specified distance of the coastline. Buyers of real property located within the

commission´s jurisdiction should understand that modifications and/or additions to any improvements and

any new construction may be subject to the commission´s approval.

Rev. 01/01/09 Page 24 of 53

In order to preserve properties deemed to be historically and/or architecturally significant, certain

governmental agencies have been vested with authority to place limitations on the manner in which they may

be used and their appearance modified. Buyers should be aware that wide latitude is allowed these

governmental agencies in designating properties historical and/or architectural landmarks. Even in cases

where a particular property is not so designated, it can be located in an historical district and subject to the

same limitations that apply to individually designated properties.

Buyers should determine whether any property they are purchasing is subject to conservancy limitations. In

addition, they should always be aware that certain properties may be designated historical and/or

architectural landmarks and limitations placed on their use and the extent to which their appearance may be

modified.

For further information concerning which properties are or may become subject to conservancy limitations

in San Francisco, contact the planning information center at 415-558-6377.

The ADA prohibits discrimination against individuals on the basis of disability. It requires entities which

operate "public accommodations" and "commercial facilities" to remove barriers in, design, construct or alter

the buildings they occupy in compliance with specific accessibility guidelines issued by the U.S. Department

of Justice.

Almost all commercial buildings are covered by the ADA. Residential buildings typically are not covered

but may be subject to its provisions if used for certain purposes. For example, if part of a private residence

is used for business purposes, that portion of the residence may be covered by the Act.

The ADA may require, among other things, buildings to be made readily accessible to the disabled.

Different requirements apply to new construction, alterations to existing buildings, and the removal of

barriers in existing buildings. Compliance with the ADA may require significant expenditures. Monetary

and injunctive remedies may be incurred if the building is not in compliance.

Brokers do not have the technical expertise to either determine whether a building is in compliance with

ADA requirements or advise buyers and sellers concerning the requirements of the ADA. For that reason,

the parties to any real property sale and purchase transaction are advised to consult a qualified real estate

attorney, contractor, architect, engineer or other qualified professional to determine the degree to which the

ADA impacts a particular property, if at all. Real estate brokers are not qualified to give opinions in this

regard.

CONDITION OF REAL PROPERTY

In most circumstances, the seller of residential real property improved with one to four dwelling units is

required, as soon as practicable before transfer of title, to provide the buyer with a completed disclosure form

called a Real Estate Transfer Disclosure Statement regarding the property. This requirement is applicable

even in cases where the property is sold in an "as is" condition.

Rev. 01/01/09 Page 25 of 53

If the disclosures in the TDS, or any material amendment thereto, are provided to the buyer after execution

of the offer to purchase, the buyer has three days after personal delivery of the TDS (five days if the TDS is

delivered by mail) to terminate his or her offer to purchase. However, in circumstances where the

disclosures are provided to the buyer prior to preparation of the offer to purchase, the buyer has no right to

terminate the offer.

The TDS is divided into four sections - one to identify supplements, one for the seller to complete, one for

the broker representing the seller to complete, and one for the broker representing the buyer to complete.

Under the law, however, brokers are allowed to make their disclosures (the result of a reasonably competent

and diligent visual inspection of the accessible areas of the property) in a document other than the TDS.

Neither the seller nor the broker(s) is/are liable for any error or inaccuracy in the TDS, provided the seller

or the broker(s) had no personal knowledge of the error or inaccuracy, it was based on information provided

by a public agency or in a report prepared by certain specified professionals, and the seller or the broker(s)

used ordinary care in providing the information.

When more than one broker is involved in the real property sale and purchase transaction, the one who has

obtained the offer to purchase is responsible for delivery of the TDS to the buyer.

Certain real property transfers are exempt from the requirement that the seller provide the buyer with a TDS

regarding the property, including transfers made pursuant to a court order or from one co-owner to one or

more other co-owners, or to a spouse, child, grandchild or further descendent.

Every buyer should be aware that under Section 2079.5 of the California Civil Code, he or she is charged

with the "duty to exercise reasonable care to protect himself or herself, including (with respect to) those facts

which are known to or within the diligent attention and observation of the buyer...."

Buyers should be aware that the present condition and useful life of the various components of the

improvements on real property will vary and can only be determined through inspections by appropriate

contractors, engineers, architects and/or other such qualified professionals. Even new construction can

contain construction defects and, for that reason, should be inspected by such experts to determine the

quality of construction and the materials used.

As a general rule, the physical condition of land and improvements offered for sale is not guaranteed by the

seller except as specifically set forth in writing in the real property sale and purchase contract. No guarantees

regarding the physical condition of the land and improvements are made by the broker.

The seller and the broker are required by law, however, to disclose to the buyer all material facts actually

known to them which may affect the value or desirability of the land and improvements. In addition, a

broker involved in the sale of residential real property improved with one to four dwelling units must

conduct "a reasonably competent and diligent visual inspection of the property offered for sale and...disclose

to the prospective buyer all facts materially affecting the value or desirability of the property that such an

investigation would reveal." A broker´s duty to inspect does not extend to areas that are "reasonably and

normally inaccessible," areas outside the site of the property, or public records or permits affecting the title or

use of the property. Nor, as a general rule, is a broker responsible for offering conclusions concerning the

ramifications of disclosed facts or an assessment of their affect on the value of the property. For that reason,

whenever a buyer is put on notice by disclosure of a material fact, the buyer should investigate the matter

further and, if necessary, engage an appropriate qualified professional, such as an attorney or contractor, to do

so.

Regardless of what facts are disclosed, buyers are strongly advised to obtain inspections for any real property

being purchased from duly licensed contractors, engineers, architects and/or other such qualified

Rev. 01/01/09 Page 26 of 53

professionals before removing any property inspection contingencies in the real property sale and purchase

contract. The inspections should include, but not be limited to, structural elements, plumbing, heating, air

conditioning, electrical and mechanical systems, built-in appliances, and the presence of hazardous or toxic

substances (including asbestos and lead-based paint). Brokers are not qualified to conduct such inspections.

A buyer may elect to purchase a property without the benefit of such inspections but it is strongly

recommended that he or she not do so.

The following are some of the items to which buyers should give particular attention:

• Roof - Buyers are advised to have inspections to determine the condition and useful life of the roof,

including all penetrations of the roof´s surface, such as chimneys and skylights, as well as gutters,

drains, etc. Although there may be no indication in the Real Estate Transfer Disclosure Statement

("TDS") that the roof leaks, that is no guarantee that with the next rain storm leaks will not develop.

Roofs do not last indefinitely. They are exposed to the punishing effects of heat, cold and water and

even the most soundly constructed roof will leak eventually.

• Heating System - Buyers are advised to have inspections to determine the condition of the heating

system, particularly its internal parts, as well as the heating ducts which distribute heat throughout

the improvements.

• Water Intrusion - Buyers are advised to have inspections to determine the susceptibility of the

improvements to water intrusion. Such intrusion can cause damage to the improvements and/or

personal property. Specific areas of concern are the foundation, garage, basement, crawl spaces, dead

spaces, as well as all living areas. Buyers should carefully check the seller's Real Estate Transfer

Disclosure Statement for notations relating to the presence of water and particularly whether the

property can be subject to seeping, flooding or running water during seasonal rains.

• Sidewalk Repair - Buyers are advised that the maintenance of public sidewalks adjacent to any real

property is the responsibility of the property owner. For that reason, sidewalks should be inspected

• Foundation and Soils - Buyers are advised to have inspections of the foundation and to obtain a soils

and drainage report, particularly for older structures and any other property where sloping or

cracked floors, ceilings, walls, slabs or driveways are observable.

Structural pest control inspections are ordered for most improved real property being sold. The inspection

must be performed by a company registered with the State Structural Pest Control Board. The purpose of

the inspection is to discover the presence or absence of wood-destroying pests or organisms. The conditions

found as the result of an inspection are described in a report prepared by the pest control inspection

company, and must be in writing and given to the person requesting the inspection. If requested, structural

pest control inspectors must delineate between evident infestation and potential infestation, in a two-tiered

report. The report also must be filed with the Structural Pest Control Board before any registered company

may commence work to correct conditions found as the result of an inspection.

The work recommended in a structural pest control inspection report may be done by the company

preparing the report or the parties may use another contractor, or do the work themselves. After pest control

work has been completed by a registered pest control company, a notice of work completed must be filed

with the Structural Pest Control Board. If the parties elect to do the work themselves, they should make sure

all applicable permits are obtained and that a structural pest control certification is issued upon completion

of the work.

Rev. 01/01/09 Page 27 of 53

A structural pest control certification is a written statement by a registered pest control company attesting to

the presence or absence of wood-destroying pests or organisms, describing work recommended in a

structural pest control inspection report and indicating which recommendations, if any, have been completed

at the time of certification. A copy of the inspection report and the notice of work completed, if any, must be

attached to the certification.

Most real property purchase contracts require a termite inspection and contain provisions which provide

several options to the buyer and seller concerning how the cost of any pest control repairs will be handled.

This cost can be substantial and it is important that both the buyer and the seller have an understanding of

the manner in which the option which is chosen will operate. Buyers should not remove the pest inspection

contingencies in the purchase contract until they are fully satisfied in that regard.

Any person may request from the Structural Pest Control Board a certified copy of any inspection report and

completion notice filed on a particular property during the preceding two years by any pest control

inspection company. The address of the board is 2005 Evergreen Street, Suite 1500

Sacramento, CA 95815 or contact it at 1-800-737-8188 or PestBoard@DCA.CA.GOV.

San Francisco´s total land area is only 49 square miles. Buildable land in the city is almost nonexistent,

except in areas zoned for industrial activity. In recent years, developers have constructed residential

structures, usually lofts, in these industrial areas. While these structures can provide their occupants with an

attractive and desirable living environment, the proximity to industrial activity, with the attendant noise and

smells at different hours of the day and night, can cause dissatisfaction. Many occupants of such structures

fail to understand that the area in which they have settled is zoned for industrial activity and the industrial

activity in almost every case was there before they moved into the area.

To make prospective transferees aware of the proximity of such structures to industrial activity and lessen the

friction that often developments between homeowners and renters and their industrial operator neighbors,

the Board of Supervisors in 2006 passed the Residential and Industrial Compatibility Protection Act.

The Act requires a seller or lessor ("transferor") of real property to deliver a prescribed written disclosure to

the buyer or lessee ("transferee") of real property having a residential use that is inside or within 150 feet of

an "Industrial Use Zoning District." Most of the real property subject to the Act is located in supervisorial

districts six, nine and 10 (generally, south of Market Street, from the waterfront west to Dolores Street and

south to Candlestick Park). But transferors are cautioned to review available City Planning Department maps

(http://www.sfgov.org/site/planning_index.asp) before marketing any property for sale or lease. This is

because "Industrial Use Zoning Districts" are sprinkled throughout many of the other supervisorial districts,

too.

The timing of the new disclosure is as follows: (1) For a sale, the same as for the statutory Transfer

Disclosure Statement (i.e., "as soon as practicable before transfer of title"); and, (2) For a lease, "prior to

tenant(s) signing a lease3;."

The transferor is required under the Act to sign an affidavit under penalty of perjury stating that the

transferor provided the disclosure to the transferee. Further, the transferor is required to store and maintain

the original signed affidavit attached to a copy of the disclosure for two years following its delivery to the

transferee in the event the city or transferee requests a copy. The required affidavit is built into a form

published by the San Francisco Association of REALTORS® entitled, "Disclosure of Adjacent Industrial

Uses."

Transferees under the Act have the following right to sue for noncompliance: "The current or former

transferee3;may institute a civil proceeding for money damages of not less than $500 for each failure to

Rev. 01/01/09 Page 28 of 53

provide the disclosure3;and whatever other relief the Court deems appropriate. The prevailing party shall be

entitled to reasonable attorneys´ fees and costs pursuant to an order of the Court. The remedy available under

this [Act] shall be in addition to any other existing remedies that may be available to the transferee."

Questions regarding whether a property is inside or within 150 feet of an "Industrial Use Zoning District"

can be directed to the City Planning Department which is located at 1650 Mission Street, Suite 400 Floor,

San Francisco, CA (telephone: 415-558-6378). Questions of a legal nature should be referred to a qualified

real estate attorney.

California is known throughout the world for its natural beauty. But the State´s dramatic coastlines and

rugged mountain ranges bear witness to a turbulent geological past. Many of the geological forces which

have shaped California´s landscape are still active today and anyone purchasing property in California

should understand that these forces still can pose risks to land and improvements, particularly where the

property is located on hillsides, near creeks or other bodies of water, or in other high risk areas. The

condition of the soil and the underlying bedrock on which improvements are constructed can greatly

influence the manner in which the improvements will react to geological changes. The fact that

improvements have been constructed on level ground is no guarantee that they will not be affected by

geological events.

Brokers are not geological experts and cannot advise buyers regarding the manner in which properties may

be affected by geological changes. Buyers are encouraged to have any property they are purchasing inspected

by a qualified geologist or other qualified professional.

California is a seismically active area. A building, depending on its location, construction type and age, may

be vulnerable to damage or collapse in the event of a significant seismic event. Buyers of real property

should be aware that such an event could cause damage to public facilities and seriously disrupt public

services. The availability of electricity, water and gas could be affected and transportation could be disrupted

or made impossible for varying periods of time.

Sellers of residential real property improved with one to four dwelling units constructed before January 1,

1960, of conventional light frame wood construction, are required by law to deliver to the buyer, before

transfer of title, a copy of the "Homeowner´s Guide to Earthquake Safety." Furthermore, the seller must

complete an earthquake hazards disclosure form found on the inside back cover of the guide (or prepare a

separate statement) identifying specific deficiencies (such as the absence of anchor bolts, the existence of

unreinforced masonry walls, or a hot water heater which is not strapped or braced) within the actual

knowledge of the seller. The homeowner´s guide and the completed earthquake hazards disclosure form (or

other statement) must be delivered to the buyer as soon as practicable before transfer of title. A broker´s

responsibility under the law is limited to providing the seller with a copy of the guide.

In addition, sellers of precast concrete, reinforced or unreinforced masonry buildings with wood frame floors

or roofs constructed before January 1, 1975, are required by law to deliver to the buyer a copy of the

"Commercial Property Owner´s Guide to Earthquake Safety."

Exemptions from the requirements set forth above are basically the same as those relating to providing other

general disclosure documents (such as the Real Estate Transfer Disclosure Statement) in real property sale

and purchase transactions, i.e., transfers made pursuant to a court order or from one co-owner to one or

more other co-owners, or to a spouse, child, grandchild or further descendent, with an added exemption in

Rev. 01/01/09 Page 29 of 53

cases where the buyer agrees in writing that the property will be demolished within one year of the date of

transfer.

* * *

Buyers of unreinforced masonry buildings ("UMBs") are advised that the owner of any such building who

has actual knowledge that the building is located in a "Seismic Zone 4" (an area where the likelihood of a

damaging earthquake is the highest) must post a sign at the entrance to the building stating that the building

is constructed of unreinforced masonry and may be unsafe in an earthquake. There is no obligation to post

the notice, however, in cases where the walls of the building are non-load bearing with steel or concrete

frames.

Buyers further are advised that if the owner of a UMB does not bring the building into compliance with

applicable retrofit standards within five years from the date of actual or constructive notice that the building

is located in a Seismic Zone 4, he or she is not eligible for any State assistance for earthquake damage until all

More than half of California is in a Seismic Zone 4, including the entire western half of the State.

The Division of Mines and Geology of the California Department of Conservation has responsibility for

identifying areas of the State where there may be a significant potential for liquefaction, earthquake-induced

landslides, amplified or strong ground shaking or other ground failure and seismic hazards in the event of

an earthquake. These areas have been or are in the process of being designated on seismic hazard zone maps.

Eventually, maps are planned to be issued for all areas in California subject to seismic hazards. New

development in a seismic hazard zone will only be permitted if the developer can show that geologic hazard

mitigation can make the site acceptably safe.

(Seismic hazard zone maps differ from earthquake fault zone maps-formerly known as special studies zone

maps-which show areas designated by the State geologist as areas containing one or more active or

potentially active faults which can pose potential hazards to structures from surface faulting or fault creep.)

Sellers of real property located in a seismic hazard zone (or their brokers) are required to disclose the fact that

the property is located in such a zone to prospective buyers. The disclosure must be given for all real

property sale and purchase transactions subject to Civil Code §1102 et seq. relating to the Transfer

Disclosure Statements.

For further information, buyers should contact the California Geological Survey at 916-324-7299 or the

Department of Building Inspection at 415-558-6088.

The State of California has identified six natural hazard zones and created a statutory form known as the

Natural Hazard Disclosure Statement ("NHD") to be used by sellers and sellers´ brokers to disclose to

prospective buyers that a property offered for sale is located within one or more of the zones. The form is

required to be used only in real property sale and purchase transactions subject to the Real Estate Transfer

Disclosure Statement ("TDS"). If the transaction is not subject to the TDS law, no NHD is required, even

though the property is located within a zone. However, if the property in a non-TDS transaction is known

to be located within a zone, that fact still must be disclosed to the buyer in some manner since the

requirement to disclose all known material facts applies to all sales of real property.

Rev. 01/01/09 Page 30 of 53

Certain local conditions may not be disclosed on State maps, but may be disclosed on local regional maps.

Buyers may wish to consult a local soils engineer or whatever local regional maps of natural hazard zones are

available, in addition to those disclosing State-designated hazard zones.

Under applicable law, the buyer has the same right of rescission after receipt of an NHD as after receipt of a

There is one circumstance under which sellers and sellers´ brokers are relieved of the duty of having to

provide a NHD and that is where a disclosure report is duly prepared and provided by a proper outside

expert.

It should be understood that if real property is located within one or more natural hazard zones, that fact

may limit a buyer´s ability to develop the property, obtain insurance or receive assistance after a disaster.

Various materials used in construction contain substances that have been or may in the future be determined

to be toxic, hazardous or undesirable and may need to be specially handled and/or removed from certain real

property.

The California Department of Real Estate and the California Department of Health Services jointly have

published a booklet entitled, "Environmental Hazards-A Guide for Homeowners and Buyers," designed to

educate and inform consumers regarding environmental hazards which are commonly located on and which

affect real property. The booklet identifies common environmental hazards, explains their significance,

identifies ways to mitigate the hazards, and lists sources which can provide further information to

consumers. Hazards which are covered include asbestos, formaldehyde, hazardous wastes, lead, mold, radon

and other contaminants. Most properties contain one or more of these hazards.

When the booklet is provided to a buyer, neither the seller nor the broker needs to provide further

information concerning environmental hazards unless the seller or the broker has actual knowledge of the

existence of such hazards on or affecting the property.

Buyers should be aware, however, that the scientific community has begun investigating suspected new

environmental hazards, such as electromagnetic fields, not described in the environmental hazards booklet.

Real estate brokers are not qualified to determine the presence of environmental hazards on or affecting real

property being offered for sale or, if their presence is known, to offer an evaluation of their potential health

risks. Buyers are strongly advised to have any real property they are purchasing inspected by appropriate

experts to determine the presence of environmental hazards on or affecting the property and, if such hazards

are present, whether their presence constitutes a health risk.

Lead can be extremely toxic, can impair the physical and mental development of young children and can

possibly lead to increases in high blood pressure in adults. The U.S. Environmental Protection Agency

("EPA"), the Department of Housing and Urban Development, and the Consumer Product Safety

Commission have moved to restrict people´s exposure to lead.

The presence of old lead-based paint in housing is the most significant remaining cause of lead poisoning,

particularly in young children. The principal means of exposure is through ingestion of peeling or

pulverized paint, which is a significant problem in inner city, lower income areas where housing may be

Rev. 01/01/09 Page 31 of 53

older and poorly maintained. Lead poisoning also can result if young children chew on surfaces that have

perfectly intact lead-based paint covering them (e.g., window sills, door edgings, banisters, etc.).

* * *

The Federal Residential Lead-Based Paint Hazard Reduction Act of 1992 creates lead paint disclosure

responsibilities for sellers and lessors of real property built prior to 1978.

In brief, the Act requires that, before a buyer or lessee is obligated under any contract to purchase or lease

"target" (pre-1978) housing, the seller, lessor or the person´s real estate broker must:

• Provide the buyer or lessee with the federally prescribed pamphlet entitled, "Protect Your Family

from Lead in Your Home." (Note: The EPA has approved the use of the State-prescribed

"Environmental Hazards: Guide for Homeowners and Buyers" booklet as a substitute for the federal

pamphlet in real property sale and purchase transactions only. Look for language on the cover of the

booklet indicating that it incorporates the federal pamphlet);

• Disclose to the buyer or lessee the presence of any known lead-based paint or lead-based paint

hazards in any "target" housing, and provide to the buyer or lessee any lead hazard evaluation report

available to the seller or lessor; and

• Permit the buyer ten days, or any mutually agreed upon period of time, to conduct a risk assessment

or inspection of the property for the presence of lead-based paint hazards.

The Act also requires that contracts for the sale and purchase of any interest in "target" housing contain a lead

warning statement and a statement signed by the buyer that the buyer has:

• Read the lead warning statement and understood its contents;

• Received a lead hazard information pamphlet; and

• Been allowed ten days, or other mutually agreed upon period of time before becoming obligated

under the contract to purchase the housing, to conduct a risk assessment or inspection for the

presence of lead-based paint hazards.

The mandatory lead warning statement, which is to be printed on a separate sheet, reads as follows:

"Every buyer of any interest in residential real property on which a residential dwelling was built prior

to 1978 is notified that such property may present exposure to lead from lead-based paint that may

place young children at risk of developing lead poisoning. Lead poisoning in young children may

produce permanent neurological damage, including learning disabilities, reduced intelligence quotient,

behavioral problems, and impaired memory. Lead poisoning also poses a particular risk to pregnant

women. The seller of any interest in real property is required to provide the buyer with any information

on lead-based paint hazards from risk assessments or inspections in the seller´s possession and notify the

buyer of any lead-based paint hazards. A risk assessment or inspection for possible lead-based paint

hazards is recommended prior to purchase."

* * *

The San Francisco Board of Supervisors has passed legislation intended to reduce lead hazards in housing

occupied by children with elevated blood levels of lead. The law gives health department officials authority

to: issue nuisance abatement orders against defined lead hazards in dwelling units; temporarily relocate leadpoisoned

children; and levy penalties against owners who fail to abate lead hazards. Enforcement is triggered

by the discovery, through testing, of a child with elevated blood lead levels residing in a housing unit.

Rev. 01/01/09 Page 32 of 53

In the last few years, health concerns have been raised about the presence of mold in dwelling structures.

Many of the molds we encounter in daily living do not pose a health threat to humans. However, some

molds release spores that are toxic and when the spores are confined within a dwelling structure, they can

reach concentrations which make them a serious health threat. In fact, some people can have such an extreme

reaction to certain mold-born spores that it is impossible for them to live in any dwelling structure in which

the spores are present. But a person´s reaction to mold may vary and what may cause a severe reaction to one

person may be tolerable to another. For this reason, even where mold is detected, its impact on an

individual can be difficult to access.

Since mold can grow in inaccessible areas of a structure or otherwise be invisible to the naked eye, it may be

that the seller is unaware of the presence of mold even though it may exist on the property. For this reason,

it is recommended that buyers engage a qualified environmental inspector or consultant to determine

whether the property contains mold or other health hazards before removing any inspection contingencies.

This is especially important if disclosure documents or inspection reports indicate the presence of moisture,

standing water, water intrusion or mold of any kind, or the buyer notices any smell or odor.

Real estate brokers are not experts on environmental hazards, such as mold, and are not qualified to advise

buyers or sellers concerning the presence or absence of molds in any dwelling structure or the health risks

molds may pose.

Beginning on January 1, 2002, sellers of residential real property containing one to four units must use the

revised version of the Real Estate Transfer Disclosure Statement which includes a question asking the seller if

he/she is aware of the presence of mold on the property, which may be an environmental hazard. (Most real

properties have mold, and mold may be an environmental hazard, so most sellers are likely to answer the

question by checking "Yes.") For the time being, sellers have no further disclosure requirements regarding

toxic mold. However, if the property has been tested for mold, that fact must be disclosed. (Please see

Certain areas have been designated by the Federal Emergency Management Agency (FEMA) as being subject

to flooding. Sellers of real property located in these areas are required to disclose that fact to buyers. If a

property is so located, it may affect the buyer´s ability to obtain financing secured by the property, as well as

the cost of homeowner´s insurance and the extent of coverage.

A flood hazard boundary map, which sets forth designated flood hazard areas, can be obtained by contacting

the FEMA Map Service Center at 800-358-9616.

Some real property is not connected to a public sewer system. If such is the case, it is the seller´s

responsibility to warrant that some form of waste disposal system exists and that the system is in proper

working order. Brokers do not have the expertise to make representations concerning the existence and/or

condition of any waste disposal system. For that reason, buyers should arrange to have the property

inspected by a qualified professional. In cases where the property is new construction, buyers are advised

that the existence of a sewer permit does not necessarily mean that there is a sewer connection to the property.

Rev. 01/01/09 Page 33 of 53

Electric utility power lines and even household wiring and appliances give off EMFs. Recently, scientists

have become concerned about the health risks associated with prolonged exposure to EMFs. Studies to

determine the effects of such exposure have been inconclusive, but research is continuing.

Although the federal government has no guidelines concerning EMF exposure, some state and local

governments have attempted to regulate exposure to EMFs emanating from high voltage power lines. There

are no known laws requiring the disclosure of the presence of EMFs on or around real property in

California. Buyers who are interested in knowing their degree of exposure to EMFs should arrange to have

the property tested by an environmental consultant.

For further information on EMFs, contact the electric utility company serving the jurisdiction in which the

real property is located or an environmental consultant.

ORDINANCES AND STATUTES

Under San Francisco's Residential Energy Conservation Ordinance, the seller or the seller´s broker, before

transfer of title of any residential building, must obtain a valid energy inspection by a qualified energy

inspector and install all applicable conservation measures enumerated in a form prescribed by the

Department of Building Inspection ("DBI"). The seller also must furnish a copy of the completed

inspection form, showing compliance with prescribed energy conservation measures, to the buyer. In

addition, a certificate of completion must be recorded with the county recorder´s office prior to or concurrent

with the transfer of title.

No energy inspection is required for any residential property for which proof of compliance with the energy

conservation requirements has been recorded with the DBI and the county recorder´s office.

In no case is any seller required to spend more than one percent of the purchase price or one percent of the

assessed value of the building, whichever is greater, to comply with the requirements of the ordinance, nor,

in the case of one- or two-unit buildings, shall the cost exceed $1,300.

The seller may transfer responsibility for compliance with the ordinance to the buyer providing, before

transfer of title, a valid energy inspection has been performed and a written agreement is signed by the buyer

and the seller containing the buyer's agreement that the required energy conservation measures will be

installed within 180 days of the transfer of title and the seller's agreement that funds equal to one percent of

the purchase price will be deposited in escrow.

For further information, contact the DBI at 415-558-6088.

Under San Francisco's Residential Water Conservation Ordinance, the owner of any residential or

commercial real property, including tourist hotels and motels, must equip the dwelling or building with the

following water conservation measures:

• Low-flow devices on all accessible showerheads having a maximum rate flow of not more than 2.5

gallons per minute. (Showerheads of the ball-joint type that cannot easily be removed from the wall

without structural alteration are exempt from the requirement.)

Rev. 01/01/09 Page 34 of 53

• Aerators attached to sink faucets which are designed to accept such devices. The aerators must have

flow restrictors.

• Low-flow toilets (3.5 gallons per flush or less) or one of the following permanently installed devices:

• Quick-closing flapper device;

• Dual-option flushing mechanism;

• Water-saving kit for flushometer toilets;

• Flush valve device which lowers the volume of water needed to flush the toilet; or

• Water displacement devices, such as toilet dams, are acceptable and meet these criteria.

In 1990, the Plumbing Code was changed to require the installation of toilets with a 1.6-gallon maximum

capacity for any toilets moved, replaced or added. The base of the toilet should have information regarding

its capacity.

Toilet devices such as quick-closing flappers are available for approximately $15. Low-flow showerheads are

available for approximately $10 and faucet aerators range in price from $4 to $8 per aerator. The devices are

available at most hardware stores.

Before transfer of title, the seller or the seller´s broker must obtain a valid water conservation inspection by a

qualified inspector and install all required water conservation measures. Compliance with these requirements

is to be achieved concurrently with the requirements of the Residential Energy Conservation Ordinance.

The costs of compliance with the water conservation ordinance are not included in the dollar limitation

established for compliance with the energy conservation ordinance. The owner may file an affidavit provided

by the city´s Water Department affirming that the water conservation devices required by the water

conservation ordinance either have been installed or an exemption is applicable. Buildings with no record of

compliance are charged higher water rates.

For further information, contact the Water Department at 415-551-3000.

Under State law, all water heaters must be braced, anchored or strapped to resist falling or horizontal

displacement due to earthquake motion. In addition, in San Francisco, water heaters which are moved or

newly installed must be raised 18 inches off the ground.

Sellers of any real property also must certify to a prospective buyer that the State bracing requirement has

been satisfied, along with the requirements of local codes relating to water heaters. The certification must be

in writing and may be accomplished in existing transactional documents, including, but not limited to, the

"Homeowner´s Guide to Earthquake Safety", a real property sale and purchase contract, the Real Estate

Transfer Disclosure Statement or a local option disclosure statement.

For further information, contact the Department of Building Inspection at 415-558-6088.

Rev. 01/01/09 Page 35 of 53

Under an ordinance which became effective in San Francisco on July 1, 1993, all low-pressure commercialtype

water heating and steam-generating boilers located in residential buildings must be inspected annually.

A low-pressure water heating boiler is one which furnishes hot water at pressures not exceeding 160 psi and

at temperatures not exceeding 250° F. A low-pressure steam-generating boiler is one which furnishes steam

at pressures not exceeding 15 psi. Low-pressure boilers do not include household-type water heaters

furnishing hot water at temperatures not exceeding 210° F.

City inspectors will not inspect boilers. Each boiler must be inspected and approved for operation by a

qualified inspector. Qualified inspectors are classified as any State-licensed "boiler, hot water heating and

steam fitting contractor" (Class C-4 license holders) or a certified boiler inspector in the employ of the

insurance underwriter for the building in which the boiler is located.

The ordinance resulted from complaints concerning the questionable safe operation of some boilers and their

ability to provide minimum standards of heating comfort to the occupants of the buildings in which they are

located. The ordinance provides that, upon a determination that a low-pressure boiler meets reasonable

standards of safe operation, the property owner is to be issued a permit for its continued operation.

For further information concerning permit application procedures under the boiler ordinance, contact the

plumbing inspection division of the Department of Building Inspection at 415-558-6054.

Both the San Francisco Board of Supervisors and the California legislature have enacted comprehensive laws

requiring the installation of smoke detectors in dwelling units.

Under these laws, every dwelling unit intended for human occupancy must be equipped with approved

smoke detectors which receive their power from the electrical system of the building in which they are

located. In single- and two-family dwellings, however, battery operated detectors are deemed to satisfy the

requirements of these laws.

Generally, a smoke detector must be installed at a point centrally located in the corridor (or area) giving

access to each sleeping room (or area). When the dwelling unit has more than one story and in dwellings

with basements, a detector must be installed on each story and in the basement. In dwelling units where a

story or basement is split into two or more levels, a detector must be installed on the upper level, except that

when the lower level contains a sleeping area, a detector must be installed at each level. When sleeping

rooms are on an upper story, a detector must be installed at the ceiling of the upper story in close proximity

to the stairway. For apartment buildings, there generally must be smoke detectors in all units and in

stairwells.

Under State law, for the sale of a single-family dwelling, the seller must deliver to the buyer a written

statement confirming that the dwelling is in compliance with the State smoke detector law. The statement

must be included in the real estate sale and purchase contract, in an addendum to it or in a separate

document. The statement should be delivered as soon as practicable before the transfer of title. It is

considered delivered by law if it is received in person or by mail by the buyer or the authorized agent of the

buyer.

For any new construction, any additions, alterations or repairs exceeding $1,000 and for which a permit is

required, or when one or more sleeping rooms are added regardless of the cost, a smoke detector must be

installed in each sleeping room and also at a point centrally located in the corridor or outside the sleeping

Rev. 01/01/09 Page 36 of 53

room(s). The required detectors must receive their power from the electrical system of the building and be

equipped with a battery backup.

Buyers are encouraged to perform an inspection of the property being purchased to determine whether

applicable smoke detector requirements have been satisfied.

After the fire storm which destroyed over 3,000 residential dwellings in the Oakland hills in 1993, the State

legislature enacted a law to require the use of fire retardant roofing material in areas designated by either the

Department of Forestry and Fire Protection or local agencies as having a high fire hazard. Under the law,

which became effective January 1, 1997, fire retardant roofing material that is classified as Class A or better

must be used for all new or existing structures where 50 percent or more of the roof area is reroofed.

Certification of the classification of the material must be made by a qualified installer. In addition, any wood

roof covering must pass a 10-year weather and rain test.

In areas not designated by the department or local agencies as having a high fire hazard, the law requires that

at least Class C or better fire retardant roofing material be used for the above-described structures.

Uniform Building Code Section 3703 requires all chimneys to be fitted with mesh spark arresters. Local

ordinances sometimes prescribe additional requirements relating to the type of arrester to be installed,

maintenance of chimneys, and disclosure obligations on the part of sellers. Buyers should have the chimney

system of any real property they are purchasing professionally inspected to determine whether it complies

with applicable legal requirements.

There are thousands of abandoned USTs in San Francisco´s residential neighborhoods. These tanks remain

potential sources of contamination of the ground and ground water, and can pose other dangers to the public

health and the environment.

Any owner of real property in San Francisco having reason to believe that an abandoned UST is located on or

under the property, or under the surface of any public street, sidewalk, alley, court or other place subject to

an easement for public access that is immediately adjacent to the property, must make a reasonable effort to

locate and identify the tank. Whenever an abandoned UST is located, the owner must file a plan for the

closing or permitting of the tank within 30 days of its discovery.

All closures (and removals) of USTs require the approval of the Department of Health, compliance with the

Health Code and applicable provisions of the California Health and Safety Code, as well as the payment of

applicable fees. Any person who is in violation of the applicable provisions of the codes is liable to the City

and County of San Francisco for costs incurred in cleaning up and abating the effects of the violation or

taking other remedial action.

Buyers of real property located in San Francisco are advised to have the property inspected to determine the

presence of abandoned USTs prior to removing the inspection contingency in the real property sale and

purchase contract. If a UST is found on the property, it can be extremely expensive to remove and clean up

any contamination.

Rev. 01/01/09 Page 37 of 53

For further information on tank closure and removal, contact a licensed contractor or environmental

consultant specializing in USTs. These individuals can be found in the Yellow Pages under "Environmental

& Ecological Services," "Tanks Abandoned, Filled & Removed" and "Tank Testing & Inspection." Or,

contact the Department of Public Health at 415-252-3800.

Under San Francisco's Hazardous Wastes Ordinance, the applicant for any building permit is required to

have the soil on the parcel of land on which the construction is to occur analyzed by a certified laboratory for

the purpose of determining the presence of hazardous wastes and, where applicable, complete certain site

mitigation measures approved by federal and State authorities when:

• The permit is for a construction project that involves the disturbance of 50 cubic yards of soil or

more; and

• The parcel of land on which the construction will occur is located either bayward of the high tide

line as indicated on certain historic San Francisco maps, prepared by the State Lands Division and

filed with the Recorder of the City and County of San Francisco, or in any area designated by the

director of the Department of Public Works ("DPW").

The director may waive the requirements imposed by the ordinance if the applicant demonstrates that the

real property has been continuously zoned as residential under the Planning Code since 1921, has been in

residential use since then and the director has no reason to believe that the soil may contain hazardous wastes.

The seller or the seller´s broker, in the sale and purchase or exchange of real property located within San

Francisco, is required to provide the buyer with a summary of the Hazardous Wastes Ordinance, prepared

by the director of the DPW, and to obtain a written receipt therefore in cases where the real property is

located bayward of the high tide line indicated on certain historic San Francisco maps or within areas

designated by the director. A map showing the areas covered by the ordinance, along with a statement of the

procedures to be followed in submitting site histories and completing soil samplings and analyses, can be

obtained from the Department of Building Inspection located at 1660 Mission Street, San Francisco, CA

94103, or by calling 415-558-6088.

Effective January 1, 2006, a property owner selling any real property (except for mobilehomes and

manufactured homes in a "park") is required by Health & Safety Code Section 25400.28 to notify a

prospective buyer in writing of a pending clean-up order for a property contaminated by a

methamphetamine lab. The prospective buyer must acknowledge, in writing, receipt of the pending order.

Upon the issuance of any such order, the property owner and any existing tenants must vacate their units

pending mandated remediation. In addition, the owner of such a property must give written notice to a

prospective tenant before entering into a rental agreement by providing to the prospective tenant a copy of the

order. The prospective tenant must acknowledge receipt of the order in writing before entering into a rental

agreement. If the property owner does not comply in this regard, the prospective tenant may void the rental

agreement.

The Department of Building Inspection ("DBI") has identified over 2,000 UMBs in San Francisco that will

be at risk of collapse during a severe earthquake.

Rev. 01/01/09 Page 38 of 53

UMBs have exterior walls of brick, stone, concrete block or similar materials, and wood or concrete slab

floors and roofs. UMBs are unreinforced because their masonry walls do not have any steel or other type of

reinforcement and are typically not well anchored to the floors or roof. UMBs are designed to resist gravity

loads. They are not designed specifically to withstand significant side-to-side forces.

Owners of UMBs are required to comply with retrofitting requirements prescribed by law in San Francisco.

Retrofitting deadlines are based on the building´s location and occupancy. Deadlines for some buildings

have already passed.

The minimum standard to be applied to the seismic strengthening of most UMBs is "Bolts Plus." This

level of retrofitting involves anchoring walls to floors and the roof, and installing wall supports to reduce

out-of-plane failures.

Assembly, educational and institutional buildings, those with rigid floor systems and those over six stories

in height must be retrofitted to more stringent Uniform Code for Building Conservation ("UCBC")

standards.

It can be extremely expensive to comply with applicable retrofitting requirements.

For further information, contact the Seismic Safety Division of the DBI at 415-558-6083 and a qualified

contractor, engineer, architect and/or other qualified professional. Real estate brokers are not qualified to give

opinions in this regard.

An owner of residential rental property in San Francisco must pay interest each year to his or her tenants on

all security deposits held for a period of at least one year. The rate of interest payable is determined annually

by the Residential Rent Stabilization and Arbitration Board. The rate is based on the rate of the six-month

certificate of deposit posted by the Federal Reserve on the Federal Reserve Statistical Release internet site. The

rate for March 1, 2009 to February 28, 2010 is 3.1 percent.

Interest on tenant security deposits accrues until the tenancy terminates. A tenant may be given accrued

interest in the form of either a direct payment or a credit against the tenant´s rent. Effective January 1, 2003,

security deposit means any payment, fee, deposit or charge, including advance payments or fees. A

residential landlord, with some exceptions, can only charge a security deposit equal to two months rent for

unfurnished units and three months for furnished units. A landlord cannot exceed the allowable limit,

except if an exception applies, by labeling the security deposit as something else, such as a move-in fee,

cleaning fee or last month´s rent.

Effective January 1, 2004, if the landlord seeks to deduct from the security deposit cleaning and repair

charges that exceed $125 after a tenant vacates, the landlord must provide an itemized statement and copies

of the receipts for any labor and materials used to repair or clean the premises. If the landlord or his or her

employee performed the work, the landlord must provide an itemized statement describing the work

performed, time spent and the hourly rate charged, which must be reasonable.

Buyers and sellers are urged to discuss any questions they may have regarding security deposits with a

qualified real estate attorney knowledgeable regarding San Francisco real property issues.

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