Selling a Rental Property in Santa Monica

Why Santa Monica Landlords Look to Sell

Much of Santa Monica’s rental housing stock is decades old — postwar apartment courts, 1960s and ’70s dingbats, and converted duplexes and triplexes — much of it covered by the city’s rent control ordinance.

For owners who have held these buildings for years, rising maintenance costs and capped rent increases squeeze the return the property generates, and a full renovation to bring units up to current standards rarely pencils out under rent control’s rent caps.

Selling the building outright, rather than trying to reposition it, is often the more realistic exit.

The TORCA Path — and Why Most Owners Skip It

Santa Monica has a unique charter provision, Article XX, known as the Tenant Ownership Rights Charter Amendment, or TORCA.

It allows an owner of a rent-controlled apartment building to convert units to condominiums — but only with tenant purchase rights and consent thresholds built into the process, plus a city conversion tax on top.

TORCA exists as an option, but the tenant consent requirements and the added tax make it a long, uncertain path for an owner who mainly wants liquidity rather than a conversion project. Most owners find a straightforward sale of the whole building far simpler than pursuing a TORCA conversion.

Measure GS: Santa Monica’s Own Transfer Tax Stacks on the County’s

Selling any Santa Monica property means paying Los Angeles County’s standard documentary transfer tax of $0.55 per $500 of sale price — but Santa Monica layers its own tiered city transfer tax on top under Measure GS. For sales at or under $5 million, the city rate is $3.00 per $1,000 of price.

Between $5 million and $8 million, it rises to $6.00 per $1,000. At $8 million and above, it jumps sharply to $56.00 per $1,000.

For an owner of a larger, long-held apartment building near or above that $8 million threshold, that jump is a real number to run before setting a price — it can materially change your net proceeds compared to a sale priced just under the line.

Selling As-Is vs. Retail Marketing a Multi-Unit Building

Retail buyers financing an apartment building purchase typically need the property to meet lender standards for condition, and many lenders are cautious about older buildings with deferred maintenance or unpermitted units — both common in Santa Monica’s older rental stock.

That financing dependency can stall or kill a retail sale after months of marketing. A direct cash purchase removes the financing contingency and the inspection negotiation that comes with it, closing on a fixed timeline regardless of the building’s condition.

What Happens to Existing Tenants

Selling the building doesn’t require clearing it of tenants first. Leases and rent-controlled tenancies carry over to the new owner by operation of law, so you’re not obligated to pursue evictions, buyouts, or an Ellis Act filing just to make the property marketable. That alone removes months of process from a typical exit timeline.

Valuing a Rent-Controlled Building

Appraising a Santa Monica apartment building isn’t as simple as pulling single-family comps. Buyers of rent-controlled income property look at in-place rent rolls against the 2.6% annual cap, deferred capital expenditures, and how many units might eventually turn over versus stay occupied indefinitely under the ordinance.

That’s a different analysis than a retail single-family sale, and it’s one reason a cash buyer familiar with Santa Monica’s rent control rules can move faster than a conventional lender evaluating the same property.

Frequently Asked Questions

Do I need to fix deferred maintenance before selling?
No. We purchase rental properties as-is, deferred maintenance included, so there’s nothing to repair before closing.

Does Measure GS apply to every sale?
Yes, the city’s tiered transfer tax applies on top of the county’s rate for any Santa Monica property sale, regardless of price.

Can I sell with tenants still in their units?
Yes. Existing leases and rent-controlled tenancies transfer to the new owner automatically at closing.

Is TORCA required to sell a rent-controlled building?
No. TORCA is only relevant if you want to convert units to condominiums — a straightforward sale of the building doesn’t require it.

Get a free, no-obligation cash offer from Cash Home Buyers CA for your Santa Monica rental property.