Wealthy San Francisco neighborhood loses gated street in tax auction

Some of San Francisco’s richest and most influential residents can’t step off their front lawn without trespassing onto Michael Cheng and Tina Lam’s property.

That’s because in 2015, the private street linking 34 multimillion-dollar homes in the city’s Presidio Heights was sold to the highest bidder right under the homeowners’ noses.

After publishing notices, county officials sold parcel 1355-001 -- also known as the one-way street Presidio Terrace -- to Cheng and Lam from San Jose for $90,582.50 in a public auction, about $89,000 more than was owed in back taxes and miscellaneous costs.

The 2-year-old purchase was first reported by the San Francisco Chronicle. Like most of the general public, the land’s previous owners, Presidio Terrace Assn., didn’t learn about the sale until recently.

Not even Cheng and Lam knew what they’d bought when they first won the lot, Cheng said. Scores of properties are sold at county auctions, most of them worthless slivers of land too awkward to be developed. The only thing Cheng and Lam knew was that it was in Presidio Heights.

“We were bidding on some that were marginally usable; this was the one that we won. You hope you did OK and didn’t overpay,” Cheng said.

About five months after the auction, the title was officially transferred. So Cheng and Lam went to look at the lot but were refused entry because it’s in a gated community.

“We found this was an extreme property. It’s an entire area of the community, all the common areas,” Cheng said. “I was pleasantly surprised.”

But he also had reservations.

“On the other hand, we also knew we’ll be coming head to head with some very wealthy people. They have a lot of connections in the city,” Cheng said.

So the couple hired a lawyer and planned their next move.

In May, a representative for the couple contacted the association and asserted the couple’s right to the land and asking if the association wanted to buy it back.

“We were hoping to just be like neighbors and talk about it,” Cheng said. “Our long-term goal is to just hold on to this property and to work out a deal” with the homeowners.

The association responded to the representative’s inquiry July 17 in the form of a civil suit, which sought to negate the sale to Cheng and Lam. It alleged that the county did not go to a “reasonable” effort to notify homeowners that their street was in arrears and also that the San Jose couple had no right to own the property because it’s a “common area.”

In fact, the association said, it had owned and managed the land since 1905 and paid property taxes between $13 and $14 annually. The only reason it fell into arrears, the lawsuit claims, is because San Francisco had been sending the tax bills to an address on Kearney Street, which the association believes was connected to an accountant who last did work for the association in the 1980.

Not even the association’s property management firm was aware that payments were not being made, the lawsuit said. In all, the association owed about $994 in back taxes, according to the lawsuit.

The property’s delinquency started in the 2003-04 fiscal year, according to San Francisco County.

“It’s really up to the property owners to keep up with their bills,” said Amanda Kahn Fried, spokeswoman for the Department of Treasury.

Since reports of this purchase first broke, Kahn Fried said she’s heard from many officials who say it’s a lesson on why property owners need to stay informed and up to date on their taxes.

“We’re all created equal under the tax code,” she said.

joseph.serna@latimes.com

For breaking California news, follow @JosephSerna on Twitter.

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