Updated 6:34 pm, Monday, February 8, 2016
An internecine legal fight between a prominent San Francisco church and the nonprofit it founded — and then sued — has been settled out of court.
Third Baptist Church sued Third Baptist Gardens Inc. in July, accusing the nonprofit of betraying its mission to operate affordable housing in the Western Addition and of illegally trying to sell Frederick Douglas Haynes Gardens for a $40 million profit to market-rate developers.
It was a fight that underscored how the city’s hot housing market can make enemies even out of onetime allies.
Under the settlement, finalized last week, the nonprofit’s board resigned in exchange for the church dropping the lawsuit it had filed in San Francisco Superior Court. The outgoing members helped select a new, 11-person board to run the nonprofit.
The settlement bars the former board members from having any contact with their replacements about management of Frederick Douglas Haynes Gardens, a 104-unit apartment complex at 1049 Golden Gate Ave. where 80 percent of residents receive federal Section 8 rental-assistance vouchers.
Residents feared eviction
Third Baptist Church founded the nonprofit in 1969 to purchase land and build affordable housing in the Western Addition. Some residents of the Golden Gate Avenue complex have lived there for decades and pay as little as $222 a month for a three-bedroom apartment, with the federal vouchers covering the rest of the rent.
Last summer, the nonprofit solicited bids to purchase the complex. Many residents feared they might be evicted because, according to the lawsuit, the nonprofit’s real-estate agents told potential buyers that monthly rents could go to $3,000 to $7,000, far in excess of what most tenants say they could pay.
Despite the rancorous legal fight — in its lawsuit, Third Bapist Church accused the nonprofit of being “blinded by the riches the gold rush dangles” — the two sides issued an amicable joint statement as part of the settlement.
It said the church “deeply appreciates the important services rendered by these former board members” of the nonprofit “in working to preserve this precious affordable housing stock.”
Complex to stay affordable
Dolores Dalton, an attorney who represented the ex-board members, said the nonprofit “vigorously disputed every allegation in that complaint aimed at them. Our client always had the goal of preserving this project as affordable housing.”
Former City Attorney Louise Renne, who represented the church, said the settlement ensures that the complex will stay affordable.
She added that the settlement was a warning to owners of publicly subsidized housing developments that, like the Third Baptist nonprofit, are on the verge of paying off their mortgages to the federal government.
“If there are other Section 8 housing projects that are giving thought to turning into market-rate development, this case sends a message — you can’t do it, and you shouldn’t do it,” Renne said.
Anthony Wagner, a retired health care executive and deacon at Third Baptist Church, will be chairman of the nonprofit’s new board.