Herrera’s settlement with short-term rental scofflaws secures $276K penalties, injunction

Defiant landlords used the Ellis Act to evict long-term residents-including a disabled tenant-then marketed vacant flats as ‘vacation rentals’ for up to $595 per night

SAN FRANCISCO (May 6, 2015) — City Attorney Dennis Herrera has secured $276,000 in penalties and fees to settle his lawsuit against two of the landlords he sued last year for illegally converting residential apartments into high-priced short-term lodging for tourists. The injunction filed in San Francisco Superior Court also requires that defendants Darren and Valerie Lee abide by strict injunctive provisions prohibiting similarly illegal conduct over the next five years in order to avoid even harsher consequences. Though Herrera’s lawsuit alleged violations of state and local law at only one of the Lees’ properties, the Stipulated Permanent Injunction filed on Monday will apply to all residential properties in San Francisco owned wholly or in-part by the Lees, as well as those they may acquire during the five-year injunctive period.

Before marketing their illegal units to tourists on such platforms as Homeaway.com and VRBO.com, the Lees used the Ellis Act to evict long-term tenants from the units at their 3073-3075 Clay Street property, according to Herrera’s April 2014 complaint. The Ellis Act is a state law that allows landlords to evict tenants and withdraw properties from the residential rental market. One of the tenants evicted was disabled, according to San Francisco Superior Court and Rent Board records also cited in the original civil complaint. While nothing in the Ellis Act precludes commercial use of properties for tourists where long-term tenants have previously been evicted, Herrera’s litigation emphasized longstanding city policy that tourist conversions of residential properties be aggressively policed “in order to protect the residents and to conserve the limited housing resources.”

“A successful settlement like this should send a strong cautionary message to current and would-be wrongdoers that there is a steep price to pay for flouting laws that restrict short-term rental uses in San Francisco,” Herrera said. “Illegal conversions that push long-term tenants out of their homes diminish the availability of residential rental units for San Franciscans, and they’re a significant contributor to our housing affordability crisis. The penalties and tough injunction in this particular case, I think, reflect just how egregious the Lees’ conduct was. They repeatedly defied state and local laws to conduct their illegal business, and they also evicted San Franciscans — including a disabled tenant. For helping us to bring this case, I’m grateful for the work of city departments, especially the San Francisco Planning Department, neighbors, and community advocates who work hard to help us pursue this kind of wrongdoing. I encourage tenants and neighbors to report housing-related wrongdoing to my office’s Code Enforcement Hotline at (415) 554-3977.”

Herrera first filed his civil suit against the Lees just over a year ago, on April 23, 2014, detailing their pervasive violations of the city’s Planning Code and state Unfair Competition Law at their Clay Street property. According to Herrera’s complaint, the defendants purchased 3073-3075 Clay Street in 2004, and invoked the Ellis Act in 2005 to evict their tenants — including one who was disabled — from both of the property’s residential units. Evidence presented in the complaint found that the Lees marketed 3075 Clay Street, a four-bedroom, three-bathroom property, for tourist lodging on such vacation websites such as Homeaway.com and VRBO.com since 2009, describing it as an “exquisitely renovated home, in prime Pacific Heights.” The Lees charged their guests between $395 and $595 per night for a minimum stay of three nights.

But in doing so, the owners flouted San Francisco’s longstanding conditional use authorization process requirements — depriving neighbors and city planners of their role to first determine whether the conversion is necessary or desirable; compatible with the neighborhood; detrimental to the City’s housing stock; or consistent with the city’s Planning Code or Planning Department’s General Plan. According to Herrera’s complaint, San Francisco’s Planning Department repeatedly cited the Lees for their illegal use of the property for commercial tourist lodging, even collecting penalties of as much $250 per day for violations. The Lees — who at one point assured Planning Department officials that the units were rented to long term tenants — then defiantly resumed marketing and renting their property to tourists, which ultimately led Herrera to file his lawsuit.

The case is: City and County of San Francisco and People of the State of California v. Darren Lee et al., San Francisco Superior Court No. 538857, filed April 23, 2014. For more information on the San Francisco City Attorney’s Office, visit: https://www.sfcityattorney.org/.

Related Documents:

PDF icon PDF of the SF and People v. Lee Settlement Presskit (May 6, 2015)

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