Herrera secures $620,000 from landlords who housed tenants in unsafe, dungeon-like basement

Settlements include protections to prevent tenant exploitation after about two dozen tenants were found living in an underground firetrap

An image of the hazardous conditions in which dozens of tenants were living in the illegal basement units.

SAN FRANCISCO (May 17, 2018) — City Attorney Dennis Herrera announced today he had reached settlements totaling $620,000 to be paid by a building owner and a commercial leaseholder who exploited about two dozen vulnerable residents for years by charging them rent to live in unsafe, dungeon-like quarters in the basement of a laundromat in the city’s Outer Mission neighborhood.

The settlements also place strict, court-supervised oversight on the defendants for at least the next 10 years to ensure they do not exploit tenants or operate unsafe housing.

“This is a victory for the most vulnerable San Franciscans,” Herrera said. “We will not tolerate slumlords who prey on those struggling to get by. If your business model is to violate the law and put people in harm’s way, be prepared to be put out of business. Every San Franciscan deserves safe housing. We work hard every day to make that a reality.”  

The settlements come after a City investigation revealed that the basement of the three-story building at 4680-4690 Mission Street, which houses the “Clean Wash Center” laundromat on the ground floor, had become a dank labyrinth secretly used for unsafe housing for more than 10 years in defiance of numerous state and local laws protecting public health and safety. The basement was a firetrap with only one door and no windows. It had been turned into a rabbit’s warren of drywall-and-wood partitions that created approximately 20 residential “rooms.” Only one of the three bathrooms had a functioning shower. There was no heat, hot water, or garbage collection, and the ceiling and pipes leaked wastewater from the laundromat. Exposed wiring laced the makeshift walls, with electricity supplied by a gasoline-powered generator spewing carbon monoxide. The defendants named the basement 5 Persia Ave.

After the Fire Department discovered the situation, it ordered the basement evacuated to protect human life. Per state law, the Fire Department also ordered the building owner and master tenant to pay relocation compensation of $4,262 per unit to the tenants.  Meanwhile, city officials, through a coordinated effort, quickly marshalled public and community resources to find emergency living quarters and support services for the residents.

Herrera filed suit on Aug. 22, 2017 against the building’s owner, Melissa Mendoza of Hillsborough, and her limited liability company through which she owns the building, Lexamark Building, LLC. The lawsuit also names Ernesto Paredes of Daly City, the commercial leaseholder or master tenant for the top floor and basement of the building who rented the basement “units” to tenants for $300 to $900 per month. He collected the rent in cash without providing the tenants a receipt or a lease.    

The settlement with Mendoza and her limited liability company requires them to pay the City $600,000. It also places court–supervised requirements — known as an injunction — on all property she owns, leases, or acquires in San Francisco for at least 10 years. Some of those requirements include:

  • bringing all of her properties up to code
  • getting all required Planning, Building, Fire, or other City permits and approvals before renting, leasing or offering any property for human habitation
  • allowing city officials to inspect any of her properties
  • notifying the City Attorney’s Office, within 72 hours, of any commercial, charitable, or otherwise non-residential tenancy agreement and provide the office with a copy of the lease
  • providing any new tenant with a copy of the injunction

The settlement with Paredes, the master tenant, requires him to pay the City $20,000 and to forfeit any claim for reimbursement of the more than $40,000 in relocation expenses the Fire Department had ordered him to pay to tenants. It also puts in place an injunction that, among other things, prohibits Paredes from renting out or offering any property for human habitation (other than to his immediate family) for the next 10 years.

Violations of the injunctions carry penalties of up to $6,000 per violation.

The $620,000 in settlement payments in Herrera’s lawsuit will fund additional enforcement of City building, housing and fire codes, as well as state laws prohibiting unlawful, unfair and deceptive business conduct.

In a separate lawsuit brought by 20 former basement tenants, Lexamark, Mendoza, and Paredes have agreed to settle and pay their former tenants a combined total of almost $2.6 million.

The need to provide emergency housing and support to these tenants inspired an ordinance sponsored by then-Mayor Ed Lee and Supervisor Ahsha Safai, who represents the district where the property is located. It was co-sponsored by Supervisor Hillary Ronen. The new law, Administrative Code chapter 80A, establishes an emergency fund to assist tenants who must be evacuated from buildings deemed too hazardous for human habitation. It also authorizes the City Attorney to file suit against building owners to recover the costs of providing that assistance.  

“I was absolutely shocked to see close to two dozen people living in Third World conditions in a dungeon at 5 Persia,” Supervisor Safai said. “In a city as rich as ours, no one should be forced to live in such inhumane and hazardous conditions. As a result, Mayor Lee and I created a law that helps displaced tenants secure shelter and transitional housing, and the slumlords are hit with hefty fees and legal action.”

“These tenants were living in horrific conditions,” Herrera said.  “I’m pleased that the ultimate outcome is one where these residents will have secure housing and where safeguards are in place to ensure these defendants cannot victimize others in the same way. Getting to this point was a collective undertaking. The City should be proud of the work we did here. I want to thank everyone who worked together on this: the men and women of my office, the Fire Department, the Department of Building Inspection, the Planning Department, the Human Services Agency, the Department of Homelessness and Supportive Housing, the Mayor’s Office, and Supervisor Ahsha Safai and his staff. I also wanted to note the hands-on work of HSA Emergency Services Coordinator Benjamin Amyes and Mayor’s Housing Policy Advisor Jeff Buckley. The outcome here speaks volumes about the work of everyone involved.”

The case is: City and County of San Francisco et al. v. Lexamark Building, LLC et al., San Francisco Superior Court Case No. CGC-17-560856 filed Aug. 22, 2017.

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