San Francisco City Attorney Dennis Herrera today announced a $276,000 settlement of a lawsuit in which he alleged a landlord couple illegally converted two Pacific Heights apartment units into high-priced short-term lodging for tourists.
In the settlement, Darren and Valerie Lee agreed to pay $276,000 in penalties and fees and consented to an injunction that requires them to obey all city and state laws concerning short-term rentals and the conversion of residential units to tourist use.
The injunction provides that any future violation that is found by a judge to have occurred is subject to a penalty of $6,000 per violation.
The settlement agreement says the Lees “deny all liability and all allegations of wrongdoing directed at them” but are entering into the settlement to avoid further expense and litigation.
The Lees’ attorney, Jeffery Woo, could not be reached for comment.
Herrera said in a statement, “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.”
“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 the housing affordability crisis,” he said.
The city attorney’s lawsuit, filed in April 2014, alleged the Lees bought the apartments at 3073-3075 Clay Street in 2004 and evicted the tenants, a family and a disabled person, in 2005 and 2006.
It alleged that between 2009 and 2014, the couple rented one of the apartments to tourists for short-term stays without obtaining a conditional use permit then required by city law for conversion of residential apartments to tourist use.
The apartment was advertised on vacation websites such as Vacation Rental by Owner and Homeaway as an “exquisitely renovated home, in prime Pacific Heights,” available for between $395 and $595 per night, according to the lawsuit.
The lawsuit also alleged the Lees falsely told the city Planning Department in 2013 that the unit was being rented to a long-term tenant.
The suit alleged the Lees rented the other apartment for short-term stays during parts of 2009 and 2010 and then rented it to longer-term tenants for rents that were four to seven times the amount allowed by the state’s Ellis Act.
The state law allows landlords to evict tenants in order to remove property from the rental market, but limits the amount of rent that can be charged if the property is returned to the rental market.
The permanent injunction agreed to in the settlement applies to the Clay Street property and also to a list of 16 other properties that the Lees own or in which they have an ownership interest.
Last fall, the city’s Board of Supervisors passed a new law that allows and regulates certain short-term rentals of apartments by resident owners. The law went into effect in February.
Owners who live in an apartment for at least 275 days per year are allowed to rent it out for the remaining 90 days annually. Owners are also allowed to rent individual rooms without time restrictions if they are living in the apartment at the same time their guests are visiting.
Hosts are required to register with the city. The restrictions do not apply to single-family houses.
Julia Cheever, Bay City News
