3073-3075 Clay Street

Two landlords who employed the Ellis Act to evict tenants from the rent-controlled units and then marketed the apartments as short-term rentals on Airbnb, Homeway and VRBO have been hit with $276,000 in penalties and fees to settle a lawsuit brought by San Francisco City Attorney Dennis Herrera last year.

“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.”

San Francisco’s Planning Department had repeatedly cited Darren and Valerie Lee for the illegal use of their property at 3073-3075 Clay Street for tourist lodging and had collected penalties of “as much $250 per day” (which was less than half what the Lees had been charging to rent one of the two units in the Pacific Heights property per night).

And despite having assured Planning Department officials that the units were rented to long term tenants, the Lees continued to list the units as short-term rentals online, which led Herrera to file his lawsuit.

The injunction filed in San Francisco Superior Court also requires that [the Lees] 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.

There were around 2,500 apartments in San Francisco listed on Airbnb as short-term rentals back in 2012.  As we outlined at the time: How To Lose Up To $1,000 A Day (Or Your Lease) Using Airbnb.

As of last quarter, there were roughly 6,500 units in San Francisco listed on Airbnb as short-term rentals, the vast majority of which remain unregistered as required by law.

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Comments from “Plugged-In” Readers

  1. Posted by San FronziScheme

    A rotten apple is taken out of the bunch. Good.

  2. Posted by MarinaBoy

    Now lets go after the tenants that are breaking the law and using their apartments as a hotel!

    • Posted by Stop Driving

      Landlords are already doing that.

    • Posted by Marco Carvajal

      Exactly

    • Posted by Serge

      Who we you kidding, according to the tenant unions, all tenants are saints and all landlords are greedy.

      • Posted by two beers

        …as opposed to the landlords’s union, aka the California State Legislature…

      • Posted by Joe T.

        Precisely…

    • Posted by Jesse Townley

      Actually, this is covered in the lease. A lot of times there’s a no sub-leasing clause. Tenants who violate it are breaking their lease and can be evicted for that.

  3. Posted by Amewsed

    That is a great looking house. I wouldn’t mind spending the night there via AirBandB. I could probably get great decorating and real estate tips. Well worth whatever price per night charged.

  4. Posted by iknowsnow

    Good. The law is the law.

  5. Posted by sf

    The city attorney doesn’t have the manpower our resources to go after all violators. This is like the fed throwing Madoff in jail and saying “See! We did something!”

  6. Posted by anon

    They broke the law. No sympathy from me.

    • Posted by Orland

      Too bad criminal penalties do not attach — yet.

      I’d be all for such amendment to the law as long as Ellis evictions are going to be allowed.

  7. Posted by Futurist

    Good smackdown. Now, we need to work on the renters who are using Air BnB to rent their units out.

    I’d like to see Air BnB completely outlawed in SF.

    • Posted by San FronziScheme

      Again with the over-the-top “passeist” boasts.

      1 – The city now allows short-term airbnb under certain conditions. When cars were invented, they had to also invent rules and driver licenses. The same thing happened here.
      2 – Longer term airbnb (30+ days) is and has always been perfectly legal

      Now I know you’re on your perch looking down on humanity and trying to pass edicts to better our collective condition against our misguided and destructive instincts (/s), but your rants are simply just that.

      Disclaimer: collecting income from 30+ days airbnb rental for 2+ years.

      • Posted by jenofla

        Wait, don’t the 30+ days rentals mean they get tenant rights? You have no problems with them staying 31 days and then refusing to pay or move out?

        • Posted by San FronziScheme

          If they want to set up a lease at a 30% premium, good for me.

          Also, these tenants are professionals, all relocating, all on linkedin. Not the scofflaw type, but you never know. If a tenant stops paying, then it’s just like all other leases.

        • Posted by SFLover

          That is a risk everyone takes when they rent for 30 days or more. But if you choose wisely and you are lucky, the tenant will move out after their month to month lease has expired. I have rented a spare room many a time to a person coming here for a project or a traveler wanting to have a longer stay or a student who is talking an ESL class for a couple of months. It’s always worked out just fine.

          • Posted by aannoon

            if you choose wisely and you are lucky

            I haven’t had the case myself, but one neighbor had a guest asking to officialize the lease.

    • Posted by Mark

      I agree – just get rid of AirBnB completely.

      • Posted by San FronziScheme (formerly known as lol)

        And why would you want such a thing? What’s next? Homeowners who will forbid all rentals because they do not want to brush shoulders with tenants at the supermarket? Organic buyer who want to forbid non-organic food in the supermarkets in fear of contamination?

        These 2 examples are as idiotic as your statement (and passéist). Simply because you do not like other people’s choices doesn’t mean you can impose a city-wide Nimbyism.

  8. Posted by benwa

    Excuse my naiveté –if the building was Ellis Acted, how come the city is letting the landlords rent out to long term tenants?

    • Posted by SFLover

      If a landlord uses the Ellis Act to evict a tenants in a building, the same units cannot be re-rent for 5 years. After 5 years, the landlord can re-rent again but can only charge the rental rate that the evicted tenants were paying.

      • Posted by Hitman

        Close but not exactly accurate.

        • Posted by BMTE

          After 5 years LL must seek out the Ellis’d tenant first before renting to anyone else, right?

    • Posted by San FronziScheme (formerly known as lol)

      When you Ellis you’d better have either a TIC plan laid out or, if you want to keep the place for yourself, a solid 10-15 year strategy before you can think about collecting market rents.

  9. Posted by eh

    So all in all the landlords came out ahead with a profit?

  10. Posted by EcceMorons

    If you’re thinking of Ellising your building – and then turning around and re-renting it…geez. Make life easier on yourself and just stick your private parts into a wood chipper.

    No sympathy for these idiots.

  11. Posted by SFR

    Is this the same Darren Lee that is a Vanguard real estate agent? Would not think the agency would still like to be associated to him if it is

    • Posted by SFJohn

      If you read his bio over @ Vanguard it could very well be him. I wouldn’t be surprised (having worked in R.E. many years ago).

    • Posted by Serge

      His E&O would probably go up if they found out about it.

    • Posted by Chief Ruffled Feathers

      Why is Vanguard full of these hustler types? Do they get a better commission rate or something?

  12. Posted by Ruth fanning

    Our landlord, George Hauser, well-known to the city,”Developer and Architect” did something similar to us as tenants. We were not “Ellis acted”, but got the sob story of moving his family in – 313 Eureka st has happily been earning hundreds of thousands through Air BnB since!

    • Posted by Futurist

      Yes, since we’re naming actual names, Hauser is not a well liked architect/developer for his (allegedly) shifty business practices.

    • Posted by EBGuy

      It’s currently not showing up on the AirBnb site.

      • Posted by EBGuy

        Whoops, I just matched the front porch posts of 313 Eureka to an AirBnB listing for $309 a night (Modern Chic Elegance in Castro/Noe).

      • Posted by aannoon

        I can see it, I think. Listing 3643650.

    • Posted by iknowsnow

      If he used an OMI eviction to turnaround and rent as an AirBnB, you might have a legal claim. I would say that renting it as an AirBnB would be prima facie evidence that OMI eviction was fraudulent.

    • Posted by SFLover

      Call his out and report him to the Planning Dept, Ruth! How long ago did you get evicted. If it’s an Ellis Act building report him to Airbnb as well. They will remove him from being listed on their platform.

    • Posted by Mark

      Did you report him? Did he do anything technically illegal?

      • Posted by JR "Bob" Dobbs

        It sounds like he simply told them a story and got them to voluntarily move. Nothing wrong with that. I suppose they could sue him for fraud if they can show he lied about the family moving in, but there is no Ellis, OMI, or AirBNB problem if they moved out on their own.

        • Posted by SFrentier

          Yeah or the family changed their mind…and now he resorts to airbnbing. Ain’t nutin’ wrong with that. Life happens!

          • Posted by Des

            My understanding is that once a tenant gets evicted for a family member to move in, they need to live in the unit for 3 years. Otherwise you have a (strong) case that it was not their intent to move in but just to evict you. There IS a difference and it CANbe grounds for a lawsuit.

          • Posted by JR "Bob" Dobbs

            Yeah, but I don’t see anything about any eviction at all. Just a landlord saying “I’m going to move a family member in” and the tenant saying “OK, I’ll leave.” Not clear, but that’s how it sounds like it went down. If it was, in fact, an eviction (“You must leave by date X”) then the issues are very different.

  13. Posted by yesandno

    I’m glad they’re being held accountable. I am still confused as to why/how tenants renting out property they don’t own is not frowned upon. For whatever reason, it still makes more sense to me for a landlord/property owner to make money renting their property out short term, than a renter. I don’t think either scenario is OK, but I believe that renters holding onto housing they cannot afford/don’t live in is causing a lot of issues and adding to scarcity of rentals.

    • Posted by SFLover

      Report these “bad players” to the San Francisco Planning Dept. It is only legal for a person residing in that unit to do short-term renting and then only if they have a short-term rental permit. The maximum # of days that one can rent their own residence is 90 days per the current short term rental regulations. If it’s a renter, the renter must have permission from the landlord , if not will be in violation of their rental agreement if it has a clause that prohibits sub-leasing and can be evicted if they fail to cease and desist their short-term rental activities.

  14. Posted by Mike Friedman

    These people rented a friend of mine an apartment. His illegal basement apartment had no heat and no ventilation in the bathroom..and the top floor unit was being regularly rented to rowdy AirBNB weekend party kids. I lived across a busy street from him and I could often hear them they were so loud.

    These people are evil.

    • Posted by SFLover

      Did you report the owner/landlord to the San Francisco Planning Dept?

  15. Posted by phillip delacruz

    Disgusting greedy bastards!!

  16. Posted by Amewsed

    Oh well, he paid a fine and is done with it. Not like the City is forcing him to accept rent control tenants on all current and future properties. He can always sell the building for a sweet premium and use another entity to purchase other properties. If I had to choose between being him or being the over leveraged developer (of the Wisconsin St. property,) I rather be the former.

    • Posted by SFLover

      If the building was Ellis Act’d, then it has to stay off the rental market for a period of 5 years. After 5 years, if it is put back on the rental market, the rents would have to be at the rate when the tenants were evicted. The party purchasing the building has to abide by these same restrictions.

  17. Posted by SFLover

    You may be off track here. If a tenant gets the permission of their landlord to do short-term renting, and that tenant gets a permit from the city, that tenant is not breaking any laws. Please don’t lump everything into one category.

  18. Posted by SFLover

    I applaud when the “BAD PLAYERS” who flaunt the laws get nabbed. These guys were bad players using the Ellis Act and the short term rental platforms to feed their greed. However, don’t lump them together with all short-term rental hosts who are doing short-term rentals legally and in a responsible manner.

  19. Posted by spatulab

    Sadly, though, if he just told you the sob story and you moved out without him filing papers, you’re up sh!t creek. Which is what a landlord once tried to do to my household. When we resisted, thanks to advice from the Tenants’ Union, he backed down.

    • Posted by Des

      Landlord not filing papers gets landlord in trouble. An eviction, whether verbal or written, is still an eviction

  20. Posted by keema therapy

    yep. not in good faith OMIs will result the displaced tenant *triple* the difference between rent that was being paid and market rate at the time of eviction, for every month said evicted tenant would have lived there. that can easily get to over a million dollars.

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