Having been charged with evicting tenants from rent-controlled units and then illegally marketing the apartments as short-term rentals on Airbnb, Homeway and VRBO, Darren and Valerie Lee agreed to pay $276,000 in penalties and fees back in 2015.
As we first reported at the time, the settlement included injunctive provisions prohibiting similarly illegal conduct over the next five years. And although Herrera’s lawsuit alleged violations of state and local laws at only one of the Lees’ properties, the aforementioned injunction applied 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.
And to quote Herrera, at the time: “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 our housing affordability crisis.”
As it turns out, the Lees violated the injunction “more than 5,000 times” within the first 11 months of it being in place, “booking more than $900,000 in short-term rentals and pocketing more than $700,000 in illicit profits” from 14 of the 45 units they now own or manage.
And following a two-year investigation, the Lees have now agreed to pay a $2.25 million fine, entering into another settlement which now prohibits the two from renting out any of units in the 17 San Francisco buildings they own or manage as short-term rentals through May of 2025 and to pledge their real estate as collateral to ensure compliance.
The buildings covered under the injunction are 439 Broderick Street (pictured above), 645-647 Broderick, 3073-3075 Clay, 417-419 Clayton, 1146-1148 Fell, 1324-1328 Fell, 1522-1524 Fell, 140 Graystone Terrace, 150 Graystone Terrace, 1109-1123 Leavenworth, 1925-1927 Lyon, 822-828 Masonic Avenue, 1145-1149 Mission, 14 Surrey Avenue, 543 Oak, 831-833 San Jose Avenue and 1362-1364 Utah Street.
At the same time, the number of formal complaints related to illegal short-term rental activity in San Francisco has continued to drop over the past year, with a total of 231 complaints lodged in the first three quarters of the year, down nearly 50 percent versus 2017 and 55 percent fewer than the 516 lodged in the first three quarters of 2016, as we first reported last week.