Lawsuit alleges CitiApartments drained tenant deposit accounts
July 31, 2009
 |
| Claims against landlord: San Francisco filed a lawsuit against CitiApartments saying the company harassed tenants to persuade them to vacate rent-controlled units. (cindy chew/the eXaminer) |
SAN FRANCISCO — Rental security deposits held by one of The City’s largest residential landlords were funneled into an array of bank accounts and plundered, potentially affecting thousands of tenants, according to lawsuits.
Several lawsuits, including a class action, have been filed in recent weeks against CitiApartments or associated companies by former tenants who claim security deposits were not returned.
“What we suspect is that the money has made it into somebody’s pocket,” said attorney Brian Devine, who is representing former tenants in the class-action lawsuit.
CitiApartments is already the target of a city-backed lawsuit that alleges the firm harassed tenants to persuade them to move out of rent-controlled units so prices could be increased to market rate. In court, they have denied those charges.
CitiApartments and associated companies, including the Lembi Group, Skyline Realty, Trophy Properties and Ritz Apartments, amassed a portfolio of properties in San Francisco that was estimated as of last year to include 307 buildings.
The company appears to have overborrowed from banks by overestimating or overstating the number of tenants it could convince to vacate rent-controlled units, according to Scott Weaver, an attorney representing a group of tenants who allege CitiApartments companies withheld payments offered to vacate their units.
Of the properties owned by CitiApartments and associated companies, 51 were foreclosed upon by the international bank UBS and more than 60 additional buildings are currently in foreclosure proceedings, San Francisco Superior Court filings show.
In a lawsuit brought by the buildings' receivers, Laramar Group, an asset manager appointed by UBS in April to manage the 51 buildings that it reclaimed from Lembi Group, makes allegations that could explain why the various CitiApartments companies stopped refunding former tenants’ deposits.
Laramar Group officials allege that the company pilfered its tenants’ security deposits by putting them into company accounts and then using the money to pay bills.
The average security deposit appears to be between $2,000 and $2,500. Roughly 5,500 units remain in the control of CitiApartments companies, according to attorneys. That means more than $10 million in deposits belonging to San Francisco tenants could be in jeopardy.
“The prior management apparently commingled security deposits with other funds in their operating accounts,” the lawsuit says. “[The Lembi Group] used those security deposit funds to pay monies owed.”
The Lembi Group did not hand over to UBS the security deposits for the roughly 1,100 households residing in those 51 buildings when it transferred the properties, according to the lawsuit.
The bank accounts for all of the foreclosed properties were “fully depleted” when they were transferred to the bank, the lawsuit says.
In an effort to track down the deposits, lawyers are seeking access to accounting records of 78 companies and individuals linked to CitiApartments.
The real estate crash, which city statistics indicate led to a 15 percent decline in residential rents during the past year, may have tipped the company into a financial abyss, according to Janan New, executive director of the San Francisco Apartment Association, which represents apartment owners. The association does not represent CitiApartments.
CitiApartments officials did not respond to phone messages left the past several days seeking comments for this story. They have not responded in court to the allegations associated with the lawsuits regarding withheld deposits.
Renters can recoup withheld deposits
Several thousand renters may be left wondering what to do if they are residing in a building owned by CitiApartments.
There are some ways to recoup deposit money that has been denied.
Under California law, tenants are entitled to damages and refunds worth triple the amount of the original deposit if it’s withheld for more than 21 days by a landlord acting in bad faith.
San Francisco Tenants Union Director Ted Gullickson suggested that tenants should file a complaint in small-claims court or contact the law firm currently handling the case, Seeger Salvas LLP, if the deposit is not refunded, or do both.
Courts sometimes order tenants to pay some rent to the unit’s former tenant when the landlord can’t return their security deposit, according to Gullickson.
“As for tenants who are living there now and planning to move, they may want to think about whether or not they should pay their last month’s rent,” he said.
Residents or former residents also need to know who controls the building. For instance, former CitiApartments buildings that were foreclosed upon transferred to companies that are paying back the deposits, according to one such company, Laramar Group, said Vice President of Asset Management Steve Boyack.
Find out if you’re affected
Tenants’ security deposits might be in jeopardy if they live in a unit owned by an entity with a name similar to any of the following*:
1100 Park Lane
124 Mason St.
737 Pine St.
Citi Properties
CitiApartments
Fel Properties
Franklin/Sutter
Gaylord Hotel
Gough Heights
Hermann Street
Lembi Group, The
Lembi, Frank
Lem-Ray Properties
Lombard Place
LSL Properties
Nob Hill Tower
Pacific Prestige Properties
Prime Apartment Properties
Ritz Apartments
Skyline Realty
Sutter Associates
Trophy Properties
* List may be incomplete
jupton@sfexaminer.com
