City Attorney Dennis Herrera (Examiner file photo)

City Attorney sues Redwood City couple for alleged below-market rate unit fraud

City Attorney Dennis Herrera filed a lawsuit Thursday morning against a Redwood City couple who allegedly fraudulently bought and rented out a below market-rate condo in Rincon Hill.

Herrera said Caroline Novak stated on her 1999 application that she did not already own property when she bought a below market-rate condo on the 300 block of Beale Street, when in fact she owned a house in San Mateo.

Novak and her husband Igor Lotsvin, both of whom are investment advisors, now live in a $2.8 million home in Redwood City and have used the San Francisco condo as a second home and rental property, according to the suit.

“Over the years, Novak and her husband, co-defendant Igor Lotsvin, continued to violate the law, illegally renting out the studio that Novak paid $178,500 for and leveraging it as security for over $1.5 million in loans and lines of credit to build their own personal wealth,” the City Attorney’s office said in statement.

“It’s unconscionable that this couple would cheat an eligible San Franciscan out of an affordable home, just so they can keep an investment property and a pied-à-terre,” Herrera said.

The City maintains a pool of below market-rate units that it offers to first-time home owners who meet income requirements. Qualified applicants are picked through a lottery system when a unit becomes available, and homeowners agree to use the unit as their primary residence and are prohibited from renting it out. The City holds a new lottery when an owner moves out to offer the unit to a new qualified buyer.

The City Attorney’s office said the case is the 22nd so far as part of Herrera’s ongoing investigation into affordable housing fraud. Altogether, the investigations have led to $3.3 million in judgements and settlements.

(Courtesy City Attorney’s Office)
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(Courtesy City Attorney's Office)

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