Two landlords accused of running an “illicit hotel chain” on Airbnb have agreed to pay $2.25 million to settle a lawsuit with San Francisco, City Attorney Dennis Herrera announced Monday.
A City Attorney’s Office investigation found in May that landlords Darren and Valerie Lee continued to rent 14 units on Airbnb despite being ordered to stop using their properties as short-term rentals in 2015. The landlords earned $700,000 in profit in the 11 months that followed the injunction.
“The serious financial penalty is an important deterrent,” Herrera said in a statement. “It sends a clear message to those looking to illegally profit off of San Francisco’s housing crisis: Don’t try it. We will catch you.”
The injunction stemmed from a 2014 lawsuit Herrera filed against the property owners for allegedly using the Ellis Act to evict tenants from two units that were later turned into short-term rentals.
Under the latest settlement, the Lees have also been ordered to once again stop renting out their units as short-term rentals. The injunctions blocks 17 buildings with more than 45 units, according to the City Attorney’s Office.
The settlement comes after Herrera filed a motion seeking to enforce the initial injunction.
“This outcome frees up more homes for long-term tenants and stops unfair competition in the marketplace,” Herrera said.
John C. Brown III, an attorney for the landlords, did not respond to a request for comment.
San Francisco law requires property owners who rent their unit as a short-term rental for less than 30 days to register with The City. Owners are also prohibited from renting out more than one unit and must live in the unit being rented.
The City Attorney’s Office said none of the units were registered with The City.
The Lees allegedly advertised their units through friends, family and associates who posed as straw tenants or Airbnb hosts for the 14 units in question, according to the City Attorney’s Office. But most of the host accounts were created from the same computer IP address.
Office of Short-Term Rentals Director Kevin Guy described the landlords in a statement as “some of the most egregious, repeat violators of the City’s short-term rental laws.”
“They have taken units off of the market that should be reserved for long-term San Francisco residents,” Guy said. “It is extremely gratifying to see them being brought to account for their actions.”
The City Attorney’s Office said the $2.25 million settlement will cover the costs of the investigation and the enforcement of short-term rental law moving forward.