Couple Pays $2.25 Million For Running Illegal Airbnb Empire

Instead of freeing up housing stock when they were first caught in 2014, the Lees refused to stop operating a chain of short-term rentals.

The City Attorney’s Office has once again settled with a couple for illegally running a chain of illegal Airbnb rentals, this time nabbing $2.25 million in penalties.

Darren and Valerie Lee agreed to the settlement before facing a court appearance on Monday for the City Attorney Dennis Herrera’s $5.5 million lawsuit, brought forward for illegally renting out 14 units on Airbnb for almost a year. The Lees are also forbidden from renting out the 17 buildings they own or manage in San Francisco as short-term rentals at least until May 2025.

“The Lees are some of the most egregious, repeat violators of the City’s short-term rental laws,” said Kevin Guy, director of the Office of Short-Term Rentals, in a statement. “They have taken units off of the market that should be reserved for long-term San Francisco residents. It is extremely gratifying to see them being brought to account for their actions.”

But this isn’t the couple’s first rodeo with the city’s top lawyer. In April 2014, Herrera sued the Lees for unlawfully converting units at 3073-3075 Clay St. to short-term rentals after using the Ellis Act to evict tenants. They settled a year later and agreed to pay $276,000 — about an eight the cost of Monday’s settlement.

A court-ordered injunction in 2015, too, prevented the Lees from operating short-term rentals in their 17 buildings holding more than 45 units. Instead, the couple violated it more than 5,000 times in the first 11 months of that injunction, a two-year investigation by the City Attorney’s Office found.

In what the City Attorney’s Office called an “elaborate scheme,” the Lees had friends, families, and associates who didn’t live at any of the 14 units posed as tenants or Airbnb hosts complete with fake leases and damp towels “artfully draped over the doors as if someone had recently showered.” Curiously, they chose to scatter the same Costco food items, arrange dirty dishes in the same manner, stock the same clothes and shoes in closets, and use the same houseplants.

The Lees made back the fine they paid in 2015 and then some, pocketing more than $700,000 from short-term rentals during that time. As a result, residents seeking housing were locked out of the mostly Western Addition and Mission units.

Herrera asked a Superior Court judge in May to fine the couple $5.5 million for violating the court orders to reduce incentive for other landlords with similar ideas — though far less than the $30 million that could have been incurred through the maximum per-violation penalties.

“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.”

Tags: , , , , , ,

Related Stories