S.F. Fines Two Airbnb Hosts $5.5M for Illegal Rentals

If the City Attorney's office had filed the maximum amount allowed by state law the two building owners could have owed a whopping $30 million in penalties.

While the city drew a hefty amount criticism for letting Airbnb take over our rental market fairly un-regulated for its first few years, it appears that San Francisco’s now making up for lost time. On Tuesday, the City Attorney’s Office asked a Superior Court judge to fine property owners Darren and Valerie Lee more $5.5 million for illegally renting out 14 units on Airbnb for nearly a year.

The lawsuit details a string of violations from the Lees stretching back to 2014. The city filed its first suit against the duo that year for Ellis-evicting tenants from a building on Clay Street, in order to list it for illegal short-term rentals on the platform. The Lees settled the case with a $276,000 payment to the city in May 2015, and agreed to an injunction that banned them from listing any more of their 45 apartments across the 17 buildings they own for rent on Airbnb. 

However, City Attorney Dennis Herrera’s office eventually caught them doing just that. According to their statement, between May 2015 and April 2016 the couple listed 14 units on Airbnb, had renters occupy the units for a total of 2,271 nights, and subsequently made more than $700,000 in profit. To skirt around the system, they allegedly had friends and relatives pose as tenants of the spaces.

When city inspectors investigated eight of the 14 units in the spring of 2016, they noticed that each apartment “had been staged to appear as if a tenant lived there, but it was obvious that it was a ruse.”

“Every apartment had the same staging: the same Costco food items scattered about, the same arrangement of dirty breakfast dishes in every kitchen sink, same personal products in each bathroom, same damp towels artfully draped over doors as though someone had recently showered, the same collection of shoes and clothes in closets, and same houseplants in each apartment,” stated the lawyers filing the suit.

The $5.5 million suit is not a random amount; The Lees are now being charged $750 for each day the apartments were listed, and an additional $1,500 for each night they were occupied by short-term renters. While $5.5 million may seem harsh, it’s actually fairly mild considering that state law allows hosts to be penalized for up to $6,000 for each violation – a move that could have cost the Lees more than $30 million. 

Herrera didn’t hold back on his criticism of the couple, calling their greed, fraud, and deceit “breathtaking.”

“This couple broke the law, got caught, pledged to stop and then did it again – only this time, with an elaborate ruse to try to hide their tracks,” he said. 

Julia Cheevers from Bay City News contributed reporting to this story.

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