Airbnb landlords penalized millions for faking rentals

San Francisco has settled a lawsuit with two property owners who rented out apartment units as short-term rentals through Airbnb without first registering them with The City.

The property owners have now been caught twice by the City Attorney’s Office violating The City’s short-term rental laws.

City Attorney Dennis Herrera said on Monday that property owners Darren and Valerie Lee will have to pay The City $2.25 million in penalties and investigation costs after now being caught twice of renting units as short-term rentals without registering the units with The City’s Office of Short-Term Rentals.

Herrera said this was a win for San Francisco residents:

“Whether you’re a tenant or a landlord who has been following the law, this is a victory. This outcome frees up more homes for long-term tenants and stops unfair competition in the marketplace. The serious financial penalty is an important deterrent. 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.”

Herrera first sued the Lees in 2014 after they evicted tenants using the Ellis Act from the property of 3073-3075 Clay St. and unlawfully changed the units into short-term rentals. In May 2015, the Lees settled with The City, agreeing to pay $276,000 and had a court injunction placed on them that prohibited the Lees from maintaining any of their units from 17 buildings as short-term rentals in The City.

Within 11 months of the injunction, The City Attorney’s Office found that the Lees violated the injunction more than 5,000 times by booking $900,000 in short-term rentals and making away with $700,000 in profits from using 14 units as short-term rentals.

The City Attorney’s Office investigated a scheme where the Lees used family members, friends and associates to pose as long-term tenants, including drawing up fake leases, pretending the unit was occupied in by putting dirty dishes throughout the unit, damp towels as if someone had just showered, and the same Costco food products throughout the unit.

Investigators found the same arrangement at each of the 14 units.

The properties covered the court injunction include those in the North of Panhandle, Pacific Heights, Twin Peaks, Nob Hill, South of Market, Glen Park, Hayes Valley, Bernal Heights and Portreo Hill neighborhoods.

Jerold Chinn

Jerold serves as a reporter and San Francisco Bureau Chief for SFBay covering transportation and occasionally City Hall and the Mayor's Office in San Francisco. His work on transportation has been recognized by the San Francisco Press Club. Born and raised in San Francisco, he graduated from San Francisco State University with a degree in journalism. Jerold previously wrote for the San Francisco Public Press, a nonprofit, noncommercial news organization. When not reporting, you can find Jerold taking Muni to check out new places to eat in the city.