SF fines two landlords $2.25 million for illegal Airbnb rentals

San Francisco City Attorney Dennis Herrera is laying down the law — literally. Today, Herrera’s office announced a $2.25 million settlement with two property owners in the city. The landlords, Darren and Valerie Lee, ran “an illicit hotel chain during San Francisco’s housing crisis rather than lawfully renting the units to residential tenants,” Herrera’s office wrote in a press release.

As part of today’s settlement, the Lees are not allowed to rent out any of their units as short-term rentals until at least May 2025. The property owners must also pay the city $2.25 million to cover the costs of the investigation and other penalties.

“These are not the type of hosts we want on our platform and are glad the City has the tools it needs to enforce the rules,” an Airbnb spokesperson told TechCrunch. “We are proud homesharing is legal in San Francisco and look forward to continuing to work with the City.”

Herrera first sued the owners in April 2014 after the two evicted tenants from their property and proceeded to use that property for short-term rentals. The Lees settled in May 2015 for $276,000 but then went on to violate a court-authorized injunction that prohibited them from continuing to offer any of their properties as short-term rentals. As part of a two-year investigation, Herrera’s office found that the Lees violated the injunction more than 5,000 times in the first 11 months of the injunction. In that time, according to Herrera’s office, the Lees booked more than $900,000 in short-term rentals and made a profit of $700,000.

It was only after this rash of later violations was uncovered that the Lees finally stopped their illegal conduct. To ensure that the Lees did not get to keep their ill-gotten gains — and to send a message to anyone else considering this scheme — Herrera filed a motion in court to enforce the injunction in May 2018, prompting today’s settlement. The $2.25 million settlement will cover the costs of the investigation and fund future consumer protection enforcement, including of the City’s short-term rental law.

As part of city law, San Francisco requires property owners renting out units for less than 30 days to register with the city’s office of short-term rentals, as well as be a permanent resident of that unit. Airbnb, however, did not take that new law well. In June 2016, Airbnb filed a lawsuit against the city of San Francisco aiming to block the law from going into effect that coming August. Fast-forward to May 2017, and Airbnb settled its lawsuit with the city.

The settlement required Airbnb to supply the city with a monthly list of all homes listed on Airbnb, along with information to enable San Francisco to confirm that the unit is registered. At that time, there were only 2,100 short-term rental hosts registered in San Francisco, but more than 8,000 listed on Airbnb.

In the case concerning the Lees, the city attorney’s office said none of the 14 units in question were ever registered with the city.