A family that just three years ago was San Francisco’s largest and most notorious owner of apartment buildings is now facing the choice of paying up to $10 million in fines or promising to cease property management in San Francisco forever.
Over the past decade, the Lembi family and its company, CitiApartments, grew infamous for refusing to return security deposits, forcing out rent-controlled tenants and, according to a series of lawsuits, harassing those who wouldn’t leave — sometimes with guns.
The court settlement announced Wednesday by City Attorney Dennis Herrera concluded five years of legal wrangling. It illuminates the dramatic fall of a business empire that, according to city real estate officials and tenant advocates, at one point was purchasing three-quarters of the apartments on the market in The City, frequently at prices far above market value.
In 2006, Herrera’s office went after the family for its practices. The settlement reached this week forced its businesses to agree to several anti-harassment provisions and to respond to tenants’ requests for repairs within 72 hours. It also requires the Lembis to pay fines, but exactly how much depends on whether their businesses survives its current financial difficulties.
At its zenith, the Lembis owned more than 300 apartment buildings in San Francisco, their attorney Ed Singer said. Today, two-thirds have been sold or repossessed. Of the remaining 100, he said, 80 are in receivership, and just 20 remain under Lembi family management.
If they survive, they could be forced to pay as much as $10 million. Yet the settlement limits the damages to just $2 million if the Lembis agree “to forever cease property management operations within the City and County of San Francisco — permanently and irrevocably.”
Herrera said he was happy with the lawsuit’s outcome, which “shined a light on illegal and unethical business practices” and helped bring the Lembi companies “to their knees.”
Yet, Singer also said he was “pleased” with the settlement.
“We think we’re paying more money than we should have to pay, and The City thinks we’re not paying as much as we should, but I thought the settlement did a good job of acknowledging the financial problems that the Lembi family is facing today,” he said.
Singer said the family will only leave The City if its woes are insurmountable. “I would hope we have to pay the $10 million, because that would mean the Lembis would have recovered financially,” he said.
Singer said the agreement was not an admission that the Lembis had mistreated tenants.
San Francisco Tenants Union Director Ted Gullicksen said that as the family’s holdings have shrunk, his counselors have heard fewer intimidation complaints. Yet they continue to hear about unreturned deposits or unresponsiveness to maintenance problems.
Gullicksen hopes the Lembis go away, but considers it unlikely.
“They’ve lost a lot of money in the past and come back bigger than ever, so I expect they’ll do it again,” he said. “I predict that we’ll have to deal with them again in the next 10 years.”
CitiApartments tenants who were harassed or forced to live in shoddy apartments cannot seek compensation through The City’s settlement, but are able to pursue redress of their grievances separately.
San Francisco Tenants Union Director Ted Gullicksen said renters in more than 100 buildings were involved with their own lawsuits. But he added that CitiApartments has still “hurt a lot of people who never received any relief whatsoever.”
Renters who helped the investigation said tenants should know their rights because CitiApartments took advantage of ignorance. Several said the owners should be made to notify renters about their options.
“They have a responsibility to inform all of these people that they have a right to file a class-action or multiplaintiff suit,” said Landra Tankha, who said she lived with old carpets, a dilapidated ceiling and cracks in her walls. “There are people who are disabled, who are poor, who have children, who got sick because of their horrible ways.”
Herrera called the successful settlement a team effort.
“I think that a great part of the success of this lawsuit was due to the fact of various community groups and tenants themselves stepping up and making The City aware of the problems,” the city attorney said.
— Kamala Kelkar
The agreement expressly forbids Lembi family companies from the following activities:
Source: City Attorney’s Office