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CitiApartments
July 2, 2009 5:42 PM   Subscribe

San Francisco's largest residential landlord is refusing to give back security deposits. CitiApartments is possibly going broke and, according to the head of the San Francisco Tenants Union, refusing to refund many tenants security deposits (he says they're getting three to four complaints a week). CitiApartments' buildings are filled with vacancies because their business model is purchasing buildings and then harassing and intimidating tenants into moving out so they can raise the rent.

The end of the SFAppeal article states: "if a person really wanted to push back against whatever it is that CitiApartments is doing, they could pretty easily twist the knife a bit on craigslist simply by flagging every single CitiApartments listing."
Here is the website dedicated to fighting CitiApartments and here are links to a three part series on CitiApartments by the San Francisco Bay Guardian. And here is an article on CitiApartments parent company from San Francisco Business Times.
posted by Stephen Elliott (79 comments total) 8 users marked this as a favorite

 
Next week's GOP Talking Points: San Francisco Values: Right For America After All?
posted by DU at 5:50 PM on July 2, 2009 [4 favorites]


Sounds like one crappy company. The writer of that SF Appeal article should go back to journalism school or beauty school or wherever he studied, though. What a mess. Look at this sentence, for example:

Citing CitiApartments' alleged practice of "buying buildings, then using harassment and coersion to buy tenants out then reoffering the apartments at an inflated rate," he says that many CitiApartments tenants are either very recent tenants who, at the time of lease signing, didn't have any plans to move -- but given the current state of the economy, have had to, and are now suffering under CitiApartments' retention of their deposits..

What? Either what? EITHER WHAT?
posted by Justinian at 5:53 PM on July 2, 2009 [14 favorites]


their business model is purchasing buildings and then harassing and intimidating tenants into moving out so they can raise the rent.

With that business model - what could go wrong?
posted by jabberjaw at 6:00 PM on July 2, 2009 [1 favorite]


I saw this on the A-team once where a bunch of thugs tried to intimidate Mr T's mom out of her apartment.
It did not end well for them
posted by Iron Rat at 6:04 PM on July 2, 2009 [17 favorites]


They need a community organizer. Organize and sue that company in small claims court, individually, but in mass numbers. Judges would get tired of hearing the name CitiApartments real fast, I'm guessing.
posted by jamstigator at 6:10 PM on July 2, 2009


"if a person really wanted to push back against whatever it is that CitiApartments is doing, they could pretty easily twist the knife a bit on craigslist simply by flagging every single CitiApartments listing."

If the reason that they can't repay deposits is because they're illiquid, why would someone who is owed a deposit want to prevent them from making money?
posted by mr_roboto at 6:11 PM on July 2, 2009 [1 favorite]


You didn't quote the whole douche-bag thing in the article, which was
You know -- and we're certainly not advocating this, just, you know, pointing it out -- if a person really wanted to push back against whatever it is that CitiApartments is doing, they could pretty easily twist the knife a bit on craigslist simply by flagging every single CitiApartments listing. (Someone we know just tried this, and says it's very fun.) Then keep an eye on them, and let us know if the listings remain on the site.
Whether you agree that spamming Craigslist with inappropriate flags is OK or not, you can probably agree that this backhanded crap is pretty craven.
posted by Nelson at 6:21 PM on July 2, 2009




It's working


posted by toni_jean at 6:21 PM on July 2, 2009 [2 favorites]


When I moved to the Bay Area a year ago everyone I met told me to stay as far away from CitiApartments as possible.
posted by bradbane at 6:26 PM on July 2, 2009


why would someone who is owed a deposit want to prevent them from making money?

This bears repeating. If they do declare bankruptcy, their secured creditors will certainly get all of the deposits, leaving the renters with nothing. The only hope for those who've put down security deposits is for the company to avoid bankruptcy (and if they continue to refuse to pay out, then you take them to small claims court). If you're currently owed a deposit because your lease is up, then you can sue now, but otherwise it doesn't look good.
posted by allen.spaulding at 6:29 PM on July 2, 2009 [1 favorite]


Judges would get tired of hearing the name CitiApartments real fast, I'm guessing.

It's not that I don't think this is a good idea. Suing in small claims court might be a good idea for some, many, or even all of these people, and a barrage of legitimate lawsuits may well put pressure on the company to change its practice/policy. But what, exactly, would it accomplish to make small claims court judges tired of a particular defendant?
posted by The World Famous at 6:30 PM on July 2, 2009


Ummmmm, vengeance and sleeping the sleep of the impoverished just?
posted by Samizdata at 6:33 PM on July 2, 2009 [1 favorite]


I don't get it. They buy buildings, then harass the tenants into moving out ... why? Are these rent-controlled units where they can't raise the rent until there's a change in ownership? Otherwise it seems pretty self-defeating; they could just wait until the end of the current tenant's annual contract and jack the rent then.

That's what every landlord in every apartment I've ever lived in has done. Everyone was there on one-year leases, and every year like clockwork the rent would go up, sometimes pretty severely, and everyone would play the "is it worth moving or do I just suck it up" game. But I never had a landlord try to get rid of people, unless they were deadbeats; that just wouldn't benefit them any.

Clearly I'm missing a part of their evil scheme, or they haven't though their cunning plan all the way through.
posted by Kadin2048 at 6:34 PM on July 2, 2009


"filled with vacancies" is my new fave oxymoron.
posted by telstar at 6:36 PM on July 2, 2009 [11 favorites]


three to four complaints a week

Stop the presses! One complaint every day or two!
posted by crapmatic at 6:38 PM on July 2, 2009 [1 favorite]


This happened to me.

I don't live there anymore. I made them pay me to move out. I'm still not sure how I feel about that personal-ethics-wise, but it got me into a much better place at a much lower rent, so I got over it. I hope someone can stop them from screwing people over.

They're evil.
posted by trip and a half at 6:38 PM on July 2, 2009 [5 favorites]


I presume having something like a residential bond authority would be Socialism, or something?
posted by pompomtom at 6:39 PM on July 2, 2009


Ummmmm, vengeance and sleeping the sleep of the impoverished just?

Revenge is a dish best served by making a part-time judge pro tem tired of a defendant?
posted by The World Famous at 6:41 PM on July 2, 2009


I was just about to say what pompomtom just said...
posted by Jimbob at 6:47 PM on July 2, 2009


Man, these guys sound awful. Thanks for the heads-up!
posted by spitefulcrow at 6:48 PM on July 2, 2009


Kadin
San Francisco is a renter's city, and not so good for landlords. It is definitely rent-controlled and after a lease is up, they can only raise rent by 5%. There are people here who have lived in the same rental unit that pay less than half of the current rental rate of similar units. The longer you live somewhere, the better. This is another reason why rent is so expensive. You aren't paying for the current market value, you are paying for something sustainable to the landlord if you live there for five years. Also, property tax is insane and keeping a tenant in a unit for a long time ends up losing a lot of money for the landlord. It is very hard to evict someone, they have to stop paying rent for about a year and have another reason on top of that, like they are dealing drugs. Evictions take court orders that are difficult to obtain.
CitiApartments has had a bad reputation for a while, especially when it comes to fixing repairs and returning deposits. I hope this puts them out of business, they own so many properties that could be turned into something beautiful in the right hands.
posted by idiotfactory at 7:00 PM on July 2, 2009 [2 favorites]


It is definitely rent-controlled and after a lease is up, they can only raise rent by 5%.

Not exactly true - the amount varies year to year. The current max increase (per year) is 2.2%; last year's was 2.0%. See the SF Rent Board for details. The more you know!
posted by rkent at 7:07 PM on July 2, 2009 [3 favorites]


In theory, it shouldn't matter if they go bankrupt, because they were supposed to keep the deposit money separate. If they've mixed the deposit money in with the operating money that is really bad.
posted by Stephen Elliott at 7:11 PM on July 2, 2009 [1 favorite]


If they've mixed the deposit money in with the operating money that is really bad.

You mean like Social Security? Or most pension plans?
posted by SeizeTheDay at 7:17 PM on July 2, 2009 [3 favorites]


This still does not answer the question of how Michael Douglas's character in Basic Instinct, a cop, was able to afford an apartment with a perfect view of the pyramid building.
posted by geoff. at 7:24 PM on July 2, 2009 [13 favorites]


By "not so good for landlords" do you mean "having laws which make it impossible to raise the rent on a monthly basis"? Or "making it impossible to evict a sitting tenant for having a baby"?

That kind of "not so good for landlords"?

*letting fall a silent tear*
posted by jrochest at 7:40 PM on July 2, 2009 [5 favorites]


Also, property tax is insane

Not if you're holding onto that 1978-era Prop 13 up-valuation, the last market-based property tax.

You mean like Social Security?

Social Security is invested in the safest securities on the market, US Gov't Bonds.

SF is a disaster-area of "tenants rights" meeting Prop 13 market distortions. I will skip over my usual diatribe, consider it #included here.
posted by @troy at 7:48 PM on July 2, 2009 [1 favorite]


Oh, I'm a regular visitor to socketsite.com, and they've had regular exposés on these operators. They were actively attempting to corner the rental market during the run-up.
Yeah, when I refer to scumsuck LL's and the like, I'm thinking about them.
posted by @troy at 7:51 PM on July 2, 2009 [1 favorite]


Yyyyyeah I'm starting to think we won't get our deposit back.

And our elevator isn't up to code and hasn't been since before I moved in.
posted by liketitanic at 7:52 PM on July 2, 2009


By "not so good for landlords"...

It's easy to say this sort of thing about CitiApartments, but if you're an individual owner who can't raise the rent enough to even meet your costs (easy situation to get into in SF) then strict rent controls don't look so good. (And pretty much every study shows that rent control increases prices for the majority of renters, to the benefit of a smaller number of longtime residents). One of many reasons I live just outside the city rather than in.
posted by wildcrdj at 7:53 PM on July 2, 2009


Hi. I'm a counselor-trainee at the San Francisco Tenants Union and it is definitely true that CitiApartments/Skyline Reality (and its various sub companies like Trophy, etc.) is a terrible company that I wouldn't wish on my worst enemy.

They need a community organizer. Organize and sue that company in small claims court, individually, but in mass numbers. Judges would get tired of hearing the name CitiApartments real fast, I'm guessing.

CitiApartments is well known by judges and other folk in city government and non-profits who have anything to do with rental units and tenants. In fact, I've heard that the San Francisco Rent Stabilization Board actually has special stamps that spell out CitiApartments because they hear so many cases about them. Also, I'm sure there is some organizing being done by pro-tenant lawyers against Citi (organizing class action lawsuits), so if anyone has had or is having issue with them, they should definitely contact CitiStop or the Tenants Union.

This bears repeating. If they do declare bankruptcy, their secured creditors will certainly get all of the deposits, leaving the renters with nothing.

I'm not so sure about this point. I know at the Tenants Union we generally tell people that when their building is sold or foreclosed on that "within a reasonable amount of time" the landlord must either return the balance of your security deposit to you along with an itemized list of any deductions made (and you would then pay a new deposit to the new landlord/bank) OR transfer the balance to the new landlord/bank and notify you in person or by mail the name, address and telephone number of the new landlord.

Basically, this means, that if your building was foreclosed upon in San Francisco and you didn't receive your deposit back from the original owner, your new landlord is liable for it when you do eventually move out. Responsibility is carried over from one owner to the next. So, I would think that whoever takes a building over from CitiApartments when it is foreclosed on is now liable for paying back those security deposits.

It is definitely rent-controlled and after a lease is up, they can only raise rent by 5%.

Someone responded to this, but I wanted to repeat that this isn't true. If a unit of housing is under rent-control (in general it has to be built before 1978ish and not be a condominium or single family home), then the landlord is only permitted to raise the rent a certain percent every year as determined by the Rent Board. The landlord can choose to bank these rent increases over several years and apply them all at once, but must give the tenant a 60 day notice if this represents more than a 10 percent increase. Also, tenants under rent control (as well as those in pre-1978 condos and single family homes) are protected from eviction after their lease expires except for if they trigger one of the 14 Just Causes for Eviction. After the lease expires the tenant enjoys a month-to-month tenancy (while meeting the obligations of the original lease) with a required 30 day notice when moving.

This still does not answer the question of how Michael Douglas's character in Basic Instinct, a cop, was able to afford an apartment with a perfect view of the pyramid building.

If it was under rent control, he probably lived there for a looooooong time!
posted by flamk at 9:31 PM on July 2, 2009 [6 favorites]


One of my friends lives in SF. He's renting one room in a 4 bedroom place. One day, he gets up to go to work, and there's some workmen setting up in the living room- he assumed it was the guys to tear out the old carpet and put in the new carpet, which was supposed to be in the works for months now.

He gets back that night, and they've started putting up structure to build a 5th bedroom in the living room.

Without notice, without warning, and no offer to reduce the rent he's paying.

He made a stink enough that the landlord took out the structure and didn't go through with it, but I don't doubt that there's other folks, in similar places, getting jerked around all the time.
posted by yeloson at 9:33 PM on July 2, 2009 [1 favorite]


You mean like Social Security? Or most pension plans?

Because that's worked out just great for them, right?

It's easy to say this sort of thing about CitiApartments, but if you're an individual owner who can't raise the rent enough to even meet your costs (easy situation to get into in SF) then strict rent controls don't look so good.

What's that? Speculators can lose money on their speculation? Saints preserve us!
posted by enn at 9:38 PM on July 2, 2009 [3 favorites]


What's that? Speculators can lose money on their speculation?

I'm sorry, I fail to understand your comment. If you are providing some long-term service like rentals, and you are legally prohibited from raising your fees to the point where you lose money providing that service, what exactly does this have to do with speculation?

(And I'm a left-leaning person who has some positive views about rent control and believes strongly that real-estate speculators are incredibly destructive to the world. But I still have no understanding of what you're talking about...)
posted by lupus_yonderboy at 10:04 PM on July 2, 2009 [1 favorite]


I briefly considered renting out a house in San Francisco I was having a hard time selling. The general headache of it combined with the notoriously landlord-unfriendly rules of San Francisco made me think twice pretty quickly. Much easier to let giant faceless corporations ("evil speculators") do the renting.

Holding on to security deposits is seriously sleazy. I'm 90% sure that Boston, MA had a rule that security deposits (as opposed to last month's rent) had to be held in separate escrow accounts. I'm a bit surprised SF doesn't have that tenant protection.

BTW, for an alternate view to the SF Bay Guardian, this SF Weekly article How renters work the system to live for free in one of America's most expensive cities was amusing reading. No doubt it describes some extreme cases of abusive tenants. But it ain't all La Boheme in this town.
posted by Nelson at 10:11 PM on July 2, 2009


If you are providing some long-term service like rentals, and you are legally prohibited from raising your fees to the point where you lose money providing that service, what exactly does this have to do with speculation?

With possibly a very few exceptions, people do not go into the landlord business in order to provide a service. They do it to make money. The fact that some of them do it in places where the law makes it harder for them to make money than elsewhere does not change the fact that they are in it for the money. It just means they are perhaps not as shrewd in their investments as they might otherwise be.
posted by The World Famous at 10:12 PM on July 2, 2009 [5 favorites]


While I'm sure there's been cases like you've described lupus, I really do wonder if that happens all that frequently in San Francisco. First of all, its a pretty transient city. I think I remember a statistic from somewhere (I'm sorry, I have absolutely no links for this) that in the past 10 years the turn over in population (either in Castro/Upper Market area or possibly the entire city?) was something like 50%. While everyone has a story about the fabled old guy they know that's been living in his apartment since 1978 and paying $200 a month on Telegraph Hill, the truth is that that really doesn't exist very much. I've been counseling/training/whatever for over a year and I can count on one hand the numbers of times I've been astonished by someone's low rent. Typically people that come in pay between 1500-4000 a month for a household. Seeing below a $1000 seems very very rare.

Also, there are ways, I believe, that landlords can petition the Rent Board for rent increases, etc due to landlord hardship. In addition, there are numerous (albeit complex and time consuming) ways a tenant can be evicted through no fault of their own (not paying rent on time, etc).

Finally, the biggest thing going against tenants staying in their rent controlled apartments is Life (with a capital L, but not the board game). People die, families and partners split up, children grow up and move out but want to continue to live in the City, someone hears the siren call of the suburbs, whatever.... and they leave and their unit's rent is readjusted to market rates. Happens all the time. While companies can truly last generations (and accrue ungodly influence and benefits in the duration) people and families are frail and transient and that's why worrying too much about the old curmudgeon living in the lap of luxury subsidized on the Newcomer's dime and driving landlords into poverty is a bit misplaced (imo).
posted by flamk at 10:29 PM on July 2, 2009 [4 favorites]


I'm sorry, I fail to understand your comment. If you are providing some long-term service like rentals, and you are legally prohibited from raising your fees to the point where you lose money providing that service, what exactly does this have to do with speculation?

The landlord speculates that future rents will cover (and hopefully exceed) his cost of ownership. Whether those rents are determined by the market or by some legislative body hardly seems to pertain. Is a speculator any less a speculator because a property tax hike, rather than a drop in real estate prices, makes his position a losing one? What definition of speculation does this practice fail to meet? There is no right to make money because you own property.
posted by enn at 10:29 PM on July 2, 2009 [2 favorites]


people do not go into the landlord business in order to provide a service. They do it to make money.

At least in my experience, people also go into service businesses to make money.

If you want to argue against rentierism I'm right with you (and there are good arguments for being against it), but there's nothing inherently wrong about being "in it for the money," whether you're selling widgets or providing a service or whatever. That's not the source of the problem. The issue stems from the monopolization and extraction of rents from land, which everyone needs, and the payment for which takes away from the pool of capital available to more productive economic activity.
posted by Kadin2048 at 10:39 PM on July 2, 2009


I'm sorry, but this bears repeating: There is no right to make money because you own property.

Nobody in their right mind jumps in to a market like San Francisco's without doing their homework. You just dropped a million or two on a building with human beings living inside it and you're surprised their might be laws and obligations tied up in that?
posted by flamk at 10:41 PM on July 2, 2009 [7 favorites]


Nelson, now we know how Michael Keaton managed to live so inexpensively in Pacific Heights (in Pacific Heights).
posted by stevil at 10:45 PM on July 2, 2009 [1 favorite]


If you want to argue against rentierism I'm right with you (and there are good arguments for being against it), but there's nothing inherently wrong about being "in it for the money," whether you're selling widgets or providing a service or whatever.

I didn't say there's anything wrong with being in it for the money. I just pointed out that landlords in general are in it for the money, and not out of some humanitarian desire to provide a service to their fellow man.

The issue stems from the monopolization and extraction of rents from land, which everyone needs, and the payment for which takes away from the pool of capital available to more productive economic activity.

Hear hear.
posted by The World Famous at 11:19 PM on July 2, 2009


l_y : unless the owner is a long-term owner who got into landlording before rent control was instituted, the details of being a landlord in a rent controlled city are part of the info you need to take into account when making your property purchase. in other words, the Market should have priced this in already. it's just another part of the regulatory environment in which your business (of being a landlord) operates.
posted by russm at 11:26 PM on July 2, 2009


Citihabitats has been finding creative ways to screw over renters, long before they were at risk of going broke. I remember looking for apartments in SF over a decade ago, when the SF real estate market lost its mind during the dot-com boom, and being warned against dealing with them.

Whether you agree that spamming Craigslist with inappropriate flags is OK or not, you can probably agree that this backhanded crap is pretty craven.

Yeah. Actually, I think the spamming's pretty un-OK, too.
posted by foxy_hedgehog at 12:22 AM on July 3, 2009


I'm sorry, I fail to understand your comment. If you are providing some long-term service like rentals, and you are legally prohibited from raising your fees to the point where you lose money providing that service, what exactly does this have to do with speculation?

If you enter where there's a market with rent controls, and you haven't done your sums, you deserve to go broke. Boo hoo.
posted by rodgerd at 12:24 AM on July 3, 2009


I just pointed out that landlords in general are in it for the money, and not out of some humanitarian desire to provide a service to their fellow man

yeah, well, the operative if not foundational mythology of our current system is Smith's Invisible Hand converting self-interest into public weal.

As a hard-core left-libertarian I'm violently torn by this debate. Markets should be encouraged to function, yet people should enjoy some degree of security of tenancy without having to become owners.

I'm a supply-sider with this; I think we need to zone up & better to let capital investment create new housing space, rather than chasing existing site value with predatory and ultimately non-economical investments in buildings older than dirt.

I spent some time in the city last month, and man, was the housing stock crappy. It's really amazing how small the desirable areas are; Fresno almost has more tony living space, going by acreage, compared to SF.

The funny thing is if I had the capital the first thing I'd want to make would be a cool apartment block in Fresno (which still has the open, quality land for this sort of thing). The garden apartments built in the 80s I'm in now gets a lot right (quality construction and if anything too much greenery and open space); I'd like to see more of these produced.
posted by @troy at 12:25 AM on July 3, 2009


I'm a supply-sider with this; I think we need to zone up & better to let capital investment create new housing space, rather than chasing existing site value with predatory and ultimately non-economical investments in buildings older than dirt.

The problem is that San Francisco is not Fresno (in many many ways). The demand for living in San Francisco is global and seemingly insatiable (or so goes the argument) and the amount of developable land is pretty much ZERO. Of course, increased densities and heights, at a certain point, would offset demand eventually, but at what cost? A beautiful city of low and medium density neighborhoods is swallowed up so that some millionaire from China has a place to crash 2 or 3 days a year when they visit? Drastically increased heights and density will be the thing that kills the goose that lays the golden egg . . . Besides, we're pretty freakin' dense already! How about cities out in the East Bay or Central Valley start trying to recreate the qualities that make San Francisco so obviously desirable (such as built form and the lifestyle that follows from that, etc) in their own cities?

Also:
It's really amazing how small the desirable areas are

This might all just be personal aesthetics, but where were you?? The entire city is like one giant (well, not really, we're quite small really) overly precious/cute gentrified playground. I mean, ok, there's the Tenderloin (which actually has some beautiful buildings) and some dodgy pockets in the Mission, but really, the entire city is sorta way too desirable (kinda the point of rent control...?)
posted by flamk at 1:21 AM on July 3, 2009


Social Security is invested in the safest securities on the market, US Gov't Bonds.

hah! Social Security has a bunch of IOUs from the government that they can't trade to anyone else. Calling them 'bonds' is stupid.

What they're SUPPOSED to have is hundreds of billions of dollars of assets that they can use to pay retirements without impacting the budget. But Congress stole all that money, and all those bonds are just IOUs that will have to be paid out of current-year tax receipts.

Social Security is absolutely broke; those "bonds" are pure fiction.
posted by Malor at 1:33 AM on July 3, 2009


Social Security has a bunch of IOUs from the government that they can't trade to anyone else. Calling them 'bonds' is stupid

That's as good as money, sir. Those are IOUs.
posted by FuManchu at 1:38 AM on July 3, 2009


This isn't your perennial gov't monetary policy thread, Malor. Please don't derail.
posted by ryanrs at 1:42 AM on July 3, 2009


I know at the Tenants Union we generally tell people that when their building is sold or foreclosed on that "within a reasonable amount of time" the landlord must either return the balance of your security deposit to you along with an itemized list of any deductions made (and you would then pay a new deposit to the new landlord/bank) OR transfer the balance to the new landlord/bank and notify you in person or by mail the name, address and telephone number of the new landlord.

There's a difference between foreclosure and bankruptcy. Ideally, a bankrupt lessor has kept security deposits in escrow accounts such that the deposits aren't comingled with other funds. In that case, security deposits are beyond the reach of the bankruptcy trustee. Honestly, that almost never happens with shady landlords unless there's a law requiring it and even then, plenty don't. If a landlord is using people's security deposits as operating capital, tenants are SOL when bankruptcy is declared. The lessees will become general unsecured creditors who lack a priority claim over secured creditors, which are likely to wipe them out. Based on what I read here, it sounds like CitiApartments is doing exactly what they shouldn't be doing (otherwise they'd just be able to cash out the deposits when asked).
posted by allen.spaulding at 4:02 AM on July 3, 2009


Why are people arguing about social security in here? Your axes are not sharp enough yet?
posted by absalom at 6:15 AM on July 3, 2009


Some landlords try to do the right thing. My wife and I own a 4-unit building in Md., just outside D.C. We bought it in the mid 1980's (remember the Get Rich Through Real Estate craze?) I worked two jobs for 5 years to save for the down payment. In the early 1990's rent "stabilization" was voted-in in this city, and we're definitely getting less rent than the next town over (unincorporated Montgomery County). My family and I live in one of the units now, as we're trying to pay kids college bills. We have great relations with the tenants; we scrupulously follow all of the many laws foisted on landlords by the city.
posted by JimDe at 6:26 AM on July 3, 2009


According to Paul Krugman, who's against rent control, '[i]n 1992 a poll of the American Economic Association found 93 percent of its members agreeing that ''a ceiling on rents reduces the quality and quantity of housing.'''
posted by shivohum at 6:33 AM on July 3, 2009


"I'm sorry, I fail to understand your comment. If you are providing some long-term service like rentals, and you are legally prohibited from raising your fees to the point where you lose money providing that service, what exactly does this have to do with speculation?"

The ability to rent is not a guarantee of profit. Nobody owes you a living.
posted by krinklyfig at 8:09 AM on July 3, 2009


In addition, there are numerous (albeit complex and time consuming) ways a tenant can be evicted through no fault of their own (not paying rent on time, etc).
Not paying the rent on time isn't the fault of the renter?
posted by kmz at 8:45 AM on July 3, 2009 [1 favorite]


This is a situation where violence is called for. Let's see how many landlords try this shit after a couple of them have received curb jobs. It's time to shift the balance of power to the people, and it isn't going to happen in small claims court, kiddies.
posted by 2sheets at 8:58 AM on July 3, 2009


This man does not represent us.
posted by box at 9:24 AM on July 3, 2009


The lessees will become general unsecured creditors who lack a priority claim over secured creditors, which are likely to wipe them out.

But, if I understand it right, wouldn't the tenants/lessees have claim with the new owner? If a tenant has the right to stay in the apartment during bankruptcy or foreclosure under the terms of their lease with the original owner (which they are, at least in SF - meaning new landlords/owners step into the shoes/obligations of old landlords) then why wouldn't a security deposit, which is also stipulated under the same lease that allows possession, not be included that? I haven't dealt with getting back deposits after bankruptcy yet, so its an honest question. It didn't seem like the director of the Tenants Union (who would most likely know) said anything to that effect in the articles, but it seemed he was mainly talking about how to get back security deposits from people who have ALREADY left their Citi units, not those who are living in their units during/after bankruptcy.

In addition, there are numerous (albeit complex and time consuming) ways a tenant can be evicted through no fault of their own (not paying rent on time, etc).
Not paying the rent on time isn't the fault of the renter?


I'm sorry, I didn't mean that! Failure to pay rent on time is most definitely one of the 14 just causes for eviction in San Francisco and is the fastest way to find yourself on the streets. Never ever ever withhold rent from your landlord - even in San Francisco.
posted by flamk at 9:50 AM on July 3, 2009


Stephen Elliott: In theory, it shouldn't matter if they go bankrupt, because they were supposed to keep the deposit money separate. If they've mixed the deposit money in with the operating money that is really bad.

SeizeTheDay: You mean like Social Security? Or most pension plans?

No, nothing like that, since it is illegal in almost every state for a landlord to mix security deposits with the operating money. They are legally required to deposit the money in an account and leave it. Some states even have stipulations as to the interest, but this law is in place precisely to prevent this sort of thing.

As far as I know, there's no such law about Social Security or pension plans, but you may correct me if you're wrong. The point is that deposits are specifically and purposefully differentiated by law from profits and operating capital.

For the specifics in the state of California, you may see see subsections (d) and (e) in Section 1950.5 of the California Civil Code, which concerns security deposits (emphasis mine):

(d) Any security shall be held by the landlord for the tenant who is party to the lease or agreement. The claim of a tenant to the security shall be prior to the claim of any creditor of the landlord.
(e) The landlord may claim of the security only those amounts as are reasonably necessary for the purposes specified in subdivision (b)…


The law is pretty clear on this: security deposits are not allowed to be absorbed into operating expenses, but must be kept separate. If they're not, the landlord is in violation of the law.

There is absolutely no similarity between security deposits and Social Security or pension plans on this point, so the comparison makes little sense.
posted by koeselitz at 10:07 AM on July 3, 2009 [2 favorites]


allen.spaulding: This bears repeating. If they do declare bankruptcy, their secured creditors will certainly get all of the deposits, leaving the renters with nothing. The only hope for those who've put down security deposits is for the company to avoid bankruptcy (and if they continue to refuse to pay out, then you take them to small claims court). If you're currently owed a deposit because your lease is up, then you can sue now, but otherwise it doesn't look good.

By the way, what I've quoted above shows that this is not true. Specifically, subsection (d) states that “The claim of a tenant to the security shall be prior to the claim of any creditor of the landlord.” If the landlord declares bankruptcy, then by law the tenants get their security deposits first and only then may creditors collect.
posted by koeselitz at 10:12 AM on July 3, 2009 [1 favorite]


So, if I were a tenant, I would hope that CitiEntrapments did go bankrupt, since then they would have no choice but to pay back the deposits.
posted by koeselitz at 10:14 AM on July 3, 2009


If a tenant has the right to stay in the apartment during bankruptcy or foreclosure under the terms of their lease with the original owner (which they are, at least in SF - meaning new landlords/owners step into the shoes/obligations of old landlords) then why wouldn't a security deposit, which is also stipulated under the same lease that allows possession, not be included that?

This can be really complicated. If a bankrupt lessor has comingled deposits in violation of the law (which is what we're likely looking at here), then I don't think they're recoverable from the estate. In a liquidation, the trustee will sell the buildings to a purchaser who assumes the pre-existing leases. If there's any equity in the building (they may be underwater) the money goes into the bankruptcy estate, with the secured creditors getting first bite, then priority unsecured, etc.

If tenants wants to argue that the deposits ought to transfer over to the new owner, who must assume them too, the secured creditors will complain. It seems like this is merely a way for unsecured creditors to advance their way up the queue, which violates absolute priority. There are many assets which are sold in bankruptcy and there are plenty of creditors who would love it if some of the new purchasers would take their pre-existing debts with them, and out of the bankruptcy estate. While there are strong public policy arguments for security deposits to be included with the sale, I'm not sure it'll happen. Even if there are state laws, or this has been written into the lease agreements, it might not change the bottom line.
posted by allen.spaulding at 10:22 AM on July 3, 2009


koeselitz - Sure, that's state law, but if CitiApartments is in violation and declares Chapter 7, it might not matter much. Bankruptcy is federal.
posted by allen.spaulding at 10:24 AM on July 3, 2009


Nelson: Whether you agree that spamming Craigslist with inappropriate flags is OK or not, you can probably agree that this backhanded crap is pretty craven.

foxy_hedgehog: Yeah. Actually, I think the spamming's pretty un-OK, too.

Actually, the Craigslist Terms Of Use are pretty clear on this point:

7. CONDUCT. You agree not to post, email, or otherwise make available Content: …i) that is false, deceptive, misleading, deceitful, misinformative, or
constitutes "bait and switch"…


If any CitiApartments advertisement even mentions a security deposit (which, by California law, must be refundable) without the intention of actually refunding that deposit in the proper circumstances, that advertisement is in violation of Craigslist's Terms Of Use, and should be flagged. It's not spamming to flag things appropriately.
posted by koeselitz at 10:25 AM on July 3, 2009


allen.spaulding: koeselitz - Sure, that's state law, but if CitiApartments is in violation and declares Chapter 7, it might not matter much. Bankruptcy is federal.

Hmm. That would be an interesting question, if it came to that.
posted by koeselitz at 10:26 AM on July 3, 2009


koeselitz - It's pretty clear that Bankruptcy preempts state law.
posted by allen.spaulding at 10:28 AM on July 3, 2009


allen.spaulding: I've been thinking about this. If a bankruptcy claim went to federal court, wouldn't the tenants be treated as creditors? I don't have enough knowledge to know whether a federal judge in CA would want to violate the state statute, even if he had jurisdiction to do so.

I have a feeling I know what would happen if it ended up in the 9th circuit, though. Heh.
posted by koeselitz at 10:32 AM on July 3, 2009


Yes, this is what I've been trying to sketch out in my posts above. I'm not sure if this has been litigated before, but I suspect it would go down as I explained. Absent escrow accounts or something resembling a spendthrift trust (i.e. extensive comingling), then the tenants become unsecured creditors and don't get much if anything. The secured creditors (likely banks which own the mortgages on the buildings in question) will argue that CA law is pre-empted in bankruptcy, which it clearly is. Like it or not, CA9 will not uphold the law. The costs of litigating this one out for the tenants would like exceed their deposits, so even if the Tenant's Union took it up and won, I doubt that there'd be much left over at the end.

So like I said from the start, if CitiApartments is indeed comingling accounts (which is why they won't give back deposits that are currently being sought) then tenants really, really do not want them going into bankruptcy.
posted by allen.spaulding at 10:39 AM on July 3, 2009 [1 favorite]


The problem is that San Francisco is not Fresno (in many many ways). The demand for living in San Francisco is global and seemingly insatiable (or so goes the argument) and the amount of developable land is pretty much ZERO. Of course, increased densities and heights, at a certain point, would offset demand eventually, but at what cost?

With the cost of density comes tax revenue and economic activity.

Under a Georgist tax regime, ground rents largely go to the city, not the landowner. This means upzoning density would bring in increased amounts of tax revenue into the city to spend on Muni, BART, schools, parks, highways, parking, etc while also encouraging the modernization of the city's housing stock (property taxes would be proportional to the zoning of the land, so underbuilt areas would be expensive to hold underdeveloped).

Now, the city doesn't need 100 more 1 Rincon Hills necessarily, but I wouldn't mind seeing more infill developments of 9 story condo blocks that you can find in Tokyo. Richmond, Outer Sunset, and of course the old industrial areas could benefit from this redevelopment. If I were king much of the city would retain its present density, but the resulting $1M ~ $2M land values would eventually convert into taxable base with the city receiving maybe $5000/mo per month. This would knock purchase values down to the cost of the structure (but such a change would require 20-30 years transition, of course).

It's sad to me that SF was where Henry George he first laid out and developed his ideas among the liberal intelligentsia of the day yet so few there understand let alone fight for his ideas.
posted by @troy at 10:47 AM on July 3, 2009 [1 favorite]


I'm surprised they haven't been sued by CitiBank for copyright infringement. I mean I assumed they were associated with the bank when I first heard the name. Talk about trademark dilution.
posted by delmoi at 12:48 PM on July 3, 2009


I've never really understood laws surrounding this sort of thing.

If I'm renting out some rooms or an apartment and I have a one year lease with a tenant, why would I have to intimidate them to move out? Am I legally obligated to offer them another one year lease after? I can't just say, "Well, your lease is up at the end of the month, so..."
posted by ODiV at 1:50 PM on July 3, 2009


This is a situation where violence is called for. Let's see how many landlords try this shit after a couple of them have received curb jobs. It's time to shift the balance of power to the people, and it isn't going to happen in small claims court, kiddies.

Or, it's time for some good old fashioned gasoline fueled South Bronx style urban renewal. Burn 'em out and build new non rent controlled units. That being said...if you get into the landlord business in a regulatory nightmare environment like SF without doing your homework you deserve what you get. Buy some rental units in Fresno instead.
posted by MikeMc at 2:37 PM on July 3, 2009


This is a situation where violence is called for.

Time to put the "angry mob" back in "flashmob"? On second thought, passive-aggressively flagging ads in Craigslist doesn't sound so bad. Out of the houses and into the Internet! Out of the houses and into the Internet!
posted by Nelson at 3:09 PM on July 3, 2009


2sheets: This is a situation where violence is called for. Let's see how many landlords try this shit after a couple of them have received curb jobs. It's time to shift the balance of power to the people, and it isn't going to happen in small claims court, kiddies.

When the Corcyraeans realized that the Athenian fleet [their allies] was approaching and that their enemies had gone, the brought the Messenians, [their enemies] who had previously been outside the walls, into the city and ordered the fleet which they had manned to sail round into the Hyllaic harbour. While it was doing so, they seized upon all their enemies whom they could find and put them to death. They then dealt with those whom they had persuaded to go on board the ships, killing them as they landed. Next they went to the temple of Hera and persuaded about fifty of the suppliants [refugees] there to submit to a ‘trial.’ They then condemned every single one of them to death. Seeing what was happening, most of the other suppliants, who had refused to be ‘tried,’ killed each other there in the temple; some hanged themselves on the trees, and others found various means of committing suicide. During the seven days that Eurymedon stayed there with his sixty ships, the Corcyraeans continued to massacre those of their own citizens whom they considered to be their enemies. Their victims were accused of conspiring to overthrow the democracy, but in fact men were often killed on the grounds of personal hatred or else by their debtors because of the money that they owed. There was death in every shape and form. And, as usually happens in such situations, people went to every extreme and beyond it. There were fathers who killed their sons; men were dragged from the temples or butchered on the very altars; some were actually walled up in the temple of Dionysius and died there…

So revolutions broke out in city after city, and in places where the revolutions occurred late the knowledge of what had happened previously in other places caused still new extravagances of revolutionary zeal, expressed by an elaboration in the methods of seizing power and by unheard-of atrocities in revenge. To fit in with the change of events, words, too, had to change their usual meanings. What used to be described as a thoughtless act of aggression was now regarded as the courage one would expect to find in a party member; to think of the future and wait was merely another way of saying one was a coward; any idea of moderation was just an attempt to disguise one's unmanly character; ability to understand a question from all sides meant that one was totally unfitted for action. Fanatical enthusiasm was the mark of a real man, and to plot against an enemy behind his back was perfectly legitimate self-defence. Anyone who held violent opinions could always be trusted, and anyone who objected to them became a suspect…

Revenge was more important than self-preservation. And if pacts of mutual security were made, they were entered into by the two parties only in order to meet some temporary difficulty, and remained in force only so long as there was no other weapon available. When the chance came, the one who first seized it boldly, catching his enemy off his guard, enjoyed a revenge that was all the sweeter from having been taken, not openly, but because of a breach of faith. It was safer that way, it was considered, and at the same time a victory won by treachery gave one a title for superior intelligence. And indeed most people are more ready to call villainy cleverness than simple-mindedness honesty. They are proud of the first quality and ashamed of the second…

In their struggles for ascendancy nothing was barred; terrible indeed were the actions to which they committed themselves, and in taking revenge they went farther still. Here they were deterred neither by the claims of justice nor by the interests of the state; their one standard was the pleasure of their own party at that particular moment, and so, either by means of condemning their enemies on an illegal vote or by violently usurping power over them, they were always ready to satisfy the hatreds of the hour…

Certainly it was in Corcyra that there occurred the first examples of the breakdown of law and order. There was the revenge taken in their hour of triumph by those who had in the past been arrogantly oppressed instead of wisely governed; there were the wicked resolutions taken by those who, particularly under the pressure of misfortune, wished to escape from their usual poverty and coveted the property of their neighbors; there were the savage and pitiless actions into which men were carried not so much for the sake of gain as because they were swept away into an internecine struggle by their own ungovernable passions…

Indeed, it is true that in these acts of revenge on others men take it upon themselves to begin the process of repealing those general laws of humanity which are there to give a hope of salvation to all who are in distress, instead of leaving those laws in existence, remembering that there may come a time when they, too, will be in danger and will need their protection.

—Thucydides, Account of the Peloponnesian War, III.81-84; translated by Rex Warner

posted by koeselitz at 5:55 PM on July 3, 2009 [2 favorites]


ODiV, apparently SF has special laws about that— from this law firm's FAQ:
Q : Does the landlord need a reason to terminate the lease at its expiration?

A : It depends on the location of the property. [....] In San Francisco, a landlord generally needs a valid reason to terminate the lease. The [S.F. Rent Ordinance] dictates the reasons that a landlord can terminate the lease [...]
and the listed reasons are restrictive enough that it does make sense that a landlord might try dirty tricks to turn their tenants over more frequently.

This works until the Scooby Gang shows up, accidentally finds the hidden passage, and then rips the mask off the Ghost of Emperor Norton. Zounds! It was Old Man Citi all along! seriously, it's kind of weird just how many Scooby Doo episodes I remember from my youth were about real estate. The others were mostly about mining/mineral rights…
posted by hattifattener at 8:37 PM on July 3, 2009


Sidetracking a little bit - The "harassing and intimidating tenants" part. I believe they're talking about rent-controlled units? In that case I gotta point out I have very little sympathy for rent-controlled tenants and I love it when landlords make their lives harder. Privileged fucks.

That being said, not giving people their deposits back is stealing. Period.
posted by falameufilho at 8:38 PM on July 3, 2009


That's interesting, hattifattener.

Seems weird you'd need to have to terminate a lease "at its expiration". It's expired! Why would I need to terminate it?

I guess this sort of thing kind of prevents you from getting kicked out of your apartment every single year, which can't be comfortable. On the other hand, it's not like tenants need a valid reason to terminate a lease at its expiration, right? If rent is cheaper somewhere else or you've found another place you like better, you can just pack up when your year is up and move.

History probably shows a bunch of landlords colluding or taking advantage of being able to displace tenants whenever they felt like it, though, so I'm not incredibly surprised at the way the law is set out. Just seems a little strange the tenant can choose to not continue the arrangement for no reason or any reason, up to and including racism, but it doesn't work that way for the owner.
posted by ODiV at 9:58 PM on July 3, 2009


falameufilho: the non-rent controlled buildings in my downtown san francisco neighborhood have a tendency of raising rent 50% or more after the first year, basically forcing the tenants to move. because they can, and that's what nearly any landlord would do if market rents had gone up at all during the last year. also, fuck you.

ODiv: the lease is just as much about protecting the landlord as it is the tenant. if you move out before you've completed the entire year, you're typically liable for the rest of the year's rent. this protects the landlord from the expense of having to re-rent the apartment.

Regarding the security deposits, landlords aren't supposed to comingle them with other funds, and I don't have sources for this, but I've heard that security deposits get paid out before other creditors in the event of a bankruptcy.
posted by cactus at 11:47 PM on July 3, 2009


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