Skyline Realty and CitiApartments' legal woes continued last week after San Francisco City Attorney Dennis Herrera filed a lawsuit alleging a pattern of unlawful and unfair business practices including multiple violations of state and local laws, one of which involves misuse of the city housing code.

The suit, filed Wednesday, August 16, in San Francisco Superior Court, alleges a "pattern ... whereby rental units were illegally recovered from tenants; renovated in clear violation of building and safety codes; and then unlawfully relet at dramatically increased rental rates – occasionally as short-term corporate housing" in violation of the San Francisco housing and administrative code.

The litigation against Castro-based Skyline Realty Inc., CitiApartments Inc., and nine named subsidiary limited liability companies follows a months-long investigation by the city attorney's office.

A news release from Herrera's office announcing the litigation said the suit "details a shocking panoply of corporate lawlessness, intimidation tactics, and retaliation against residents."

Skyline and CitiApartments, generally known as one of the largest residential landlords and property managers in San Francisco, was hit by a similar lawsuit in May. In that litigation, 23 tenants sued, alleging a pattern of harassment and intimidation designed to drive people out of rent-controlled apartments in order to get higher rent on the units.

Attorneys representing the tenants claimed CitiApartments has a pattern of purchasing buildings and then trying to force out "vulnerable" tenants who are paying rent below market rate.

CitiApartments manager David Raynal refuted those allegations in a June interview with the Bay Area Reporter . In that interview, Raynal charged lawyers filing the suit with using "innuendo, distortions, illogic, and flawed arguments based on faulty information to advance their stale agenda against improved housing."

"CitiApartments does not practice or tolerate harassment of residents," Raynal said at the time. "We maintain the buildings we own, repair the buildings we purchase, restore units to make more housing available throughout San Francisco, and provide security services to keep our residents safe."

In announcing the lawsuit, Herrera said, "The facts revealed by my office's investigation demonstrate very clearly that the owners of Skyline Realty and CitiApartments made a calculated business decision to operate in violation of the law – and to do so consistently."

"Given its dominant market position and web of subsidiaries, Skyline's illicit business practices do not merely victimize tenants, they cheat the vast majority of law-abiding landlords with whom they compete unfairly. Their business conduct is egregious, it is pervasive, it is illegal, and it will not be countenanced in San Francisco's rental marketplace," Herrera said.

According to the complaint, Skyline and CitiApartments employed "frequently harrowing" tactics to intimidate tenants into surrendering their rent controlled tenancies, including "unannounced visits by armed paramilitary-like agents; unauthorized entry into rental units; shutting off utilities without notice and for extended periods; changing locks and depriving tenants of keys; and retaliating against tenants who refused to accept offered buy-outs."

Herrera's lawsuit alleges that once in control of vacated units, Skyline occasionally undertook extensive construction and remodeling work without bothering to obtain requisite permits. The company also skirted inspections necessary to assure compliance with state and local safety and building codes, according to the lawsuit.

A statement from CitiApartments and Skyline Realty spokesman Sam Singer, released Tuesday, August 22, calls the lawsuit by the city attorney "regrettable" and "without merit."

"CitiApartments has been locally owned and managed by three generations of San Franciscans and enjoys an outstanding reputation," Signer stated.

"The charges against the company are without merit," Singer added. "A number of 22 individuals who have filed lawsuits against the company did so in retaliation after action had been taken against them for failure to pay rent or because they created a nuisance for their neighbors and were asked or forced to vacate their units."

Singer went on to state, "The company believes the plaintiffs have misled the city into believing false claims they have made against CitiApartments. CitiApartments takes great pride in its operations, its employees, and its tenants and has never engaged in any of the allegations that are alleged."

In one of several violations detailed in the city attorney's lawsuit, Skyline went around the city's hotel conversion ordinance by illegally offering residential units in a single room occupancy hotel for rent for non-residential or tourist use – including as extremely lucrative "corporate suites." The city attorney's office said that city law permits such conversions, but requires a mitigation fee to offset the loss of residential housing stock.

According to information on just one scenario provided by the city attorney's office the practice allegedly paid off big for Skyline Realty and CitiApartments.

"When the defendants purchased the Gaylord Hotel at 620 Jones Street in August 2005, the building's certificate of occupancy confirmed it to be a 171-room residential hotel, with all of its rooms designated as residential, and none allowed for tourist use," according to information provided by the city attorney's office.

Herrera charges that despite its current legal status as a solely residential hotel, CitiApartments and Skyline Realty within one year began marketing rooms for rent to tourists in violation of city housing codes.

"According to the annual unit usage report filed with the city's Department of Building Inspection by the Gaylord Hotel's previous owners in October 2004, average monthly rent for a residential room was $990. A year later – following the defendant's purchase of the building and re-incorporation as Gaylord Hotel LLC – the average monthly room rental had skyrocketed more than four-fold, to $3,972," according to information provided by Herrera.

Herrera's litigation against Skyline Realty, CitiApartments, and related defendants alleges multiple violations of state and local laws, including the San Francisco housing and administrative codes; California health and safety and civil codes; and the state business and professions code's unfair competition law.

The civil action seeks "disgorgement" of profits and restitution, as well as recovery of civil penalties for past conduct that could include $1,000 per day for each housing code violation; $2,500 for each unlawful business act; and an additional $2,500 for each unfair and unlawful business act perpetrated against a senior citizen or disabled person. Attorneys' fees and costs are also sought under Herrera's action.

The City Attorney's office maintains a code enforcement hotline for callers speaking English, Spanish, or Cantonese at (415) 554-3977. Callers may use the hotline to report suspected illegal conduct by Skyline Realty, CitiApartments, or its subsidiaries. A general TTY number for the office is available for hearing-impaired callers at (415) 554-6770.

The case is City and County of San Francisco and People of the State of California v. Skyline Realty Inc., CitiApartments, Inc., et al .