More than 20 people still on the streets months after city calls building “uninhabitable” — and landlord fights relocation fees
By Alexis Terrazas and Tim Redmond
JULY 29, 2015 — Adan Lobo, a native of Honduras, was living in a small, run-down place on Hampshire Street, sharing a room with and showering under a tarp to keep the dirty water leaking from the ceiling above from dripping on his head.
It was, he says, “kind of nasty.”
And now he misses the place – because he’s been forced into crummy residential hotels that he says are infested with fleas and bedbugs, and now he’s living in a van. Some of his former housemates are sleeping in their cars, or on the street.
Eviction stories like this are increasingly common in San Francisco – but this one has a stunning twist. It’s as bad as we’ve ever seen: The residents of 938-940 Hampshire were forced out when the landlord allowed it to decay so badly – including a ceiling collapse – that the Department of Building Inspection ruled that it was uninhabitable.
That triggered a state law mandating that the owner give the tenants relocation money – but according to court filings, Working Dirt LLC, which bought the place in January, stopped payment on the checks.
According to public testimony before the Building Inspection Commission, some had already cashed the checks at a check-cashing place and spent the money on hotel rooms, and the check cashers were calling and demanding the money back.
The tenants had been forced to leave with little notice and left most of their possessions behind. Then the landlord locked the building with a chain, and it’s been hard for them to get back in to get clothing, cooking utensils, and other things that are still in the building.
And now, months later, the building repairs still aren’t completed – in fact, the landlord has removed kitchen and bathroom fixtures and torn down the front stairs, making it impossible for anyone to get in, even to reclaim his or her possessions.
“Since the building was vacated, a contractor removed the front stairs with no permit,” Chief Housing Inspector Rosemary Bosque said at a recent commission hearing.
The hearing was called because the landlord wanted to deny responsibility for relocation fees for the tenants and wanted to claim that the abatement orders were improper.
The property at 938-940 Hampshire, which is technically a two-unit building, has been used as a boarding house for at least 20 years. It was owned much of that time by Medardo Avina, who lived in the place, chose all the tenants, and collected rent individually from all of them.
There were as many as 24 people living in the two units, often two or three to a room.
“The Hampshire property has been used as a boarding house for decades,” a filing by the tenants submitted to the Building Inspection Commission states. “There are tenants who have lived there for 20 years. Many of them have been there for over a decade. Each occupied room has been rented out as an individual unit for which rent has been paid directly to the landlord. No tenant had a say in who occupied the other rooms. New tenants were permitted at the sole discretion of the landlord.”
Avida didn’t put a lot of effort into maintaining the place, the records show. The Department of Building Inspection has abatement orders demanding upgrades on the place dating back to 1995.
But the tenants, mostly monolingual immigrants, didn’t get their complaints resolved, and learned to live with the situation. “They had to use an umbrella to keep the dirty water from the ceiling out of the shower,” Diana Martinez, who works with the Mission SRO Collaborative, testified at the commission.
When Avida died, his daughter, America, inherited the property, records show. She sold it in early 2015 to Working Dirt2 LLC for $670,000.
Working Dirt2 is part of a web of companies connected to or controlled by Abraham Farag. He is also a part of Working Dirt LLC and Working Dirt Management Inc.
Property records show that companies connected to Farag have bought and sold dozens of buildings in the past few years, mostly in Palo Alto, East Palo Alto, and other Peninsula cities.
He is, according to a lawsuit filed by the tenants, part of “related real-estate speculative companies [that] have extensive experience purchasing distressed properties, clearing the properties of rent-controlled tenants, and then remodeling to rent out to new market-rate tenants of to sell for profit.”
He has recently begun buying property in San Francisco, and has filed at least two eviction cases against tenants, court records show.
In 2014, he was indicted on federal charges of bid-rigging:
The indictment, filed today in U.S. District Court for the Northern District of California in San Francisco, California, charges Northern California real estate investors Joseph Giraudo, Raymond Grinsell, Kevin Cullinane, James Appenrodt and Abraham Farag with participating in conspiracies to rig bids and schemes to defraud mortgage holders and others. The indictment alleges that the defendants agreed to stop bidding or to refrain from bidding for properties at public foreclosure auctions in San Mateo County, California, in return for payoffs and concealing the fact that monies were diverted from mortgage holders, homeowners and others to co-schemers.
So Farag and his partners bought this piece of San Francisco real estate – and while we don’t know what they intended to do with it, we do know that they were well aware of the conditions in the building, including the fact that it was occupied by a larger number of tenants.
The LLC “purchased the premises as-is with the knowledge that it was tenant occupied,” a brief filed by the tenants’ lawyers states. “New owners of rental property are required to address outstanding code violations even if they were caused by the previous owners of the property.”
Again: Farag is no novice here. He’s been in this line of work for quite a while. It’s inconceivable that he bought the building without inspecting it, knowing that there were pending abatement issues, and that a whole lot of work needed to be done to bring it up to habitable standards.
According to Department of Building Inspection records, “The property has severe habitability conditions deemed unsafe to the occupants due to structural instability and leaking sewage.”
A January 16, 2015 inspection revealed “Housing Code violations including the following items in disrepair: water heaters, windows, locks, showers, ceilings, doors, stove, sink, cabinets, floors, siding, electrical switches and receptacles, as well as mold, infestation, and accumulation of debris.”
A letter citing the violations was sent to Farang’s LLC. On January 21, a Notice of Violation was posted on the building. Almost a month later, on February 17, the place was re-inspected – and “no violations were corrected.”
On March 19, the landlord applied for a building permit that “does not include plans … DBI staff seeks to meet with contractor to discuss scope, lack of plans, and $47,500 valuation.”
That’s right – Farag’s group filed papers saying that all of the problems, including a set of back stairs that were unsafe – could be fixed for less than $50,000. DBI officials testified that the estimates were way too low.
On April 2, the ceiling in the upstairs unit collapsed. DBI ordered the tenants to leave for their own safety.
Here’s what happened next, according to DBI records:
April 9: Deputy director and DBI staff meet with contractor. Inspection is scheduled for Monday, April 13, to review valuation and scope.
April 13: Inspection cancelled by contractor. BID staff offers to try again the next day.
April 14: BID staff calls contractor, who still cannot make it.
April 15: BID staff calls contractor, who still cannot make it. Inspection scheduled for April 16.
April 16: Contractor does not appear for scheduled inspection.
A month later, Working Dirt appealed the abatement decision saying that BDI had “abused its discretion” in ordering the repairs.
Meanwhile, the tenants were trying to figure out what to do.
Lobo, who works as a painter, was staying in residential hotels in the Mission, sharing rooms with two others. He’s been trying to find a more stable place, but “But we can’t find anything. Nothing is available.” So he sleeps in a work van.
Before he left his home, he said, he grabbed three shirts and three pairs of pants. He left his bed there, his TV, his dishes and pots – everything that he owned.
According to court declarations, on April 7, Working Dirt sent checks that averaged about $1,800 a tenant to Jason Wolford, who with Lisa Giampaoli, is representing the group. Wolford then wrote checks to the tenants.
But the next day, the bank informed Wolford that Working Dirt had stopped payment on the checks. So he had to stop payment, too, since there would be no money in his trust account to cover them.
Some tenants had already cashed the checks at a check-cashing place and spent the money on rent at a residential hotel.
The check-cashing outfit started calling those who were paid out about an hour later, demanding the money back.
Wolford told us that he managed to settle with the check-cashers, but that he was out “a significant amount of money” himself.
Working Dirt is represented by Scott Freedman, a partner in Zachs & Freedman, one of the most notorious landlord law firms in the city. We asked Freedman about the checks and he said that his client had stopped payment because there was a disagreement about the amount of the payment.
And in fact, after stopping payment, Farag sent replacement checks for about half the amount of the first payment.
In a declaration filed in court, Farag stated that he stopped payment on another $16,000 in relocation fees because the tenants “refused to accept” the money.
Wolford said that “is not factually accurate.”
“At this point,” Freedman testified, “we have paid more than $30,000 in relocation fees. In response to our offer, the tenants have demanded more than $100,000.”
That’s not a lot of money for more than 20 tenants who have to pay market rents in San Francisco today.
While the living conditions weren’t great at the Hampshire St. residence, the lives of the tenants have declined since they were forced out.
Lobo told us his truck was stolen in May. He lost his wallet and a pair of pants. Now he takes the bus to work.
The landlord hasn’t made it easy to get their stuff. According to court documents, when the renters arrived a few days after being forced out, there were security guards at the door who demanded identification – a problem for some of the former tenants.
In an interview in a parking lot outside a Mission SRO, Rosa Delio Carillas, who works as a cook and dishwasher at Papito restaurant, told us it was hard to get his own clothes.
“They’re afraid we’re going to steal our own things,” Lobo chimed in.
The majority of people in the Hampshire house were family—cousins and brothers. We asked where they were now, and Carillas responded—“They’re like doves. Who knows, we’re divided because there isn’t enough room for all us in one hotel.”
Many of the men were sending money back to Honduras to support their families. That’s become impossible: “For all of us, the money we earn from work, we spend on hotels,” Carillas said.
Juan Cardenas, another tenant from Honduras, says the residential hotel he’s stahing in is charging $327 a week for one room. The tenants say seven people share three rooms.
“And if we don’t find a place … we have to sleep in the street,” said Carillas.
Juan Alberto Cardenas (not related to Juan Cardenas) said he lives in a hotel room on Mission Street with two other people. He pays $410 a week. “Sometimes when we’re broke,” he said, “we have to endure hunger.”
All of the tenants we talked to work for people who know what they’re going through. But work is lean, so they can’t get many hours. They have to buy cheap food. And all of them say the hotel rooms they get are “disgusting” — and that the Hampshire house was cleaner, despite the problems. They just want to go home.
At the Building Inspection Commission hearing, Freedman said that his client had hired a new contractor and was working diligently to make the repairs. Given Working Dirt’s history of buying and flipping buildings, it’s not unreasonable for the tenants to believe they will eventually be forced out.
DBI staff and some commissioners were unsympathetic to the landlord. “They knew in February that there were problems,” Bosque said. “Clearly they didn’t want to put any money into it.”
Freedman said that his client may have had “misguided optimism” about the property and the cost of renovating it. But he also said, very clearly, that “many [of the tenants] may not allowed to go back.”
Commissioner Debra Walker was pretty blunt: “When you buy a piece of property, you guy all of the things attached,” including the tenants and the maintenance issues. If Farag didn’t want to deal with those problems, she said, he shouldn’t have bought the place.
And he bought it for $670,000 – a steal considering that a single unit in the two-unit building sells for more than that these days. If it’s vacant.
The Building Inspection Commission voted unanimously to reject the appeal of Farag and his LLC. That means he the tenants have the right to their relocation money and that the abatement orders are still in effect.
But the building isn’t repaired, the tenants are still on the streets – and it’s not clear that they will ever be able to move back in.