Landlord’s conditions tied to proposed $125,000 buyout spur lawsuit from tenants

For the better part of 40 years, the six-unit property at 24th Street and Hoffman was an enclave for artists and teachers. With rents kept below market, its previous owner, Imogene “Tex” Gieling, was able to house people she deemed essential to the city. She turned a condemned turn-of-the-century outpost into an artist commune.

Karen Lee found this site, affectionately called “The Compound” by its residents, to be the perfect place to help her budding gardening business grow.

“There was enough space here for me to bring tools, some plants, and flowers before beginning a new project,” said Lee, 50.

At Tuesday’s Board of Supervisors meeting, Lee was awarded a commendation by District 8 Supervisor Rafael Mandelman for fighting and organizing against Ellis Act evictions.

Her own Ellis Act eviction, in fact.

What began in 2018 as battle of self-preservation has grown into an organizational effort from all over the city to combat a man tenant activists label as a predatory landlord.

“It started off as a support group, but it turned into something else,” Lee said.

Calling themselves the “Adams Family,” half a dozen tenants from across the city have teamed up to counter the same property developer, Adam Phillips, who runs an LLC called 366 Developments. Philips and his company have purchased as many as 10 properties in the city in the past three years. He claims he’s only had to use the Ellis Act to evict tenants twice over 10 years. Tenants’ activists, however, claim Phillips has put out dozens of tenants, with many leaving prior to the formal filing of an eviction.

Lee is one of four remaining tenants at 4397 24th Street, a six-unit property where she has resided since 2010. Planning Department documents reveal that the property was purchased for $3.9 million in December 2017. By January 2018, Phillips began emailing tenants with buyout offers.

Emails obtained by Mission Local indicate that Phillips bought the property with the sole intention of flipping it after renovations. These emails highlight profit margins, prices per square foot, and rental buyout negotiations. A Jan. 9, 2018 email to tenants went as far as detailing how Phillips planned to nearly double his initial investment to $6 million.

In a January 9 email, developer Adam Phillips shares his plans for the properties at 24th and Hoffman known as “The Compound.” In the email he discusses plans on how he would increase his profits.

In a March 21, 2018 email, Phillips offered Lee and her flatmate Aya Osada a $125,000 buyout — with conditions. In order to pocket this money, Lee and Osada would have to give a declaration regarding another tenant, known only as “Janet,” whom Phillips suspected was not actually residing in her unit.

Lee tells Mission Local that she was unsure whether Janet lived in the unit or not — and was uncomfortable making a definitive statement in order to receive payment.  

In October 2018 Lee and Osada filed a complaint against Phillips, alleging unlawful business practices.

“Defendants conditioned payment of the buy-out funds on Plaintiffs providing testimony that met Defendants’ approval,” reads the suit.

In an email chain between Lee and Osada’s attorney Dave Crow, Adam Phillips agrees to buy-out Lee and Osada from their tenancy so long as they provide a statement on another tenant that is “acceptable to us.”

Phillips denied to Mission Local that he was the author of the e-mails regarding the buyout terms, claiming the details were being worked out by his attorney, Jonathan Seigel, and Dave Crow, Lee’s attorney at the time.

The e-mail, however, came from Phillips’ account. Asked again if he recalls the conversation, Phillips said he’d have to review his notes. Then he renewed the offer.

“I was okay with the economics of the deal. I’m still willing to pay that same amount,” Phillips said.

“Janet,” incidentally, has since moved out.

Karen Lee, left, with Aya Osada, right, and her African grey parrot Seven. Photo by Abraham Rodriguez.

Cynthia Fong, an organizer for the Housing Rights Committee, said Lee’s case is not unique. Fong claimed that Phillips and his company used the Ellis Act or the threat of it to displace as many as “30 to 50” tenants across the city.

In his emails to tenants on 24th Street, Phillips says he hopes to get everyone to agree to a buyout number so they can move on easily.

“But we have now owned the building for 3 months and have been going back and forth  on terms for a month and a half,” Phillips wrote on March 17, 2018.

Phillips writes in a March 21, 2018, email that some of the negotiation attempts for buyouts have been unacceptable and threatens an Ellis Act eviction unless they come to an agreement.

He later adds that if there isn’t consensus on a buyout he would be mailing Ellis Act paperwork by March 22, 2018. Phillips confirmed he did this, filing an Ellis Act on Lee and Osada — but reiterated that he would still offer them a buyout.

Phillips told Mission Local that he’s been developing properties in San Francisco for 10 years but claimed he sometimes doesn’t make much of a profit after investing several million dollars.

When it comes to The Compound, Phillips said things have not gone so well, and describes the situation with Lee and Osada as “acrimonious.”

“I understand what they’re trying to drum up, that landlords are assholes,” Phillips said. “I’m not a landlord who is an asshole who uses rough-and-tumble tactics to get people out.”

Lee hopes her lawsuit can help dissuade property speculators from targeting low-income or below-market properties. Incidentally, Lee also owns Bay Area property — but keeps it rented below market rate with tenants she meets through word-of-mouth recommendations.

Her next tenant might be herself. If her eviction goes through, she’ll have to leave the unit after March 28.

24th and Hoffman. Courtesy of Google.