The City of West Hollywood is preparing to give up a lengthy and expensive fight over the use of apartments at 8500 Sunset Blvd. as short-term rental units.
The city’s Planning Commission on Thursday will consider granting the owner of the AKA buildings at 8500 Sunset permission to rent out up to 30 of the apartments in its 110-unit West Tower for as few as five days. The rest of the units can be rented out for stays of at least 31 days. Rates for a one-bedroom unit in the West Tower range from $295 to $375 a day, or $9,145 to $11,625 a month.
A memo to the Planning Commission from the city’s Planning and Development Services Department notes that the city on March 20 reached a tentative agreement with BPREP 8500 Sunset LLC to settle the lawsuit it filed against the city on Sept. 26, 2018, over West Hollywood’s requirement that all apartments in the building be rented for an initial term of 361 days (one year). BPREP 8500 is a company controlled by Korman Communities, which operates the AKA short-term corporate rental business, and the Brookfield Property Group. BPREP 8500 said it would suffer $40 million in damages if it was unable to move forward with its plans for short-term rentals .
The lawsuit filed by BPREP 8500 has been expensive for the city, which has filed a counter suit. Last summer the City Council voted to allocate over $650,000 to cover its legal costs. Baker & Hostetler is the law firm representing the city in the lawsuit.
The proposed permit for AKA Communities will be considered by the Planning Commission along with a zone text amendment that clarifies that rental apartments, accessory dwelling units (aka “granny flats”), and duplexes must have initial leases of one year or more. It would allow owners already renting out units for only 30 days or more in commercial districts to continue to do so if they apply for a permit from the city by July 31. Those buildings on the section of Sunset Boulevard running from Doheny on the west to just past Harper Avenue and Roxbury Road on the east, an area whose zoning is covered by the Sunset Specific Plan, could rent out up to 30% of their units for as few as five days.
The initial lawsuit was filed after Planning & Development Services Director John Keho issued a ruling in 2018 that BPREP 8500 LLC was violating city law by offering what it described as “luxury serviced residences” for periods as short as 31 days. In effect, Keho had ruled, BPREP was operating a hotel.
In its memo to the Planning Commission, the Planning & Development Services Department said the short-term rental units “will help fulfil the need for 31-day rentals for medical tourism and entertainment needs that have been expressed via community input during this interpretation and ZTA (zone text amendment) process.”
It noted that in 2018 there were 25,833 dwelling units in West Hollywood, with 66% (17,083 units) of those rental units such as apartments, accessory dwelling units and duplexes. The other 34% of housing units included 1,104 single-family residences and 7,646 condominiums.
According to the memo, “there are approximately six buildings with known 30+ day rentals in commercial districts. There were several apartment buildings in residential districts that have been renting units for 30 days or more, but this proposed regulation would not allow those units to be legally nonconforming.”
The buildings owned by BPREP 8500 were initially intended to house apartments. In 1999, a developer operating as Sunset Millennium Associates had acquired three parcels of land on either side of the intersection of Sunset and La Cienega boulevards and got the city’s permission to develop a 371-room hotel and 208,000 square feet of office space on the property. In 2005, the city agreed to amend its agreement with SMA to permit two hotels with 811 parking spaces and two condominium buildings with 268 parking spaces. In 2011, the city agreed to cut the parking requirement by 385 spaces and eliminate a proposed tunnel under La Cienega Boulevard that would connect two of the parcels. In 2017, the CIM Group bought the property and requested minor changes, including permission from the city to use the condominium units as residential apartments. Then later that year, CIM Group sold the two residential towers on the southwest corner of Sunset and La Cienega to BPREP. BPREP bought the buildings for a reported $250 million, claiming that it didn’t know that existing West Hollywood law would bar it from renting out on a short-term basis.
A decision by the Planning Commission to formalize the requirement than an initial residential lease must be for a term of at least one year may have an impact on the Kalt Group, which has entered into a long-term lease with a company called StayTony that offers several of the apartments in the Kalt Group’s building at 8917 Cynthia St. for rent for $5,950 for one month.
By assigning management of those apartments to a company that uses them only for short-term corporate rentals, Kalt Group appears to be finding a way to maneuver around the Ellis Act, a controversial law passed by the state legislature in 1985, that says the owner of a rent-stabilized building can take it and all of its apartments off the rental market (and evict the tenants) if he no longer intends to use it as rental housing. Otherwise, the owner must abide by a city’s rent stabilization laws.
The City of West Hollywood in 2015 banned corporate rentals, which then were defined as a company’s long-term lease of an apartment where its employees could stay for short work visits. Allegations have been made that such rentals had been taking place at the Huxley and Dylan apartment buildings on La Brea Avenue.
But corporate housing traditionally is defined as a company entering into a long-term lease for a residential property and then letting its employees or clients use that property for short term stays for work.
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