The City of West Hollywood’s efforts to stop the owner of a building at 8500 Sunset Blvd. from using it for extended-stay corporate apartments has experienced a major setback.
L.A. Superior Court Judge Monica Bachner has denied the city’s request for a preliminary injunction that would have stopped such rentals until the final resolution of a lawsuit that the city brought against the property owner, BPREP 8500 Sunset LLC, in December 2018. Bachner issued her decision on May 17.
The lawsuit stems from the City Council’s affirmation in September 2018 of Community Development Director John Keho’s ruling that BPREP 8500 LLC, the owner of the property, was violating city law by offering what it describes as “luxury serviced residences” for periods as short as 31 days. In effect, Keho had ruled, BPREP was operating a hotel. BPREP 8500 Sunset is a company controlled by Korman Communities, which operates the AKA short term corporate rental business, and the Brookfield Property Group. BPREP claimed that the city’s decision to stop the corporate rentals would cost it $40 million.
In his ruling, Keho added specific definitions to terms such as “long-term basis,” which is the description of the rental period for an apartment, saying that an initial lease had to be of one year or more.
The city’s lawsuit against BPREP 8500 LLC claims that despite the City Council’s affirmation of Keho’s decision, AKA has continued to rent suites in its 110-unit West Tower for minimum stays of only 31 days. AKA has agreed to rent the 80 units in its East Tower as conventional apartments (with eight of them set aside as affordable housing.) In addition to asking the judge to affirm its decision in the AKA matter, the city is asking that BPREP be ordered to reimburse it for the costs of the lawsuit, which include attorney’s fees and the cost of monitoring BPREP’s use of the apartments. If the city were to lose, it would reimburse BPREP for its legal costs.
In her decision to deny the preliminary injunction, Judge Bachner said the city was unable to demonstrate that BPREP 8500 had breached the terms of a development agreement that the city entered into in 2005 with Sunset Millennium Associates LLC, the then-owner of the property. That continuing agreement allowed the owner of the property to construct two buildings – the East and West Towers — with a total of 190 units that could be used as “residential condominiums” or “residential apartments.” The agreement also required that the owner of the property adhere to “current land use regulations.” At that time, the City of West Hollywood had not specifically defined the “long term basis” that the apartments had to be rented for. BPREP 8500 LLC bought the 8500 Sunset property in 2017.
Judge Bachner’s ruling is not a final decision on the validity of the City of West Hollywood’s argument that BPREP 8500 should be permanently blocked from renting units in its West Tower for periods of less than one year. The city has argued that BPREP, by allowing rentals of as few as 31 days in the West Tower, effectively is running a hotel without having gotten city permission to use the property in that way.
In her ruling on the preliminary injunction, Bachner said that she had had to decide whether there was a reasonable probability that the City of West Hollywood would prevail at the trial and that she had to balance the “irreparable harm” that BPREP claims it will suffer if it isn’t allowed to offer short-term rentals for now versus the harm the city claims it will suffer if BPREP 8500 Sunset is allowed to continue offering apartments for rent for a minimum of 31 days until a final decision is made at the trial.
In her ruling, Bachner supported BPREP 8500 Sunset’s argument that the City of West Hollywood was improperly requiring it to adhere to standards that were not in place in 2005 when it was granted permission to use the two buildings as rental property.
“Plaintiff has not sufficiently established that Defendant’s conduct constitutes a breach of the original agreement itself, only that Defendant has not complied with subsequent interpretations and changes to the agreement’s terms,” Bachner ruled.
In an email to WEHOville, Eric George of Browne, George, Ross LLP, the law firm representing BPREP 8500 Sunset, said “we trust the City Council will honor the court’s ruling, and end its litigation efforts against a productive citizen of the West Hollywood community. Doing otherwise will continue to cost the city additional hundreds of thousands of dollars that would be better spent on programs like those targeting drug addiction and chronic homelessness.”
City Attorney Mike Jenkins, responding to a question from WEHOville about the decision, said “… the ruling is not dispositive of the city’s case; we knew going in that preliminary injunctions are difficult to obtain absent irreparable harm. While the city hoped to obtain preliminary relief in order that the housing units in question in the litigation be made immediately available for their intended purpose – actual housing – and is disappointed by the ruling, we are confident in the case we will make at trial. The units were entitled and built to provide much needed permanent housing and instead have been converted to hotel use. That’s just not right.”