The Rent Control Board will take up the issue of corporate tenants tonight, nearly a month after a newly remodeled rent control building on Tenth Street appeared on corporate housing websites. Chairperson Anastasia Foster and Commissioner Nicole Phillis placed the discussion item on tonight’s agenda regarding a “prohibition of rental of controlled units as corporate housing.”
At the moment, there is no regulation to prevent a company from becoming a tenant in a rent control building. Once a corporation is on the lease, they have the same protections as a person – including a cap on annual increases and protections from eviction. It is up to the landlord whether to allow subleases in the units, but otherwise, corporations are free to offer the space to traveling employees.
“Commissioner Phillis and I want to see if a majority of the Board has any interest in taking up a regulation to prevent corporate rentals in rent-controlled units,” Foster said in an email to the Daily Press. “It has come to our attention that some units are being used in this way. This would seem to be at odds with the intention that rent level protections are for people who want to make Santa Monica their home, not for temporarily housing transient corporate travelers.”
In June, code enforcement opened an investigation into a rent control property owned by Neil Shekhter, Santa Monica’s most prolific developer and property manager. The complex at 1238 and 1242 Tenth Street has undergone drastic remodeling and city officials are investigating whether the existing apartments were carved into smaller units. The building’s website, www.swellapartments.com, still advertises “junior suite” apartments that do not include kitchens for rent between $2,795 and $3,995 a month.
A spokesman for Shekhter and his affiliated companies said each building has ten units that are under rent control. A rental agreement for the complex obtained by the Daily Press includes a corporate application. The Tenth Street property is run by My Suite, LLC, which is managed by Shekhter’s son, Adam. My Suite also offers furnished rentals at a second rent control building in Santa Monica: “Pacifico” at 1445 9th Street.
“Discover a rare opportunity to live in a furnished apartment located in a community that is intimate and yet sophisticated, with controlled access entry and apartments that showcase thoughtful design, fine finishes and spacious layouts,” reads an online advertisement for Pacifico.
Spokesperson Eric Rose did not respond to recent questions from the Daily Press regarding corporate tenants.
“We look forward to reading your story,” Rose said.
The Rent Control Board’s top attorney said courts have upheld regulations that seek to preserve rent control’s intended purpose: allowing residents to stay in Santa Monica. For example, a property owner who believes a unit is not the tenant’s primary residence may petition the Board for a rent increase.
Lewis said it is up to the Board to decide tonight whether they want to pursue the corporate tenant issue.
“What a regulation would look like, if any, is something they would need to give some thought to,” J. Stephen Lewis said.
Commissioner Nicole Phillis said corporate tenants compete with residents looking for an affordable place to live in Santa Monica.
“It undermines what I see is the cornerstone of rent control. It turns housing that is intended to be long-term and stable into something that is extremely transitory to the benefit of corporations,” Phillis said.
The Board will meet tonight, Thursday, July 12 at 7 p.m. in Council Chambers, City Hall, 1685 Main Street.