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Any landlord leasing a rent-controlled apartment to a corporation without first getting a removal permit from the Rent Control Board is running afoul of the law, according to the Board’s top lawyer, J. Stephen Lewis. The assertion comes as the Board attempts to clarify its own rules in order to deter the practice in Santa Monica.

The issue came to light in June after a rent-controlled building at 1238 and 1242 Tenth Street began advertising apartments on corporate rental websites. A leasing agreement obtained by the Daily Press included a “corporate application for rental form” and an addendum to rent “by the suite.” At the time, the Board’s Executive Director said the addendum sounded problematic but there was nothing illegal about leasing a rent-controlled apartment to a corporation.

On Wednesday, Lewis sought to clarify rules for all landlords who may have corporate tenants.

“Because they might not have realized that the conduct was illegal, we will likely give them a chance to voluntarily comply with the law before taking any action,” Lewis said. On Thursday, the Rent Control Board will consider a regulation that would “do nothing more than make crystal clear to everyone what the law already is,” Lewis said.

Lewis’ proposed regulation would define a tenant as a person or “individual human being” and require any landlord to get a removal permit from the Board before renting to a business. In order to obtain a removal permit, a landlord has to demonstrate that he or she cannot get a fair return on the unit by renting to an individual.

The Board does not track leases and thus has no idea how many corporations occupy the city’s limited stock of rent-controlled apartments. As tenants, the corporations have the same rights as individuals and are shielded from no-fault evictions except in instances of the Ellis Act. Depending on the lease, a corporation could then be able to sublease or offer the unit to employees as a perk or as temporary lodging for business trips to the area.

“A new threat to the rental housing supply has emerged,” Lewis wrote in a staff report to the Board.

Code enforcement has opened an investigation into the 10th Street property. It is managed My Suite, LLC, which is owned by the son of Santa Monica’s largest property developer and manager, Neil Shekhter. In an email to the Daily Press, Shekhter said: “I have nothing to do with the new ownership.” The website for My Suite, LLC, still lists available units at the property.

The building is now owned by WS Communities (formerly WNMS), a spin-off of Shekhter’s NMS Properties, run by his former Vice President, Scott Walter, according to tax assessor records. Walter was responsible for acquisitions and development projects during the six-year span when NMS became one of the largest landlords on the westside of Los Angeles. NMS ceded managerial and operation control of housing developments to the new company in 2017.

WS Communities currently has more than a dozen buildings in some stage of development in Santa Monica.

The Rent Control Board cannot outright ban the practice of renting to corporations because land-use regulations are outside of their purview, according to Lewis.

The RCB will also discuss a resolution to encourage the City Council to increase permanent relocation benefits for tenants experiencing no-fault evictions. The discussion item was brought by Vice-Chairperson Caroline Torosis and Commissioner Nicole Phillis.

A third agenda item says the Board will consider a formal policy on whether commissioners should be able to teleconference into meetings when they are out of town.

The Rent Control Board will meet Thursday, Aug. 9 at 7:00 p.m. inside Council Chambers, City Hall, 1685 Main Street.

Kate Cagle

Senior reporter for the Santa Monica Daily Press