Berkeley units to stay rent-controlled after 2012 fire

The rear of the apartment building at 2227 Dwight Way where extensive fire damage is evident. Photos: Tracey Taylor

The March 2012 fire at 2227 Dwight Way caused extensive damage to the building and displaced many residents. Photo: Tracey Taylor

A three-story, six-unit apartment building destroyed by fire early last year will remain rent-controlled, and former residents should have the right to return to the property, city staff said Tuesday night.

The Berkeley City Council heard an appeal Tuesday, filed by former tenants, of a June 2013 Zoning Adjustments Board decision regarding the property. Appellants alleged that property owner Lakireddy Bali Reddy was negligent in his approach to building maintenance, and that his negligence contributed to an unsafe situation that led to last year’s devastating fire at 2227 Dwight Way.

In addition to criticizing the city process related to rebuilding after the fire, appellants also said Reddy, of Everest Properties, should have to pay into the city’s affordable housing fund. City staff explained that the municipal code does not require that, since what is slated to be rebuilt is no different from what was on site before.

More than anything, Tuesday night’s hearing allowed former tenants to air their frustrations about what they described as Reddy’s negligence, and also to give city staff and officials the chance to clarify what happens next, and what rights former tenants do have.

Appellants asked the council to make a ruling related to whether Reddy had been negligent or not. City attorney Zach Cowan said, even if the council made that determination, it would have no impact on the zoning board ruling. Council ultimately did not address the issue of negligence.

Former tenants, some of whom have been involved in lawsuits and settlements with the property owner, said they believed Reddy may have disconnected fire alarms at the building following numerous false alarms prior to the March 2012 fire, and that some rooms in the building were without smoke detectors altogether. They said they believed an improperly installed water heater had led to the fire, which they said also should have been deemed to be Reddy’s fault.

(The city staff report prepared for Tuesday’s hearing includes the official report from the Berkeley Fire Department about the fire, which investigators ruled to be accidental: “Based on the available evidence the fire appears to have originated in or around the water heater enclosure near the bottom of the rear staircase. The probably source of ignition is the heat produced by the gas fired water heater appliance within the enclosure.”)

Appellant and former 2227 Dwight tenant Adam Bolt told the council that, “Negligence is a reasonable factor when determining fault when a building like this is destroyed in Berkeley.”

Bolt said, on the morning of the fire, he heard no smoke alarms, and that when he tried to pull an alarm to alert other residents or authorities, “nothing happened. Nothing happened at all.”

Bolt said he had been asleep at the time of the fire but woke up at 4 a.m. due to coughing from thick smoke, which had completely filled his room on the third floor. He woke up his roommates then ran downstairs.

“This building was an absolute tinderbox,” he told the council. He said, as he tried to get outside, he had to navigate broken glass, pieces of the ceiling that had “fallen out and rotted,” and discarded construction materials that littered the hallways prior to the fire.

Bolt said there had been six prior false alarms to the building, and that firefighters had arrived within six minutes each time. But the night of the actual fire, he said, none of the alarms he tried appeared to work, and it took more than 25 minutes for firefighters to arrive. He also noted that a staff member from Everest Properties had told another tenant, prior to the fire, “to stop calling the Fire Department because they were assessed a fee for every time the false alarm went off.”

Bolt said he has since moved out of Berkeley and never received any relocation assistance from the landlord. When he went into Everest Properties to collect his security deposit and pro-rated rent, he said, “I was told I was going to be charged for the four hours when I was in the building when it was burning down around me.”

Bolt said everyone in the building suffered from smoke inhalation, and that he had to undergo several medical treatments as a result. He said he hasn’t yet decided whether to file a lawsuit against the property owner, and is focusing on moving forward with his life as a law student in Davis.

One community member who spoke during public comment, Judy Shelton, said the city needs to rethink its policies with regard to negligence and fault: “It’s too narrowly construed if it means taking a match and starting a fire.”

She said she believed there had been clear negligence with regard to maintenance of the building’s water heater and smoke alarms, and called the process following the fire “extremely confusing.”

City planning director Eric Angstadt told council members that units at 2227 Dwight will remain rent-controlled and subject to the city’s rent control ordinance; that former tenants have a right to return to those apartments; and that former tenants should be eligible for relocation assistance.

Councilman Jesse Arreguín described the appeal as “one of the more complex” ones he’s seen: “There are so many different issues. There’s also a lot of unanswered questions.”

In his motion to uphold the zoning board’s decision, he also asked staff to make rental safety reports for 2227 Dwight for the past five years available to council members, and asked staff to contact the property owner to ensure he is aware of his obligations related to relocation assistance for former tenants. Arreguín advised tenants to make sure they know their rights related to returning to the property if they so choose.

Arreguín also said it will be vital for the city to take another look at its policies to ensure that it’s not creating an incentive for property owners to fail to maintain their buildings properly.

Property owner Lakireddy Bali Reddy is one of Berkeley’s wealthiest men, owning about 1,000 apartments that generate about $12 million in rental income each year, according to the San Francisco Public Press. Reddy was involved in a notorious human trafficking case in 2001, which ultimately led to his conviction and a state prison sentence. (He has since been released.)

Prosecutors said that, over a period of 14 years, Reddy asked many young girls to work in his house or come to Berkeley to work cleaning his apartments. He then subjected the girls to “sexual servitude.” Two of his sons helped bring the girls into the United States illegally, according to prosecutors. The ring was exposed by Berkeley High Jacket reporters after one of the girls, Chanti Pratipatti, 17, died of carbon monoxide poisoning in November 1999 while sleeping in a Lakireddy Bali Reddy apartment in Berkeley.

Related:
Fire displaces around 35 people, building a hazard (03.09.12)
Berkeley fire leaves at least 9 people homeless (03.08.12)
Early morning apartment fire near campus, no injuries (03.08.12)
10 years later: How 2 Berkeley High reporters broke sex-ring scandal (12.08.09)

Berkeleyside publishes many articles every day. To see all our stories in chronological order, and read ones you may have missed, check out our All the News grid.

Print Friendly
Tagged , , , , , , , , , , ,
  • Adam Sandler

    I hope inspectors check every one of Everest Property’s buildings for code violations. Mr. Reddy has shown himself to be unconcerned with the safety and property of his workers, tenants, and the poor girls smuggled in from India.

  • emraguso

    Thanks for pointing this out; we are firm believers in always giving credit where it’s due. I added that info above, and a link to our past coverage about the BHS reporters who had that scoop.

  • guest

    In this case, the landlord has many apartments. They should be required to provide comparable apartments at comparable cost to the displaced tenants without waiting to get the building fixed.

  • Rob Wrenn

    “will remain rent-controlled”. Question for Emilie: Does this mean that the rents will be the same for each unit as they were when the fire occurred? Our rent control law normally allows rents to be raised upon vacancy. I certainly hope that remaining rent controlled means that each unit will have the pre-fire rent regardless whether the displaced tenant(s) return to that unit. Also was the Council decision unanimous?

  • emraguso

    The vote was unanimous but I believe Max Anderson and Mayor Tom Bates were not in attendance.

    I will have to check on the rents; I imagine that, if the old tenants do not return (and it sounded like at least some of them do not plan to) the rents would be subject to new leases. But I will check with city staff.

  • batuwarrior

    I lived in Unit #1 back in 2000. The ceiling in my roomates bedroom caved in onto her bed. Good thing she was out of town. She had lived there for about 8 years before I moved in. She had nothing good to say about the landlord, but the rent was cheap. They fixed the ceiling, but we soon left after that.

  • Completely_Serious

    Rent control is hugely responsible for the run-down buildings in this town. When you artificially suppress prices, housing providers have to cut corners. Maintenance suffers.

    You can look it up.

    As I’m fond of saying, it’s easy to be a Socialist when someone else is paying.

  • Rob Wrenn

    Because of rent control, thousands of people have been able to keep living in Berkeley instead of being displace by sky-high rents. Landlords (or “housing providers” if you prefer), even in Berkeley, have been raking in windfall profits from an overheated housing market. Maybe their profits aren’t as high as they would be elsewhere, but I feel no sympathy whatever for them.

  • fred dodsworth

    ….yeah. Lakireddy clears a million bucks a month from his Berkeley rental properties but “Completely Serious” says rent control keeps this former child slaver from fixing his properties… You can’t be serious!!! Really.

  • emraguso

    I got in touch with Lakireddy’s attorney, Andy Cohn, after I posted this story and he offered these comments:
    “The issue of whether former tenants have the right to return was not decided by the City Council. I’m not suggesting that my client wouldn’t extend them an invitation to return, but the legal issue of whether there is actually a right to return remains murky and unresolved. Since it will be some time before the apartments are re-built, by which time the former tenants will likely have scattered, it’s quite possible the issue will never be formally resolved.”
    He also said: “The property owner never maintained that the re-built property would be exempt from rent control. The article gives the impression that this was an issue that the Council decided adversely to the property owner, but as I wrote in my response to the appeal (in bold letters):
    ‘With respect to the rent control ordinance, both before the fire and after the fire, the units will be subject to all the provisions of Berkeley’s Rent Stabilization and Good Cause for Eviction Ordinance.’”

  • Tammy

    No kidding…

    Arreguín also said it will be vital for the city to take another look at
    its policies to ensure that it’s not creating an incentive for property
    owners to fail to maintain their buildings properly.

    See above.

  • guest

    I do not accept the assertion that maintenance and rent-control are related. To prove it, you only need to rent a place in Albany, where there is no rent control, and not much maintenance. Albany features places with lousy heaters, high rents, no heat whatsoever, moldy walls, no insulation, staircases falling of the outside, and fine schools. If you complain to the city of Albany, they do nothing.

    The thing that Albany lacks is not rent control, but inspection and regulation of business.

    Any landlord in Berkeley who feels at this moment that he cannot pay enough toward maintenance to maintain his place is invited to sell it on the open market, where he will make a killing, to someone who can maintain it.

    Landlords pick the price the pay when buying the building. They have to account for all future variables – rent, maintenance, interest, credit – in planning their business. They know what the laws are, and apparently lots of them believe they can make a profit here, hopefully while providing safe apartments. Those that want to cut corners need government to enforce the laws on them.

  • guest

    you get what you pay for

  • guest

    The rent control and renters rights laws are why Berkeley’s rental units are largely controlled by a small number of extremely wealthy landlords like the Lakireddys who can get away with letting their properties get run down because they have little real competition. Berkeley is just too much trouble for small-time landlords to bother.

  • AnthonySanchez

    Not true. I can provide many examples of properties with their mortgage information and rental pricing, but here is one in particular that is not too different from most other rental properties:

    On Haste and College, a landlord bought an 8 unit building in 1993 for $250,000 that had 1 rent controlled unit (that’s 12% of the units and comparable to many buildings with any hard rent controlled units). The Landlord did quite fine, despite that, ranking in as much as $8674 a month in rent and as much as $104,088 a year at its peak in 2010, even with the rent controlled unit. He then sold the building in 2010 for $1.1 million dollars, a price premised on the fact that these “rent regulated” units are still profitable and will increase in profitability with vacancy de-control over time (why else would investors buy these properties -they know something that conflicts with what you’re asserting).

    I can provide tons of examples like this -the data exists with the Rent Board and County records.

    If a landlord is having a difficult time and claiming that they are cutting corners because they can’t make enough money on rent stabilized units, you have to question their financial judgement and integrity since profit can still be easily had -don’t let any landlord tell you otherwise, especially Everest Properties which rakes in millions of dollars of rent but skimps on maintenance, not due to rent stabilization, but profit maximizing that would exist regardless of rental type.

    Interestingly enough, when the Daily Cal did a story about some “poor” landlord having a tough time with Rent Control, it was discovered that he had owned his building since 1982, which would mean low property taxes and a low sale price, and that his units were actually raking in $44,000 a month. If he was struggling as he claimed, it was not due to the few rent controlled units in his building but probably bad financial decisions and refinancing at the wrong times. Otherwise, his rents would be profitable even if he had to make mortgage payments based on the current value of the property, business taxes, management and repairs.

  • AnthonySanchez

    See my comment as well. The numbers do not lie.

  • Bryan Garcia

    I don’t buy this argument for one main reason: students.

    Students make up a very large portion of the renting population here in Berkeley. The maximum amount of time that a student would stay in the same unit would be four years. Even that would be pretty rare, as most Cal students are going to spend at least the first year or possibly two years (or maybe even more) in University-provided housing. In any case, those student-occupied rental units are turning over fairly quickly, which means new leases. New leases means the landlord can charge whatever they want for rent. Rent control is simply not a factor.

    So now that we’ve established that rent control is not a factor for a sizable portion of the rental units in Berkeley, what about the maintenance and upkeep of those properties? Well, a lot of them are not kept up very well at all. I’ve been in many of these buildings. You’ve got thin, leaky windows, mildew, half-assed modifications, leaky ceilings, etc. All of this in spite of the owners raking in market-rate rents.

    On top of all this, many of these buildings charging market-rate rent are owned by the Lakriddy family mentioned in this article, via Everest Properties and other companies. Your argument simply doesn’t hold water.

  • AnthonySanchez

    Spot on.

  • guest

    I don’t buy that either. I just bought a house in Berkeley, and the closest competition in the bidding came from a guy from out of state who wanted to rent it out to get in on these crazy high Berkeley rents.

  • guest

    Anyone remember this article? http://www.berkeleydailyplanet.com/issue/2013-03-15/article/40886?headline=Rent-Board-Assertion-on-Landlord-Reinvestment-Absurd–By-Sid-Lakireddy-President-Berkeley-Property-Owners-Association

    Just thought its contents are a bit ironic considering Bryan Garcia’s well-reasoned observations.

  • emraguso

    Via Jay Kelekian, executive director of the Rent Board: “For returning tenants – the rent will be the former rent plus any Annual General Adjustments the owner would have been eligible to receive (the AGA has been 1.7% for both 2013 and 2014). The City Council’s determination Tuesday evening is consistent with the Rent Board’s interpretation that vacancies caused by fire are not voluntary vacancies and the former rents, plus AGA’s would be the rent ceiling. One thing not addressed in the discussion about affordability is that once the original tenants leave, future adjustments will presumably be substantially higher than they otherwise would have been had there not been a fire and rehab. Thus, while the initial occupancy may be at the former rent level, there is an unfortunate loss of long-term affordability.”

  • Completely_Serious

    Bryan,

    It is not true that the “maximum amount of time that a student would stay in the same unit would be four years.” A student’s stay in her rental unit can long exceed her enrollment at Cal. Many students, myself included, opted to make Berkeley home after graduation.

    Without a survey or study, you have no idea if rent controls is or is “not a factor for a sizable portion of the rental units in Berkeley.” That’s just made up.

    While it is true that a landlord can charge market rent on a voluntarily vacated unit, subsequent increases are limited to 65% of the CPI for the region. That’s a losing proposition for the landlord — revenue can never keep up with costs with that formula.

    Those of you who claim to know Lakireddy’s monthly or annual income, well, I guess he must publish it somewhere. I don’t know Lakireddy, other than what I read in the paper, which I don’t like.

    I speak for my own thoughts. And no, I don’t own rental property in Berkeley. I never will. Because of rent control. It’s easier to get divorced than to evict a tenant. And that’s wrong.

  • Completely_Serious

    You state, the builidng had “1 rent controlled unit.” How can that be? Every unit built before 1979 is subject to rent control.

  • Completely_Serious

    It’s also possible that Berkeley drags down Albany. If I’m an Albany landlord and the competition includes Berkeley units, I might choose to let my units degrade because that’s what the market will allow.

  • AnthonySanchez

    My mistake for intermingling terms that are used interchangeably depending on the context. Rent Stabilization and Rent Control are sometimes meant to mean two different things, even though the latter can mean the former.

    It is true that all the units in the pre-1980 universe are “rent controlled,” but rent controlled is colloquially used to refer to those pre-80′s units where the original occupant still resides from the time of Costa-Hawkins -that means the rent is still at the 1998 or earlier level and subject only to AGA increases annually.

    In that same vein, Rent Stabilized Units are colloquially referred to units that have been subject to vacancy de-control -its rents set at market rate relatively recently, but protected from large rental increases while the occupant remains.

    The difference be as simple as $678 for a unit occupied since the 90′s and $1350 for a comparable unit occupied since 2005 that now rents for $1612 for 2009 tenancy.

    I recognize that I should have used more accurate terms rather than speaking colloquially, but when I used Rent Controlled, I am referring to that $678 unit, not the units that are at or very near market that turnover quite frequently -those units generate substantial income that can more than cover costs.

  • EBGuy

    Since vacancy decontrol (Costa-Hawkins) came on line, we’ve seen a noticable improvement in the rental stock in Berkeley. It doesn’t seem like Lakireddy was hurting for money on these units as most were close to market rate. From the Rent board database:
    2227 DWIGHT WAY 1 1520.42 06/01/11
    2227 DWIGHT WAY 2 1520.42 05/27/11
    2227 DWIGHT WAY 3 1418.72 08/16/11
    2227 DWIGHT WAY 4 1555.56 08/01/09
    2227 DWIGHT WAY 5 1306.37 07/01/06
    2227 DWIGHT WAY 6 1659.61 08/01/09

  • tor_berg

    For what it’s worth, rent control only applies to about 2/3 of the units in Berkeley. The exact numbers are in a report somewhere on the Rent Board’s site and I’m too lazy to look it up right now, but it’s something like 18,000 of 27,000 total units that are governed by rent control. No units built since 1981 are subject to rent control.

    I realize that’s a slightly different point from the one Bryan is making, but it is nonetheless the case that a significant number of Berkeley landlords are not bound by rent control.

    And if your tenant doesn’t pay their rent, it’s very easy to evict them. No grace period is required, and then it’s three days or quit.

  • guest

    According to who? Your realtor who was pressuring you to bid higher than you originally planned to? Not the most reliable source.