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Uploaded: Wednesday, September 2, 2009, 7:45 AM
Tenants win injunction against Page Mill
San Mateo County judge bars property owner from increasing rents
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by Gennady Sheyner
Palo Alto Online Staff
East Palo Alto's biggest landlord suffered a legal setback Tuesday when a San Mateo County judge granted an injunction barring it from raising rents at its properties.
The injunction was requested by a group of tenants of Page Mill Properties, a Palo Alto-based company that owns about 1,700 apartments in East Palo Alto's Woodland Park neighborhood. Tenants have accused Page Mill of hiking rents in violation of the city's rent-control ordinance and argued that the company formed an assortment of sham limited-liability companies largely to avoid having to comply with the ordinance.
On Tuesday, San Mateo County Superior Court Judge Steven Dylina granted the plaintiff's request for a preliminary injunction enjoining Page Mill and its many alternate entities from "collecting or enforcing any rent increases imposed on plaintiffs and other tenants living in properties owned by the LLC defendants since they took ownership of the properties." The ruling also bars Page Mill from imposing rent increases on plaintiffs and other tenants while the litigation is ongoing.
Most of Tuesday's arguments focused on the relationship between Page Mill and more than a dozen smaller companies, each of which owns four or fewer units. East Palo Alto's ordinance, which limits how much rents can be increased each year, includes a "mom and pop" provision that exempts landlords that own four or fewer units. Tenants' attorneys Robert Hawk and Ryan Marsh, both from the local firm Hogan & Hartson, argued that Page Mill acted in bad faith when it characterized its limited liability companies as entities separate from itself.
Hawk argued that Page Mill typically treats all the apartments owned by these companies as its own when it sends out newsletters to tenants or applies for loans. But Page Mill suddenly starts treating the companies as separate companies when it wants to raise rents.
"It is inherently bad faith. It is inherently inequitable when the defendants, time and time again, where it's convenient, asserted themselves as a common organization," Hawk said. "But, on the other hand, when it's convenient, they asserted themselves as separate entities."
Marsh cited statements from numerous tenants, some of whom said they had to go without medication, cancel doctor appointments, collect cans to make money or move out after seeing their rents increased by more than 40 percent last year. He noted that of the four plaintiffs, three no longer live at Page Mill-owned properties.
Page Mill's attorney Christine Griffith, from the San Francisco firm Ellman, Burke, Hoffman & Johnson, argued that Page Mill's system of forming smaller entities is very common in real-estate management. She also said Page Mill never denied that the companies are all related.
"We have never hidden the fact that these are related companies," Griffith said. "There is no evidence of subterfuge; there is no evidence of a hidden agenda."
Dylina said the plaintiffs "have shown that there will be an 'inequitable result' if the entities are treated separately for the purpose of applying the (rent-stabilization ordinance)." But Dylina also said he has seen no evidence demonstrating that Page Mill formed its network of limited-liability corporations for fraudulent or deceptive purposes.
The company's organization, he ruled, could be based on legitimate purposes.
The tenants' attorneys will now compose the court-granted injunction, which would then be reviewed by Page Mill's attorneys and take effect at the end of the month.
The legal skirmish between Page Mill and the tenants in their subsidiaries is one of many the controversial property owners has been involved in since it purchased the East Palo Alto properties in 2007. The company has also been involved in more than 10 lawsuits against the City of East Palo Alto.
Meanwhile, the Palo Alto Police Department has been conducting an internal investigation on Lt. Tim Morgan, a former police lieutenant who moonlighted for Page Mill while still on the Palo Alto police force.
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Posted by Chris Lund, a resident of East Palo Alto, on Sep 2, 2009 at 9:54 am Please visit epa-tenants.org for more information on Page Mill Properties.
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Posted by Hmmm, a resident of East Palo Alto, on Sep 2, 2009 at 10:31 am So glad to read this fair and accurate depiction of the goings-on. There are more than 80 plaintiffs in this case, many suffering extreme financial hardship with the illegal rent increases. It is wonderful that no rent hikes will during this litigation, for those in this suit or the other tenants. Landlords can make a profit without being as corrupt and arrogant as Page Mill Properties.
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Posted by Robert Allen, a resident of East Palo Alto, on Sep 2, 2009 at 10:38 am Gennady
Thanks for your clear, concise, and insightful reporting.
You captured well the nearly 6 hours of legal bantering.
"What Dreams May Come?"
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Posted by annonymous, a resident of Menlo Park, on Sep 2, 2009 at 11:02 am I was involved in the sale of many properties, where I represented the Sellers, and Page Mill Properties was the Buyer. When they took over properties, where the sellers had an agreement to stay at the property for a period of time, they kept their deposits unfairly, and treated them horribly. I have no sympathy for this company or it's officers, who care nothing for their tenants and treat them poorly.
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Posted by Mark, a resident of the Midtown neighborhood, on Sep 2, 2009 at 11:04 am What a great article! Very well written.
What most people do not know is that it is very difficult to make money in the multi-family investment market, except with appreciation on the assets. In a market with rents that are flat, there is no appreciation. So, if the rents are raised, then the properties are worth more. The properties are then painted, landscaped, and carpets replaced etc. Then sold for a profit. Then next landlord buys with same mind set. Ultimately most of the apartments are renovated and then the tenant base changes to affluent working folks who pay their rent on time. Over time, a town becomes a place where people are proud to live. I personally believe that that is change and change that is good.
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Posted by Hmmm, a resident of East Palo Alto, on Sep 2, 2009 at 11:07 am Hi annonymous, so interesting to read your comment. I am sorry to hear that your previous tenants were so poorly treated, but I am not surprised. Landlords who treat tenants well are a treasure we often don't realize til we don't have it!
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Posted by Anonymous, a resident of East Palo Alto, on Sep 2, 2009 at 11:15 am I had a 25% rent increase and I've since taken on a second job to help me pay rent along with my other bills. I haven't seen much improvement in the property for the extra money I pay every month. EPA was only afforable place left to live on the Peninsula, and while higher rents will bring in better quality tenants, it also restricts those of us who work on the Peninsula but don't make a lot of money to have fewer options of where to live. Even if you don't have a lot of money, should be able to have a decent place to live.
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Posted by Justice, a resident of East Palo Alto, on Sep 2, 2009 at 11:28 am Thank you for writing a story about this.
Page Mill has been an absolute disaster for East Palo Alto. They have abused residents, the city, and the law. It's really good to see that the residents finally got a little taste of justice. It is shameful that this has been going on so long, and it is about time that Page Mill pay the price for their illegal activity.
Props to everyone involved in bringing a bit of justice to East Palo Alto. These are hard times, but Page Mill's attempt to compare themselves to "the little guy" need to end NOW. And they are ending now.
Hopefully, someone will guide this mess toward a soft landing. The key is tie up the pilot who ran the ship aground.
-EPA resident
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Posted by Hmmm, a resident of East Palo Alto, on Sep 2, 2009 at 11:49 am All of these great comments! I sympathize with those whose lives have been negatively impacted by this loser landlord. Their atrocious business practices and illegal activities may be catching up with them since they've spent so much money on legal fees and cosmetic property improvements without investing in really fixing up the properties to justify rent hikes. Their intimidation tactics as well have been spurious and illegal.
There are still many myths about EPA residents and PMP tried hard to capitalize on those myths, further marginalizing tenants and making them all feel so "other." PA residents have long bought into this, from what I've read often on these threads. To realize that the west side of EPA is a multi-ethnic, multi-age and multi-educational area is a surprise to many, but it's been this way for many, many years.
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Posted by YES!!, a resident of East Palo Alto, on Sep 2, 2009 at 12:01 pm As a plaintiff in this case, I want to thank everyone who has worked so diligently on it, from the tenants who first filed, to the tenant organizers, to the attorneys and everyone in their firms who assisted them, to the reporters who have followed this case and my fellow tenants who have endured unnecessary hardship.
PMP has tried to buy off community orgs in EPA with small donations, wanting to partner with them in order to look good and be able to send out cooing press releases lauding their efforts. But they aren't investing in the community; they are investing in illegal, dangerous tactics, a high stakes investment game that as of this writing, has left them struggling to pay their 50 mil balloon loan payment. They have laid off employees, many of whom live here on the west side in PMP units. This means they have tenants struggling to pay rent that used to go to their paychecks.
This has all been too much like the stories you here about a corporation owning a whole town, from the feed store to the saloon, from the bordello to general market, the mine - everything. But these people have no industry here, they have no real reason to be here except for the greed of their predatory equity scheme. Even watching the ridiculous patrols by their security on city streets irked me and felt somehow ominous. I didn't feel protected - I felt spied on and suppressed.
I have never before lived with fear everyday, fear of my landlord - what they would do next, fear of losing my home, fear of a rent increase that was illegally high, fear that my neighbors would have to endure more hardship at the hands of these greedy landlords, fear of the changes that were happening in my community that was also based on the greed, avarice and dishonesty of this company, knowing that our precious tax dollars are going to pay insane legal fees. To live, everyday with this fear for nearly 2 years has taken its toll. I am so relieved that we were heard, that there can be justice, I can still feel that relief. I hope others are taking time to enjoy this victory if only for a few minutes!
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Posted by Charisse, a resident of East Palo Alto, on Sep 2, 2009 at 1:02 pm Finally, a judge that can see right through Page Mill Properties and their sleazy corporate tactics! It takes courage for the tenants and East Palo Alto residents to stand up to Page Mill and to be persistent about it. I know this is only part of a long battle.
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Posted by Hmmm, a resident of East Palo Alto, on Sep 2, 2009 at 1:09 pm Mark clearly has those elitist tendencies which whitewash the real issues. We all know that is hard to make money with this type of investment, and it's risky. However, it is also no excuse to abuse the legal system and also constantly break the law. The predatory equity scheme carried about by this landlord is expoitive and extremely risky.
I am proud to live in a place I can afford, proud of my hard work to keep the place up even when my landlords have consistently failed to do so, proud of my contributions to the mid-peninsula area, both professionally and as an activist and volunteer. I am even, a lot of the time, proud to be an EPA resident, even given the news bias against it.
I would be happy to see my landlord make a profit *legally* and *honestly* - which would include basic maintenance and upkeep before we even get to "improvements."
Moreover, we need to have folks in the service industry as well as students, young families, the retired and disabled, hard working lower income folks as I have been at times, be able to safely and affordable live near their workplaces, schools and services.
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Posted by William Byron Webster, a resident of East Palo Alto, on Sep 2, 2009 at 1:14 pm The City of East Palo Also is a microcosm for America. I often tell those interested in the future, "If you wish to see the face of the future of America, go to East Palo Alto." Long before the end of the Twenty-First Century America will demographically look like East Palo Alto today. The problems of that future America are the problems of East Palo Alto today. If it is not possible to bring a measure of justice and harmony to the proverbial two-and-a-half square miles of East Palo Alto (actually 2.4 square miles), then how is the America of the future that resembles East Palo Alto today "from sea to shining sea" to enjoy the blessings of liberty and justice? Judge Dylina's rulings are a step in the right direction to affirm that possibly there is a measure of "liberty and justice for all" even in the City of East Palo Alto. If anyone had any doubts as to how divorced from the spirit of avarice that motivates Page Mill Properties and its CEO David A. Taran is from the ideals of "liberty and justice for all," please consider the irony of the injunction that Page Mill Properties has filed in whichever LLC guise it assumes at the moment to prevent the voters of a city founded principally by people with a long history of disenfranchisement through abuse of the law from voting on the revision of the Rent Stabilization Ordinance to bring it into conformance with State law on the 3 November 2009 ballot. It would be a disgrace that the people should be prevented from exercising their right to vote in what purports to be a democracy, but it is a scandal that the descendants of slaves should be threatened with denial of their right to vote more than a century after the Civil War and the Emancipation Proclamation in a city founded specifically to empower the disenfranchised. Let the people vote!
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Posted by YES!!, a resident of East Palo Alto, on Sep 2, 2009 at 1:28 pm In a condescending manner all to familiar from many PA residents towards EPA residents, what Mark has said is something most of us know. We are not ignorant, stupid boneheads. This groups of plaintiffs does indeed reflect the face of America, as does EPA. Old and young, families and singles, employed, retired, disabled, immigrants and long-term residents, some plaintiffs with Ph.D.s, some are tradespeople, some of them are self-employed - we reflect the changing face of this country. We also have rights, which we have exercised with excellent legal representation.
So many of us have stated we would be happy to pay legal rent increases and we could be happy to have our residences improved. In short, if our landlords raised rent legally, we would've dealt with it or moved out - but without litigation. If we weren't harassed and scared we would be more forgiving of the landlord's many mistakes. If we didn't have to watch our neighbors suffer and suffer alongside them, we would be more tolerant of our landlord. But none of this happpened, so we had to "stick it to the man!"
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Posted by Hmmm, a resident of East Palo Alto, on Sep 2, 2009 at 1:47 pm I find it a delicious coincidence that PMP shares the headlines with a child molestor and a thief who has a previous record. And ok, CalTrain horn noise reduction, which is a relief for many, but not as interesting of a headlines!
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Posted by Janet Boggs, a resident of East Palo Alto, on Sep 2, 2009 at 2:58 pm As a relative newcomer to this community, who was born and raised in PA, I just want to say that I've loved being a part of the efforts to provide decent and affordable housing to those who can't afford high rents in the Bay Area. I've met and worked with a wonderful group of people here in EPA. I went to the Cal PERS Board Meeting on June 15 and used the words "dishonest," and "manipulative," along with the phrase "uses tactics of harassment and intimidation" to describe PMP. I'm so happy that the tenants prevailed in this latest hearing. I'm also dedicated to doing everything I can to getting the proposed RSO voted into law in November.
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Posted by Elaina, a resident of the College Terrace neighborhood, on Sep 3, 2009 at 7:56 pm Can someone explain why PMP is so horrible to its tenants?(besides raising the rent)
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Posted by YES!!, a resident of East Palo Alto, on Sep 4, 2009 at 12:47 am Elaina, for a longer, fuller explanation, please peruse epa-tenants.org
For the short explanation: PMP's strategy is called a predatory equity scheme, and they've invested the retirement money of CalPERS employees here on the west side of EPA, approx. 1700 units. They also have loans with several banks. This scheme is to drive out current tenants, make some improvements and likely flip the property. There is talk they want to develop this area commercially.
One of the tactics in this type of scheme is to also litigate the heck out of everyone and everything that is a real or imagined threat. Hence, the at least THIRTEEN legals suits involving PMP - and that is just here with their EPA portfolio.
Here is what they've done, tactically, in short:
PMP raised rents illegally for the majority of their tenants, from 10-90%, and for a few, even doubling the rents. They claimed it was for tenant improvements. I can honestly say where I live, there has not been 1 single improvement made, and getting them to do maintenance is like pulling teeth. When they do do it, it's shoddy work, often because they use shoddy materials.
They have harassed tenants in a variety of ways, including eviction without just cause, issuing 3 day pay rent or quit notices to numerous tenants, repeatedly, even though they've paid their rent, ignored maintenance requests, some of them dire, ignored phone calls and emails, they have spied on at least one tenant-activist, illegally, using one of your city's off-duty cops, who had lied to his chief about what his work with PMP was, as it was in reality a conflict of interest. PMP has torn down signs posted by tenant activists and tried to evict them. The also do things like write illegal leases, hoping tenants will sign them without realizing they are illegally written, and they've even had tenants sign 30 day leases for no reasons. These tactics are all designed to harass and intimidate tenants.
Their employees are often rude, condescending, ignorant and ill-equipped for their jobs. That did seem to improve for awhile, but since they've had layoffs, the good ones seem to have disappeared.
Another tactic is also not to fill empty units, hoping they can maintain a level of vacancy that will open doors for them for other kinds of development - condo conversion, for example.
PMP also illegally installed gates in alleyways, claiming they own the alleyways that the city owns. They didn't get permits or work through the county at all.
They have spent a lot of money on cosmetic improvements to apartments and duplexes, but ignored the more needed interior maintenance.
They have allegedly evicted tenants by claiming they were drug dealers when they weren't. They have also evicted drug dealers, but that doesn't justify wrongful evictions.
PMP has also tried to partner with many of EPA's community orgs and nonprofits, claiming they want to invest in the community. However, their donations are great given all the press releases they want to do in exchange - it's all about looking good.
I, for one, would be happy to have legal rent increases with the correlating much-needed maintenance. PMP made many of these cosmetic improvements and then asked the rent board to waive their rent control registration fee, but they didn't follow procedure. Procedure means asking ahead of time, following the rules. The waiver for the fee is meant to be applied to mom-and-pop type property owners who don't have lots of extra money but wish to keep up their property.
PMP can't play by any civilized rules. They are lying, cheating, arrogant bullies. I do not use those words lightly.
They really are like one of those old mining companies that own everything, in addition to the mine. But this is no longer the wild west and there are consequences. They need to consistently be held accountable. They have wreaked utter havoc in just a few years - financial, emotional, personal and professional - against tenants, their non-tenant families, the city officials, the correlating agencies, their employees and of course, CalPERS. There are tenants who have become homeless because of these people. I personally left my much-loved job to take a riskier job to pay higher rent - an illegal rent increase, btw.
This all sounds very melodramatic, because it is. EPA has decent rent control laws - just cause for eviction is crucial - it protects the tenant and the landlord.
This is all melodramatic because there are millions and millions of dollars at stake, all because some investment "experts" chose a high-risk, high-return investment scheme for CalPERS, somehow found PMP to execute it, and now there is this mess - w/PMP unable to pay their 50 million $ balloon loan payment to Wells Fargo last month. Given how much $$ is at stake, they don't care about us, or the city or the rent board. They play dirty, dirty pool, high stakes pool, and we are just "collateral damage" while they go home to their expensive, well-maintained homes and plan the next day's nasty trick.
I honestly hope they implode. I hope they suffer, continue to lose money, are laughed at by their peers and are excoriated at every opportunity. I hope they lose their jobs, that they suffer for what they've done.
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Posted by Elaina, a resident of the College Terrace neighborhood, on Sep 4, 2009 at 1:27 pm Yes -
Thanks for the explanation. I had always wondered why EPA residents were so against this company for wanting to improve things. To them it is valuable land and to you it is your home.
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Posted by YES!!, a resident of East Palo Alto, on Sep 4, 2009 at 3:07 pm Hi Elaina - it's not about the desire to improve things that tenants are having issues with, but the mass evictions, illegal rent hikes, harassment and duplicity. Ironically, some actual needed maintenance inside units would result in improving the properties and most tenants would accept commensurate rent increases. I know many, many tenants who have not had any maintenance done at all in their unit or the outside, but have received incredibly high rent increases.
PMP wants immediate, radical change at the literal expense of tenants, the city and the county.
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Posted by Rejoice?, a resident of the Leland Manor/Garland Drive neighborhood, on Sep 5, 2009 at 6:22 am If I read correctly yesterday and today, the success of bringing down PMP is resulting in it going bankrupt.
Web Link
Does the phrase "kill the goose that lays the golden egg" mean anything to anyone?
It will be a lot of fun trying to get someone else to buy the properties after seeing the treatment of PMP, and it will be even more fun for the tenants to try to squeeze blood from a turnip when it comes to getting money for repairs and upkeep to the properties.
We have to live with market realities, folks, or we cause even worse market realities. Unions, pay attention, demand too much and you will kill your geese also.
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Posted by Once again..., a resident of another community, on Sep 6, 2009 at 11:39 pm Someone posting who knows nothing about the situation, as Rejoice posted.
The win on 9/1 didn't result in PMP going bankrupt. No one knows how much $$ they have. What's known is that they didn't make their huge loan repayment for fifty mil. The win on 9/1 is the first step in the legal course of action taken by the minority of tenants. What is known is that PMP has spent vast amounts of miney to quickly gobble up most of the west side of 101 that belongs to the City of EPA. It's interesting that they pay a "color consultant" who works part time 20k a month - nice gig if you can get it. They've also paid a lot in legal fees. Tenants know $$ hasn't been put into competent employees, decent materials or even basic maintenance at many units, despite PMP's lies to the contrary to attempt to justify their illegal reant increases.
PMP may be a giant goose, but they've never laid any golden eggs!
No one knows yet what will happen. No one knows how deeply mismanagement and corruption runs at PMP. Their investors should demand an audit pronto.
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Posted by Jared Bernstein, a resident of the Professorville neighborhood, on Sep 12, 2009 at 10:43 am The reporting has been clean and seems simply accurate.
My question: Does anyone know who owns Page Mill Properties (and its LLC spawn)? Who are the officers of the corporation and/or who are the actual owners?
Just curious...
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Posted by Golden goose, a resident of the Leland Manor/Garland Drive neighborhood, on Sep 12, 2009 at 7:01 pm Dear Once Again: It is nobody's business how much or who a private business pays to someone for their services. The only point of a business is to make money. Thus, they can be trusted to use their money as wisely as possible to grow the company, or they will go bankrupt.
Perhaps they were foolish, and that is why they are going bankrupt. Perhaps it was bad luck with the economy. Perhaps it was a combination, and the lawsuits by the tenants pushed them over the edge.
But, it doesn't matter, in the end, if they go bankrupt and if nobody is willing to take it over. The bankruptcy process can go on for quite a long time..a year, 2 years..and in the meantime, who will pay for anything at all? And then, after that, who will bother risking any money on the area? So, where will the money come from to paint etc the apartments?
That is what is meant by killing the goose that laid the golden egg. I know for an absolute fact that some repairs and upkeep was done by PMP, but now I suspect none will happen.
But, oh well, at least they are gone!!
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Posted by Page Mill tenant, a resident of East Palo Alto, on Sep 15, 2009 at 10:31 am "It doesn't matter, in the end, if they go bankrupt and if nobody is willing to take over"
What? The total Page Mill portfolio in East Palo Alto comprises approximately 1800 rental units. Using US Census data for average occupancy, these units were home to between 5,000-7,000 people before Page Mill came to town. If Page Mill ends up in bankruptcy, who will assure that these tenants, who are in now way responsible for this risky investment, will continue to have an affordable place to live?
Incidentally, it does matter who the investors are and who the executives are. In this particular case your money is at stake! Page Mill's East Palo Alto acquisitions were funded by a $100 million investment from CalPERS and a $244 million loan from Wachovia.
CalPERS made a number of dubious real estate investments during the feverish days of the bubble and now their portfolio has suffered deep losses. CalPERS is asking cities, counties, and the state to make bigger contributions on behalf of the public employees the retirement fund serves. Where do those funds come from? Taxes. So who has to make up for the losses from these ill-conceived, extremely risky investments? Taxpayers.
And this is before we consider who is affected by the loss the bank incurs on the loan. Wells acquired Wachovia in a deal that give it preferred tax treatment for the losses it incurs on the Wachovia loans. That means that taxpayers will again foot the bill for this part of the loss, because lower tax receipts means either a reduction in services or higher taxes for everyone else.
So ask yourself who will really be hurt by the reckless behavior of Page Mill.
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