City Council Settles AKA Lawsuit and Confirms Apartment Leases Are for a Year or More

In a final move to settle an expensive legal battle over the use of apartments at 8500 Sunset Blvd. as short-term rental units, the West Hollywood City Council agreed to permit such rentals but only in commercially zoned areas along Sunset Boulevard.

In approving the zone text amendment at its meeting tonight, the Council also agreed that initial leases of apartments outside the commercial area of the Sunset Specific Zone must be for one year or more.  And it reluctantly agreed to allow owners of condo units and single-family homes to rent out their property for as few as 31 days. However, the Council agreed that it will later consider extending that minimum to 90 days or more.

Tonight’s decision affirms a tentative agreement with BPREP 8500 Sunset LLC to settle the lawsuit it filed against the city on Sept. 26, 2018, over West Hollywood’s requirement that all apartments in the building be rented for an initial term of 361 days (one year). BPREP 8500 is a company controlled by Korman Communities, which operates the AKA short-term corporate rental business, and the Brookfield Property Group. BPREP 8500 said it would suffer $40 million in damages if it was unable to move forward with its plans for short-term rentals .

The lawsuit filed by BPREP 8500 has been expensive for the city, which has filed a counter suit. Last summer the City Council voted to allocate over $650,000 to cover its legal costs. Baker & Hostetler is the law firm representing the city in the lawsuit.

A representative of Unite Here 11, the hotel workers union, and a number of hotel workers called into the Council’s virtual meeting tonight to object to the amendment. They included Spanish-speaking housekeepers and other workers whose comments were translated into English for the Council. They referenced the impact of the COVID-19 pandemic on local hotels, which led to them being laid off from work.  Permitting short-term stays at the AKA West Hollywood would create more competition for hotels that already are struggling financially.

The item before the Council drew objections from others for other reasons. Danielle Leidner-Peretz, governmental affairs and external relations director for the Apartment Association of Greater Los Angeles, objected to the requirement that initial apartment leases be for one year or more. “Now, more than ever, renters need flexibility in their lease terms,” Leidner-Peretz said, citing as an example medical workers who were coming from other states to assist local hospitals during the pandemic.

The proposal also was opposed by Tony Diamond because it would ban short-term rentals in apartment buildings outside the commercial areas within the Sunset Specific Plan district. Diamond’s StayTony company leases apartments from building owners and then rents them out for short-term stays of 31 days or more. StayTony now operates four apartments at 8917 Cynthia St., which effectively takes them off the rent-stabilized apartment market. 

A representative of Brookfield Properties called in to support the zone text amendment as did Ted Green, who identified himself as a West Hollywood resident although he also has been a lobbyist for the AKA West Hollywood owner.

The zone text amendment as originally presented to the City Council would have allowed short-term rentals in buildings in commercial zoned areas throughout the city for the next ten years if the owners of those buildings already had been violating zoning regulations by offering such rentals and applied for permission to continue. A memo from the City Hall staff said there were approximately six apartment buildings in commercial areas that were known to have been offering short-term rentals already.  Listings in both the Dylan and Huxley apartment buildings have been seen on Airbnb.  The Council’s decision to limit such short-term rentals to commercial districts in the Sunset Specific Plan area means they will not be permitted in other areas. An estimated 300 apartments are in the commercial districts covered by the Sunset Specific Plan.

Under the city’s settlement of the lawsuit with AKA it will only be allowed to offer short-term rentals in its 110-unit West Tower, and as many as 30 of those can be rented for periods of as few as five days. Apartments in its 80-unit East Tower must be rented for a year or more.

While some Council members were not happy about allowing the short-term rentals in the Sunset Strip area, Councilmember John Heilman noted the importance of the city finally confirming that apartments are meant to be leased for a year or more. That would help protect the city’s affordable-housing stock, he said. Heilman also convinced his fellow Council members that revenue from the hotel room occupancy tax that would be applied to units rented for as few as five days should be put in the city’s Affordable Housing trust fund.

The Council agreed to ask City Hall staff to come back at a future meeting with a proposal to set a longer-term requirement for rental of single-family houses and condos.