City has issued a record number of code violation notices at 39 buildings owned by giant landlord

Owning more than 230 rent-controlled properties in San Francisco, Veritas Investments Inc. markets itself as a premier real estate company that buys and renovates aging apartment buildings, increasing their property value while enhancing the quality of life for thousands of tenants.

And Veritas, which claims to be the city’s largest residential landlord, says it has a good track record of caring for those living in its 5,000-plus apartments, pointing to data from the city’s Department of Building Inspection as evidence.

“The data establish that Veritas is one of the best and most proactive landlords when it comes to maintenance and care for its buildings,” company spokesman Ron Heckmann said.

But an analysis of public records for a subset of the company’s properties shows they experienced a sharp increase in the number of reported problems and citations after Veritas acquired them. And city inspectors, who vetted those tenant complaints, found more to be valid than under the buildings’ previous owners.

Veritas Says Analysis ‘Based on False Assumptions’

Those properties experienced a record high in complaints and notices of building-code violations in 2018 — the year by which the company had acquired them all — compared with any other year since the Department of Building Inspection started its digital tracking system in the mid 1990s.

Graphic by Reid Brown // San Francisco Public Press

Under Veritas’ ownership, complaints ballooned in response to construction projects that residents said inconvenienced them or seemed unsafe. Other complaints pointed to mold, infestations of bedbugs and rats, broken windows, worn-out mechanical systems and peeling lead-based paint.

Veritas is the target of a lawsuit by 106 tenants living in 39 buildings — the focus of this article’s analysis — who allege the company has neglected living conditions and subjected them to noise, debris and stress from renovations on newly vacant units in order to encourage turnover. New tenants can be charged much higher rents under the city’s rent regulations. The suit was filed last October and expanded in December to include more plaintiffs.

Veritas has denied what it called the lawsuit’s “unsubstantiated allegations.”

The Public Press findings represent only a partial image of Veritas’ track record. A fuller picture would require tabulating all complaints and their outcomes, which multiple city departments record in different ways. This stymies efforts to define the full arc of trends — for any landlord.

The Public Press explained how it had performed its analysis so the company could weigh in on the conclusions and methodology. Veritas chose not to do so.

“We have not spent the time to try to re-create whatever analysis you performed,” Heckmann said, “because, frankly, it is based on false assumptions and a false narrative” that “appears to have been ghost-written by counsel for plaintiffs.”

He added that Veritas sometimes incurs notices of building-code violations — known in the industry as NOVs — when attempting to comply with recent citywide ordinances, including earthquake retrofits.

“Such work will sometimes result in complaints or NOVs, such as for not having a necessary permit,” he said. “To the extent such issues arise, they are promptly addressed.”

Trading Blame

Heckmann said an increase in complaints is likely due to activists and attorneys who discourage telling Veritas about their habitability problems. Instead, they “encourage the filing of complaints with the City as part of their litigation strategy” to “paper the record,” giving the false appearance that Veritas is neglectful, Heckmann said.

“They are worried that, if they give us fair notice of an issue, we will promptly fix it,” he said. “And then what happens to their media campaign and their lawsuits?”

Ryan Vlasak, one of the attorneys representing the tenants, commented via email about Veritas’ claims by saying it “has consistently blamed everyone but itself for the fact that tenant complaints significantly increase whenever it acquires and assumes management over another building in this city.” Vlasak said many plaintiffs complain in writing directly to the company about “habitability defects, nuisance construction, tenant harassment, and wrongful eviction attempts on a regular basis — but to no avail.”

Brad Hirn, a community organizer at the Housing Rights Committee of San Francisco who frequently assists Veritas tenants and represents them in disputes, said that he and his organization had no agenda to “paper the record.”

“We have an agreed-upon protocol” when counseling tenants on how to resolve habitability problems, Hirn said. “We encourage them to correspond directly with management first. We routinely help tenants to write those letters to management. We’ve had that protocol for years. If tenants are not getting the response or service they need, we tell them their next option is to file a complaint with DBI,” referring to the Department of Building Inspection.

Hirn also said that the plaintiffs’ attorneys had never asked him to go against protocol and direct tenant complaints to the building department instead of Veritas at the outset. “Oh, my god, no. Are you serious? No,” he said.

Hirn offered one explanation for the increase in official complaints: Better-informed tenants.

Veritas has frequently petitioned the city’s Rent Board to pass along expenses in the form of legal rent increases, including for certain types of construction, Hirn said. By attending the Rent Board hearings, many Veritas tenants have become especially savvy with engaging the city’s bureaucracy — and they might be more likely to file complaints than tenants of other landlords.

Complaints and Violations Jump

Veritas, which had a reported value of more than $3 billion last year, bought the 39 buildings from February 2011 to May 2018. It began growing its empire in earnest a decade ago, when the housing bubble’s rupture dropped real estate prices and the notorious Lembi family — which owned more buildings and was sued by the City Attorney for allegedly mistreating tenants — went bankrupt and sold off much of its holdings to Veritas CEO Yat-Pang Au.

By late March 2019, the corporate landlord’s tenants had filed 392 building complaints, 146 of which inspectors elevated to code violations. That means the number of complaints more than doubled under Veritas, and violation notices rose 62 percent.

The Public Press asked Veritas repeatedly for its own tallies of tenant complaints and notices of building-code violations for the properties, but the company has not provided them. In late February, Heckmann said only that there were 18 unresolved violations at the time, “which means most buildings don’t have any.” Veritas says it tracks complaints through a third-party service.

Complaints and notices of building-code violations are hard to analyze using city records. Department of Building Inspection data do not organize them by categories of problems, said James Sanbonmatsu, a senior housing inspector. So the Public Press read their descriptions in order to tally and sort them into categories.

Before Veritas bought the buildings, the most commonly reported problems fell under general maintenance issues, at 20 percent of the total. This included deteriorating paint, cracking floors and walls, broken windows and poorly kept garbage areas. The next-most-common issues related to construction work, as well as plumbing or water damage — both at about 9 percent.

Tenants Raise Construction Issues

While general maintenance was still the most reported problem after Veritas acquired the buildings, construction became a more widespread vexation, at 15 percent. Many people complained of “work being done in dangerous manner,” or said that the owners had not done enough to disclose the nature and scope of the work.

“Construction is going on within the building and there does not appear to be any permits,” read an August 2017 complaint from a tenant at 516 Ellis St. “No permit signs are posted and no permits come up on the online permit search.”

“Unit above has construction with no prior notice to tenants,” read a September 2015 complaint from a tenant at 1819 Golden Gate Ave. “Part of ceiling almost fell on customer’s son.”

Others said that construction areas were not properly sealed, sending dust into the rest of the building. Some people speculated about what was in the dust. “No containment for lead and asbestos disturbance,” read a July 2016 complaint for 655 Stockton St.

Inspectors visit buildings in response to complaints and cite the owners for any code violations they discover.

‘Repair Before the Inspector Arrives’

While Veritas owned the buildings, only 9 percent of the construction-related complaints led to violation notices upon inspection. By comparison, more than half of the general-maintenance complaints led to notices, as was the case for complaints about mold.

Does that mean the construction complaints were unfounded?

Not necessarily. Greentree Property Management, a Veritas subsidiary that operates its buildings and deals with tenant issues, is a client of San Francisco-based Violation Radar, which alerts property managers when the city receives complaints. The service claims on its website that it helps landlords “repair before the inspector arrives.”

Violation Radar’s creator, Devon Bradley, said Greentree subscribed to the service in 2017. He called Greentree “the most proactive” at logging into the platform to check on complaints, though he said this was his personal observation rather than a data-driven measurement. He said Violation Radar tracks nearly 1,000 buildings, but would not say how many landowners use his service in San Francisco, the only city where it operates.

In other words, it is possible that few of the construction complaints led to notices of violation, referred to in the industry as NOVs, because building managers fixed problems soon after checking Violation Radar, rather than because there was nothing to fix, said Hirn, of the Housing Rights Committee.

“The official documented NOVs don’t tell the whole picture,” he said.

But he said the official record of complaints itself understates the extent of problems in many buildings, because of “basic fear about lodging a complaint, even if it’s anonymous, against your landlord.”

Mold, Lead, Bugs and Other Vermin

Complaints about mold also became more frequent after Veritas acquired the buildings, as did complaints about lead hazards and pests like rodents, cockroaches and bedbugs — all of which fall under the purview of not only building inspectors but also the Department of Public Health.

Unlike the building inspection department, the health department does not maintain a frequently updated online database of complaints and code violations.

A bedbug infestation this spring at 1260 Broadway, an 18-unit Veritas property cited in the lawsuit, was one example of a problem the department’s lack of transparency obscured from public view.

Evan Meagher and two other affected tenants are plaintiffs against the real estate giant. After telling the building manager about the bedbugs, they also complained to the health department, unwittingly routing the complaint away from the building inspection department’s more visible dataset. The health department responded by sending an inspector.

The health department verified the infestation in April and found the insects in “not just one unit,” said spokeswoman Veronica Vien. Neither she nor Heckmann provided a count of units affected

In an email, Heckmann wrote that “the unit that was the source of bedbugs did not report it at all, but a neighbor who later saw a few bedbugs (as they started to spread from the apartment that was the source) advised us — in March.” Veritas “responded quickly to eradicate the problem in cooperation with the Department of Public Health’s exacting monitoring and requirements. We were scrupulous about addressing the problem, and the building is an attractive, well-maintained building.”

Meagher described a different experience, in which Greentree and the building manager seemed to lack a sense of urgency to resolve the problem.

“Maybe I’m being overly cynical,” he said, “but they would love if this was so terrible that people would move out. Because it’s a rent-controlled apartment and they could just charge higher rents to new people.”

Meagher had been getting mysterious bites for months. When it became clear that bedbugs were the culprit, his nerves started getting the better of him.

“For the first four nights, every time I would feel the slightest thing, I would flip on the lights,” he said. “That happened about four or five times a night. Kind of comedic, in the grand scheme of things, but also not that funny in the moment. A tragic tableau.”

Slowly, he acclimated. “I feel like I’m starting to accept my own disgustingness,” he said in late April, about three weeks after his neighbors discovered the spreading infestation. His apartment was about to get its third and final weekly spraying from the pest-control officer. In his living room, stacked halfway to the ceiling, were the bulk of his and his wife’s possessions, wrapped in plastic bags in an effort to keep the bugs out.

“My sister-in-law is supposed to visit us this weekend,” he said. “And I’m like, are you cool with being around lepers?”

1260 Broadway is one of 39 buildings named in a lawsuit filed by 106 tenants against Veritas, which says it owns more than 230 rent-controlled buildings. Photo by Noah Arroyo // San Francisco Public Press