The former owner of a large Evandale Avenue apartment complex has filed a lawsuit against the city that claims he lost as much as $24.5 million when the city opposed his efforts to renovate the apartments after his redevelopment project fell through.
Plaintiff Sal Teresi claims that city officials, under the direction of former city attorney Michael Martello, engaged in "capricious and arbitrary conduct" to prevent him from renovating the 64 vacant apartments at 291 Evandale Avenue, which he ended up selling in the middle of the recession. As a result of the city's actions, Teresi claims he lost $4.5 million in rent over five years and $16-20 million from appreciation of the building.
The issue took center stage in a City Council meeting in October of 2009. Teresi's lawyer claimed then, as Teresi's new lawyer claims now, that Teresi had a right to re-roof and repair the buildings without being subjected to a design review process, which the city officials told Teresi was required June of 2008. In the 2009 meeting, City Attorney Michael Martello disagreed, saying that "under their theory they could rebuild the entire complex" without any oversight.
Teresi's troubles began when he had lined up a buyer for the property just before the recession hit, and decided to vacate the apartments before closing escrow, according to the claim Teresi's lawyers have filed in the case. The sale fell through when the real estate market tanked. After unsuccessfully trying to find another buyer, Teresi needed to rent the apartments again to pay his bills.
Despite the city's orders against it, Teresi got a roof permit through the city's website and began work on the buildings in October of 2008, work which his lawyers say was within his rights as the project maintained a "conforming use" on the property. When the city discovered this, the project was halted, the buildings were red-tagged, and a fence was put up to keep workers out.
While the buildings sat, Teresi claims unfinished roof work allowed rainwater to damage the interior of the apartments, causing the "rank odor" and mold that city officials later complained about.
The City Council voted to uphold the denial of the roof permit to Teresi in 2009. Shortly after the complex was sold, the council approved detailed plans from Bay West Realty to renovate the apartments in May 2010.
Poor conditions cited
Having a new owner pleased neighbors, who apparently didn't trust Teresi and opposed his renovation of the apartments. They saw that the complex was allowed to remain in poor condition for years, with garbage littering the courtyard and the buildings in disrepair. Neighbors often said crime went down when the complex became vacant.
Defending the move to red tag the buildings, Zoning Administrator Peter Gilli cited "life safety issues," such as illegal exterior water heater sheds mounted in spaces formerly used as exits and walkways. Meanwhile city staff observed workers at the complex doing unapproved work on the buildings, with workers camping out at the complex in the process, Gilli said in a staff report. "Staff was concerned people would start occupying an uninhabitable building," Gilli wrote.
In 2008 the city reported that "numerous structures have rodent infestation, insect hives along with dry rot and signs of termite destruction. Numerous units lack working bathroom fixtures, kitchen appliances, lighting fixtures and heating devices."
Other problems reported by city staff include the "presence of rank odor," likely from a broken sewer line, broken concrete stairs and metal guardrails, missing smoke detectors, mold, unvented water heaters and numerous electrical violations.
Teresi's lawsuit claims that the city opposed his renovation work in part because the City Council spent $125,000 of the city's affordable housing funds to relocate the 250 residents of the apartment complex. According to Teresi's claim, "the bulk" of that money went to city administrative costs, which city planners say is untrue. As the Voice reported in 2008, the Community Services Agency administered the relocation funds. The CSA used only a small portion for administrative costs.
City Attorney Jannie Quinn said she was waiting on a revised claim from Teresi's lawyers after several issues with the claim were brought up in court. Quinn had no comments about the ongoing case, but she did say that Teresi still owes the city $97,000 in planning fees for processing his 2007 development request, which could result in the city filing a counter suit against Teresi.
Teresi's lawyer, Susan Reischl, did not respond to a request for comments.