Predatory contracts, tenant neglect and unreturned deposits predated housing scandal
In April, a housing agency leasing apartments mainly to UC Davis students from China quietly stopped forwarding the students’ rent to their apartments, setting off a chain of events a lawyer would later call the “most interesting case” she has ever worked on.
After the agency, WeHousing, neglected to give the students’ April rent money to the apartments, property managers at nine Davis apartment complexes served a total of about 100 students eviction notices. “It was a big shock,” said Guanlin Li, a computer science student from China who had paid that month’s rent to WeHousing as usual.
According to WeHousing founder Alan Gao, the company went into debt after failing to fill about a third of their units for the year. The company leased apartments in Davis as well as in several other college towns across the country. In April, some of those loans came due. “For April and May, we used most of the rents collected to pay off loans,” Gao said.
After students brought the mass eviction notices to UC Davis’s attention, the university, City of Davis, and apartments worked together to find a solution that kept students in their apartments and cut WeHousing out of the equation.
Gao told media outlets and apartment managers the company wanted to get out of its contracts with the apartments to limit future losses. However, accounts by students, property managers and lawyers indicate that Gao did everything in his power to prevent the apartments from terminating the contracts, thereby forcing the property managers to “evict” the company in order to get their units back.
“If he wanted to walk away, he could,” Kevin Schultz, the onsite manager at the Drake Apartments, said in May. “Instead, he’s demanding the residents continue to pay him while he doesn’t intend to pay us.”
Sometime May, Gao stopped answering calls and went into hiding. One apartment representative went to Gao’s home and delivered an eviction notice in person, only for Gao to reportedly “pretend not to be who he is” to evade the notice. Another property manager hired a law firm, which sent eviction process servers to Gao’s home in Pleasanton every day for two weeks. They found no trace of him.
“The man just disappeared,” said Jingying Lu, a UC Davis student who graduated in June. While he was hiding, Gao continued to demand rent payments from the students, threatening them with late fees, defaults on their credit reports, and legal action if they failed to pay. The students were scared, but they no longer trusted WeHousing. “It was very hard to believe (Gao),” Li said. “That’s two months they didn’t pay rent to Drake.” They decided to hold onto their money until the situation was resolved.
Toward the end of May, one apartment complex succeeded in evicting WeHousing by serving the notice at the California Secretary of State’s office. Gao only found out when a student calling to track him down happened to mention it. Eventually, other apartments also won their units back from WeHousing.
The Davis Police Department opened an investigation into Alan Gao in the spring. Deputy Chief Paul Doroshov said this week the investigation is still ongoing. Police have not yet determined whether Gao committed any criminal violations.
Since The Enterprise first reported on WeHousing in May, subsequent accounts of tenants and property managers — as well as documents obtained by The Enterprise — revealed a longer history of deceitful business practices by the company.
The contracts students signed with WeHousing state that they do not constitute a landlord-tenant relationship, but a licensor-licensee relationship. “None of the rights or protections afforded to tenants are afforded to licensees,” the contracts state. The subtle technicality meant the students had no exclusive right to their own rooms, and the company could consider them trespassers in their apartments and evict them at any moment without due process.
Typically, license agreements are used for things like hotel rooms, kiosks or billboards. They are for the short-term use of a space or property, while leases are for exclusive long-term occupancy. “It is uncommon for someone renting their own room for a full year to enter into a license,” said Marc Janowitz, a supervising attorney of housing practice at the East Bay Community Law Center.
While the terms are clearly stated in the WeHousing contracts, students said they had no idea they were entering into an unusual type of housing agreement and signing away their rights. “WeHousing didn’t explain anything about license versus landlord,” said Kang Sheng, a UCLA student from Singapore. “I don’t think any of us expected anything more complicated.” Many of the students signed the contracts before arriving in the U.S.
Several months after moving in, Sheng said, he realized there was something odd about the housing agreement. “WeHousing rented out the living room. Then there were situations where people would come and stay for a night and then leave. We didn’t know who they were,” Sheng said. “We felt personally unsafe.”
The lack of a landlord-tenant relationship may have also limited the students’ recourse for recovering security deposits. Jongseok Han, a UC Davis exchange student, sublet his room to another student in January 2019 when he moved back to South Korea. The new tenant paid WeHousing a $1,400 security deposit so that Han could get his deposit back, but WeHousing never returned Han’s deposit to him.
“The bottom line is that it’s an attempt by the landlord to diminish the legal rights of these tenants. This way, the landlords have more power over them and can intimidate them in a variety of ways,” Janowitz said.
Aside from using predatory contracts, WeHousing gained a reputation among property managers as being sloppy and disorganized. By January 2019, the Drake Apartments had informed Gao they would not renew their lease with WeHousing for another year.
Apartment manager Kevin Schultz said WeHousing frequently neglected to inform the apartments when new students were moving in. “During fall move-in we would get people asking for apartment keys. They didn’t know what apartment number they were in and we didn’t know either,” Schultz said. “It was extremely confusing and frustrating dealing with [WeHousing].”
While WeHousing went into business to cater to the specific needs of international students, the company appears to have taken advantage of that community’s vulnerabilities. “Many scams are perpetrated against our international students because they come from countries where these types of scams don’t happen,” UC Davis Police Chief Joe Farrow says in an informational video made by UC Davis Services for International Students and Scholars.
Most of the students renting through WeHousing returned to China in June without getting back their security deposits. Nine students at the Drake apartments had paid rent up front for the final six months of the lease, and did not get anything back. The apartments also lost a lot of money. Schultz estimated WeHousing owes the Drake Apartments about $100,000 in unpaid rent.
— Reach Caleb Hampton at 530-747-8082 or champton@davisenterprise.net.
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