Short term rental company Sonder is suing to terminate the lease it entered into last year at 2100 Market Street, a 52-unit residential development at the intersection of Church and Market Street.

Sonder had planned to use 2100 Market Street as a flagship property for Sonder Residences, which offer furnished apartments for stays of a month or longer.

In a lawsuit filed on July 2 with the San Francisco Superior Court, Sonder claimed that the recent changes in the city’s legal requirements due to the pandemic have significantly impacted its business to offer corporate housing. The pandemic has led to remote work and halted corporate travel.

In its court filing, Sonder said that “the shelter-in-place orders have decimated Sonder’s ability to market and lease available units at the Premised.” Furthermore, the city’s expanded moratorium on residential evictions means that tenants can “effectively stay rent-free for months” — until January 2021 before landlords can collect back rents.

Sonder has invoked the early termination provision in its 5-year lease contract because its business model and operations have been rendered ‘unviable’ from emergency measures instituted by the city.

The defendant in the lawsuit, 2100 Market-Church LLC headed by local developer Brian Spiers, countered that as long as Sonder is able to operate in some capacity, even if “in a severely diminished state”, it can’t void its obligation. “Spiers alleges the company has not paid rent since March,” according to the SF Business Times.

This comes at a difficult time for San Francisco’s residential market. The rental market recently has been gripped by plummeting prices as people have left the expensive city for cheaper accommodations elsewhere and better quality of life, especially since work can be done remotely now. SFist reported that one-bedroom rent prices in San Francisco have fallen by 11.8%.

Sonder, meanwhile, closed a Series E funding of $170 million in June, giving the company a valuation of $1.3 billion.

photo credit: brian spiers development

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Categories: Stays