SOUTH LAKE TAHOE, Calif. – The chainlink wrapped and boarded up Sunray Hotel, described as an eyesore by some, has accrued over $50,000 in fines from the City of South Lake Tahoe.

That’s according to the city’s Director of Development Services, Zachary Thomas, who provided City Council with an update on the property along with the Motel 6 building at the City Council meeting on May 7.

“It appears, it would be staff’s opinion,” Thomas explained to council, “That the building has relatively reached the end of its life, barring some level of pretty extreme reconstruction of it, redevelopment.”  

The building has been vacant and boarded up since September 20, 2022, according to a city report. City staff had conducted an inspection there in March 2022 and found dangerous health and safety conditions that violated at least nine different codes, including the California Fire Code, as well as state electrical, health and safety codes.

Since the property became boarded up, the hotel has fallen subject to the city’s code pertaining to abandoned and damaged structures, accruing fines.

“It’s an eyesore,” Erick Asbury said during public comment at City Council.

The property was in escrow as of city council on April 23, but fell out of escrow sometime within the two weeks leading up to the May 7 meeting. The property is also subject to a lawsuit filed by Sep Hines, who was a prospective buyer.

In the court complaint filed July 7, 2023, Hines alleges breach of contract as well as unjust enrichment, among other claims and allegations, against current property owners and sellers Yan Jiang, Fu Jiang and Fragranice Inc. The lawsuit claims seven figures worth of damages when sellers entertained another buyer after Hines placed over $400,000 into the property.

According to the court document, Hines and the owners entered into a written contract for Hine’s purchase of the property and agreed to close escrow within one year. That agreement was made around March 25, 2022 and allowed Hines to make repairs and address other issues on the property during the one year.

It further outlines Hines’ actions during that year of evicting tenants—listed as vagrants, homeless persons and drug addicts—bearing the cost to do so as well as expending around $320,000 on construction costs to get the motel code compliant. During this period, the property was identified with foundation issues, jeopardizing Hines’ ability to get a loan for the property.

The complaint says Hines requested a 30-day extension from Jiang and Fragranice Inc. It was during this time, the document alleges, that sellers had another buyer and never intended to allow Hines close escrow on the property.

It’s unclear whether the escrow that fell through between council meetings around late April and early May involved Hines or the new sellers.

Thomas told council that although the city does not have funds to purchase and redevelop the property for housing at this time. City staff would work with a new owner, should a sale occur, to address violations on the property and expedite redevelopment. The hotel is not publicly for sale. The prior sale attempt was entered into privately.

Thomas highlighted the property is within the currently proposed Mid-Town Area Plan boundary and would fall under uses and redevelopment potential through the plan that kicked-off at that very same meeting.

Mayor Cody Bass proposed a receivership as a means to expedite demolition of the building while the parties are held up in court, also inquiring if the cost could be placed on the property as a lien.

“This could be a candidate for a health and safety receivership, potentially,” City Attorney Heather Stroud said.

However, Stroud explained pursuing a receivership is itself a lengthy process in which the city would petition the court. Receiverships typically use equity in the property the city attorney said and does not know how much the Sunray has. If none, the city would not be able to put a lien on the property for the demolition without permission from a court. Another element Stroud explained is the receivership does not grant the city control of the property. It grants it to a receiver, which is a separate entity.

A majority of councilmembers expressed interest in the idea of a receivership,

Stroud asked for time for her and code enforcement staff to research the prospect and look into potential receivers before bringing the item back to council.

Council also discussed the Motel 6, recently acquired by the California Tahoe Conservancy. The Tribune will provide an update on Motel 6 in a future article.