Tenants of the Villas Parkmerced, one of San Francisco's largest apartment complexes, filed a class-action lawsuit against the company, accusing it of illegal rent increases Wednesday.

The tenants claim coupons issued by the Villas Parkmerced are a scam that skirts San Francisco’s rent control laws, which permit a 1 percent to 2 percent rent increase per year.

Tenant Lee Parmelee, an executive administrative assistant with Great Bay Bank, said she recently learned about the lawsuit.

"My rent jumped by almost $450 in January, so I filed a petition with the rent board," Parmelee, an SF State geography alumna, said.

The tenant's attorneys, who are seeking more plaintiffs from the 3,456-unit complex near SF State, said tenants signed a one-year lease for $1,675 a month and received 12 “bonus bucks” coupons worth $350 each.

Tenants could use the coupons, which expired at the end of their lease, at their discretion. After the coupon deductions were made, each tenant paid an average of $1,325 per month for one year.

At the end of their lease the rent was raised to $1,703, a 28.5 percent increase from $1,325, or a 1.7 percent increase from $1,675.

The lawsuit is seeking a court order to place all the leases in question back to a rate comparable to $1,325 plus a 1.7 percent increase.

"We are also seeking restitution for rent over-paid by my clients, emotional and punitive damages,” according to Fredman.

Fredman said the exact total the class action would seek depends on the amount of plaintiffs it will include and the amount of time since each plaintiff used the bonus bucks.

“It will be in the hundreds of thousands,” Fredman said.

Parmelee signed her one-year lease with the Villas Parkmerced in January 2005 with a bonus-bucks offer. She said she was told she could sign up for another year under the same offer in January 2006, since the company would not allow a two-year lease.

“When I went to renew my lease they told me I had to wait for it to expire," Parmelee said. “Then they told me the bonus bucks are only for new tenants."

Parmelee said she will join the class action, but she felt intimidated by the Villas Parkmerced legal team.

“They had two attorneys, their own court reporter, the general manager, the lead sales person, and a real estate appraiser all against me at the rent board hearing,” Parmelee said.

Villas Parkmerced attorney Dave Wasserman, with Wasserman-Taxman Attorneys at Law said the lease contracts in question clearly stated the bonus bucks were revocable at any time. He also stressed the San Francisco Rent Board did not consider the offer a scam.

"The intent was to fairly compete in a very competitive market for good tenants. The bonus-bucks coupons were not a permanent feature of the lease," said Wasserman.

The Villas managers are no strangers to the stringent rent control ordinances in the city. They are under close scrutiny of the Rent Board, and therefore would not risk defrauding tenants, Wasserman said.

Stellar Management, a New York real estate owner and operator, and Rockpoint Group, a real estate investment firm, bought the complex just more than a year ago.

One of San Francisco's oldest and largest apartment complexes, The Villas Parkmerced was built to house returning World War II veterans.

Wasserman suggested an upcoming rent board decision will determine any future litigation, including the class-action lawsuit.

Fredman said the San Francisco Rent Board has 19 cases, two of which were already settled in favor of the plaintiffs.

“If this scheme is legal, then rent control is over in San Francisco,” Fredman said.

The San Francisco Rent Board will hear the matter at 25 Van Ness Ave. on Oct. 17 at 6 p.m.