Stanford Terrace Inn owners sue Palo Alto to halt demolition

The owners of a dilapidated building that used to house the Stanford Terrace Inn are suing Palo Alto in federal court in an effort to overturn the city’s demolition order for the property.

The lawsuit, filed July 16 in the U.S. District Court of Northern California, alleges city code inspectors “disproportionately singled out” the property at 531 Stanford Ave. for “aggressive enforcement action.” Additionally, the suit alleges city officials discriminated against property manager Sophia Y. Huang because she is Asian American.

“The actions of City officials demonstrate this selective enforcement was based upon the race and ethnicity of the Ownership’s representatives who are Asian-American,” the lawsuit states. “One building official made derogatory remarks concerning the Ownership’s representative being Asian made her incapable of complying with City ordinances and looking for cheap ways to fix code issues.”

It’s not the first time the owners of the building in the College Terrace neighborhood have fought demolition orders and code violations for the building. Stanford Orion, the named property owner in the lawsuit, converted the Stanford Terrace Inn from a hotel to a residential complex in 2020 after the hotel lost its customer base during the pandemic. It then made rooms available for long-term stays, mostly by Stanford faculty members and students.

Since then, Stanford Orion and the city have been embroiled in a legal feud over illegal occupancy and code violations. A city inspection in March 2024 found a host of hazards, including a worn-out sprinkler system, flammable liquids that had been improperly stored and an exit door on an upper floor that featured only a deadbolt, making escape impossible. The ceiling hallway also had plastic film that would allow a spreading fire to accelerate, according to Fire Marshal Tamara Jasso.

When city officials were preparing to approve a demolition order in April for the building due to severe fire and safety risks, the attorney representing the property owners called the listed code violations “inaccurate, immaterial, grossly overstated, or which have already been addressed.”

“Further, these violations are only relevant to issues or habitability and do not establish that the building has been fifty percent damaged, decayed or deteriorated from its replacement value,” attorney Brian O’Neill wrote in an April letter to city officials.

O’Neill also wrote at the time that the demolition timeline was unreasonable because it required work during the rainy season.

Another allegation that emerged in prior letters and the most recent lawsuit is that the city was intentionally delaying approval of a new housing development proposed for the site.

The building was vacated in spring 2024, and Stanford Orion proposed two separate housing applications, the most recent of which plans for 22 three-story homes. O’Neill previously argued that the city had instead wanted the property to be redeveloped for high-density housing, and officials were dragging their feet on Stanford Orion’s proposal because it was not what they had envisioned.

On April 20, the City Council approved the demolition order for the building with a six-month deadline, rejecting O’Neill’s appeal letter.

Now, the property owners are turning to the courts to seek an immediate stay on the demolition order as well as payment for attorneys’ fees and other damages. The lawsuit also demands a jury trial.

“The City’s sudden (enforcement)  actions, after years of engagement regarding potential redevelopment of the Property, appeared to be in retaliation for the Property owner’s decision not to sell the Property or repurpose it in accordance with the City’s preferred high-density housing agenda,” the July lawsuit states.

The city has not yet filed a response to the lawsuit.

This story originally appeared in Palo Alto Weekly. Riley Cooke is a reporter at Palo Alto Weekly and Palo Alto Online focusing on city government.