(Image: Harry’s Guest House)

The growing business family around Bellevue Ave’s Harry’s Fine Foods is facing a potentially serious financial setback over its use of a neighboring duplex it purchased from a beloved neighbor to serve as a bed and breakfast guest house.

The City of Seattle revoked the Short-term Rental Operator License for Harry’s Guest House in a February decision after it was determined the property was making more than one unit available for rent, a violation, the city inspector who found the listings on Airbnb said, of the license requirements in the program developed to ease and regulate the use of private Seattle homes on rental services.

An appeal for Harry’s owners Jake Santelli and Julian Hagood has been filed with the Hearing Examiner.

“Revoking our license would force us out of business, causing significant financial hardship,” Santelli writes in the appeal (PDF). “Without the ability to operate, we would lose our primary source of income, making it impossible to meet our financial obligations, including our mortgage payments.”

In the February 28th appeal, Harry’s asks the city to allow the Guest House to continue operating “while we work toward compliance.”

A spokesperson for the city’s Department of Finance and Administrative Services said they could not comment specifically on the licensing decision for Harry’s “as it is an active case under appeal with the Hearing Examiner” but said that city inspectors “conduct regular compliance checks on properties that advertise short-term rental opportunities to ensure compliance with the City’s short-term rental ordinance.”

The purpose of the ordinance is, in part, to “balance the economic opportunity created by short-term rentals with the need to maintain supply of long-term rental housing stock available at a range of prices,” the spokesperson said.

According to the license revocation document, the issue dates back a year to March 2024 when the listings for multiple units for rent were first found and the city says Harry’s was notified of the problem.

Compliance is a long, expensive path. The property owners either have to operate the Guest House with only one unit for rent, undertake an expensive and possibly impossible change of use process for the old house, or pursue an avenue by which they establish an Accessory Dwelling Unit use for the property — and get the city’s inspectors to sign off on it.

According to the city, architects with Harry’s were working on the ADU plan but the process was still underway with the Seattle Department of Construction & Inspections as of February when the license was finally revoked.

According to SDCI, the permit for a change of use from “apartment (multifamily residential) to single family dwelling unit with attached accessory dwelling unit” is under review.

Reached by phone, Santelli was tending to another major new Harry’s project. He and Hagood have a new baby daughter they announced in an adorable social media post. The Harry’s guys haven’t returned our messages about the situation.

CHS reported here last year on the opening of Harry’s Guest House on E Mercer next to their Harry’s Fine Foods restaurant. When they learned their friend and neighbor Winnie was moving out and leaving her beloved home behind, Santelli and Hagood moved to make the house part of their presence at the corner, shelling out $1.2 million for the house.

The land use issue over the Guest House isn’t the first time Harry’s has faced a challenge with city permits. In 2018, CHS reported on Harry’s run-in with red tape over its 200-square-foot Chandelierium addition.

For now, it is business as usual at the corner. With the paperwork process underway for changing the property’s permitted use with the city and the Hearing Examiner case pending, the house, its Lucy Suite and its Winnie Suite remain available for guests at harrysguesthouse.com.

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