Longtime NYC apartment building owner. Trying to stay in my lane. There are a couple of million apartments in NYC. I am almost certainly not your landlord.
New York, USA
Joined February 2022
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"I know the rent is in arrears. The dog has not been fed in years. It's even worse than it appears. But it's alright." -- Garcia/Hunter
I approved a rent stabilized tenant's sublease today (which I'm legally required to do). The tenant pays about $2400 for an apartment the market rent of which is probably around $2600 or so.
I had to hand hold the tenant through the whole process, rejected the first proposed subtenant, and explained the risks involved ("yes, you also need to see your subtenant's finances -- you are still liable if he doesn't pay you the rent under the sublease").
It will probably be fine but if the subtenant defaults or doesn't surrender the apartment at the end of the sublease, my tenant is in a world of hurt due to the dysfunctional NYC Housing Court.
October 1, today, is the start of the NYC Rent Stabilization year which amusingly is the day that I increase employee salaries (for decades now). Everyone who gets a W-2 from my family business is getting at least a CPI increase but that can't last forever.
We don't own the neighborhoods that the Mayor and his comrades have figuratively set on fire (South Bronx, Northern Manhattan, Central Brooklyn) but the bulk of our apartments are rent stabilized and without significant change in the law the carnage will come for us too.
It's time for stupid rent stabilization games. Probably because we own a similar albeit occupied townhouse in the neighborhood, last weekend I got a postcard this listing: lesliegarfield.com/propertie…
It's a vacant 18 foot townhouse that was probably built as a single family house in the late 1800s or early 1900s. DOF has it listed as a Converted Multiple Dwelling which means the hallways probably have fire sprinklers, and it has are no fire escapes. HPD's website says the townhouse has nine Class A apartments, and DOF's website says the townhouse is being charged $80 annually in Rent Stabilization fees (i.e. four of the nine apartments are/were rent stabilized).
The listing says that the "building is currently configured as nine rental apartments, allowing its next owner to immediately renovate or reimagine the property without the complexity of existing tenancies. Beyond a spectacular single-family conversion, buyers may also look to create a sophisticated live-with-income residence or a thoughtfully designed multi-generational home with separate private living spaces for family or friends."
I'm a fan of reversions of houses like this to their orginal form. I'm sure that the Rosenthals and Weavers of the world are not (and think the converted apartments should remain in perpetuity). But there are rent regulation traps in a conversion situation.
So here it goes. Imagine a rich banker buys the townhouse and reverts it back to a single family house at a cost of $3.6 million on top of the purchase price ($600 psf renovation cost). He gets transfered to London and rents it to another banker at his firm who stops paying rent and claims he's rent stabilized. In light of the HSTPA and the DHCR's position on subtantial rehabilitiion (like in Peak Capital), who wins and what's the rent? When the owner comes back from London can he nonrenew the tenant? Doe he have an immediate and compelling need? The "live-with-income" scenarios are just as bad.
Finally, for the record, I'm pretty sure that every townhouse broker I've spoken with since HSTPA was enacted are aware of the legal danger of stabilized units in even vacant townhouses (nobody's trying to pull one over on anyone here).
We rented a RS apartment in a nice outer borough elevator building today. There is nothing unusual about that. But what's interesting about the story is that our new tenant was getting scammed and decided to double check.
I got a call Friday afternoon. The caller asked for me or my brother (we are officers listed at HPD Online) and wanted to know if we had an apartment to rent at the building. I said that the broker had it, we pay the broker*, and gave the broker's cell.
I asked the caller how they knew about the apartment. S/he responded that it was listed at an apartment website I hadn't heard of. I looked up the listing. The apartment was there listed by a name and number that I was unfamiliar with. I called the number and got a not in service message.
It turns out that our new tenant met my agent, saw the apartment, was qualified, and took it. My broker dropped off the lease today and said that what happens is that scammers take listings from Streeteasy (which apparently checks brokers' license numbers), puts them on other websites (usually with an unusually low rent), and asks for money to be Venmo-ed before showing the apartment. For some reason our new tenant (who works at a STEM job) got suspicious and double checked. My broker it happens repeatedly. Complaints to the City and State bodies haven't been productive.
*My biggest problem with the FARE Act is that it imposed an additional cost on owners while limiting our ability to pass the cost through (we have some flexibility with preferential rents). I think I get my money's worth renting through brokers.
Today’s news is that the RGB voted zero increases for one *and* two year renewals for the year starting October 1 and ending September 30, 2027. I’m not really surprised about the one year but a bit surprised about the two year.
I have heard a bit about suing the RGB. Unless there is concrete evidence of malfeasance (which recently resigned RGB member Christina Smyth may have), I doubt the courts would want to get involved in the Board’s sausage making.
That said, I think this decision is just one more straw that will ultimately break the back the rent stabilization system which does a very poor job of rationally allocating its benefits and burdens (the system's flaws are well known).
It's pretty clear that the government can constitutionally regulate rental prices mostly to prevent price gouging. What I think the courts will ultimately hold is that the government cannot force owners to rent apartments for less than prudent costs plus a market return on capital (make the cash flows more variable by things dysfunctional courts causes the market to require a higher return). I’m not aware of any cases directly on point (I’m an owner/manager, not a constitutional lawyer) but there is a whole body of utility rate making law a long these lines.
Does this apply to individual apartments or buildings as a whole (the takings law "denominator problem" which is an important issue in the SPONY case)? That's unclear but I lean toward individual apartments. Imagine if the city included free housing for teachers for its new child care program and placed them in vacancies in luxury buildings paying the owners rent of $1/mo. Does anyone think that wouldn’t be a taking no matter who profitable the building was?
What should the industry do? It should round up plaintiffs with unprofitable buildings and sue the City and State to make up for their losses. The RGB found that 9% of buildings with rent stabilized apartments have revenues that don’t cover operating costs (let alone provide a return on capital). This rent guidelines order will almost certainly increase this percentage.
The industry shouldn’t sue to change the rents. This is the City and State’s mess that they should pay for.
@erik_engquist has a good column about HPD dismissal requests here: therealdeal.com/new-york/202…
We did one in April for a small building where most of the violations were in an illegal apartment that we lawfully removed years before after taking over management. We handed the DOB plans and the sign-off to the HPD inspector -- the two agencies don't talk to each other.
The funny part of the story is that HPD wouldn't take a bank check from the building's bank because it was captioned "Teller's Check" even after having the clerk refer it to her supervisor. We had to replace it with a bank check from the management company's bank which was captioned "Official Check".
We have a strip of stores in Queens. The owner across the street has been building condos for more than six years (he starts, he stops, he restarts, etc.)
During construction @NYC_Buildings has written numerous ECBs relating to the construction, many of which (but fewer than half) are indexed (listed on BIS) against our building (which is *across* the street): Remaining open ECBs consist of two against his first contractor, five against his second contractor, and two against our LLC.
I haven't done anything with the ECBs written against our neighbor's contractors. I gave the first ECB written against our LLC to our regular expeditor (which I like) but they only got the minimum penalty (which I haven't paid) and I didn't appeal (I should have).
Today I had the ECB ("OATH") telephone hearing on the other violation against our LLC which was for not clearing snow from the construction site (a new three story building is specifically cited on the violation -- ours is a single story strip of stores). I handled it myself (I haven't been to an ECB hearing in 20+ years).
The DOB attorney emailed the picture of the construction site to me and the judge. We discussed it and they seemed to understand that the violation wasn't made against the right party. The DOB attorney looked up my neighbor's new building application and was apparently looking at a Google Maps picture (or equivalent) of my stores as he asked about them.
The DOB attorney should have requested that the case be dismissed but made "no recommendation" to the judge. I requested dismissal. She reserved decision. There is a possibility she rules against me.
I any case I do need to clean this up as we have other plans for the property. Last year I reached out to the Administrative Enforcement Unit. A few months ago at the suggestion of a friend, I wrote the Borough Commissioner (certified mail). Last month I resent that letter. I have heard from no one.
Does anyone have experience like this? Have an expeditor who they can recommend? Am I going to have to start an Article 78?
IIRC you are Princeton guy: dailyprincetonian.com/articl…
We were in housing court today. It was the first time on so nothing happened. Our tenant in a no pet building got a dog. We started a case so the tenant got a lawyer and then a psychologist's letter about the need for an emotional support animal. Fine. We dismissed the case.
Several months later same tenant got a second dog and dogs doing what they do, a litter was had (I don't know nor particularly care if it was intentional). The neighbors of course complained.
I've been doing this since long before the onset of ESAs. Still, this is the first time I ever sued someone for breeding dogs in a one bedroom apartment in the boroughs.
For anyone following along, the Kingston Common Council declared an emergency under ETPA authorizing continuation of rent stabilization in the upstate (anything north of the Bronx is upstate for me) city notwithstanding a 7% vacancy rate in their survey.
I'm happy to report that the mayor vetoed it. timesunion.com/hudsonvalley/…
I saw this morning in the NY Post that was a 4 alarm fire at 201 W. 107th yesterday. Fortunately, it seems that only there were only minor injuries among three tenants and a firefighter. teapawt.net/FDNY/status/1998435703…
At 8:20 Tuesday morning, the FDNY responded to a 4-alarm fire at 201 West 107th Street in Manhattan. Units arrived in just over three minutes. Firefighters and Rescue Paramedics escorted two civilians out of the building to be treated by EMS. One Firefighter was treated for a minor burn injury.
“This building is a six-story non-fireproof building with four apartments per floor. Upon arrival, we had heavy fire on the top floor and through the roof. Fire heavily involved three of those four apartments. The fourth apartment and some of the apartments below have heavy damage. We had a heavy collapse of the roof space into the top floor and also of the parapet wall into the street. The parapet wall is the extension of the exterior wall above the roof line. Our engine companies moved in very aggressively, and did extinguish a tremendous amount of fire, but due to the amount of fire and the structural stability, we had to remove them below that top floor and open up our tower ladders. These are large caliber streams, able to extinguish that fire,” said Chief of Fire Operations Kevin Woods.
The fire was placed under control at 10:30 a.m.
FDNY Fire Marshals are working to determine the cause of the fire.
I took a few minutes to look online and noted that the owners (no idea who they are) have owned the building since 1977 and took a $2.5 million mortgage from Flushing Bank (good lender) in 2018.
HPD says there are 21 apartments; DOF says it's a $25,050 sf building (subject to LL97 by 51 feet) with 20 residential and three non-residential units. DOF shows the most recent rent stabilization charge of $200 indicating that 10 units are subject to rent stabilization. Some of the remaining 10 or 11 units may be rent controlled. HPD shows no active lead paint regulation exemptions.
On the off chance that the owners or managers see this, I wish them well. Seal up the building and take a deep breath. There is a lot of work to do. My guess is that you will spend more than the insurance proceeds to restore the building.
Off the top of my head:
1. Hire a good public adjuster to negotiate your insurance claim. There are good ones and bad ones out there. Quality makes a big difference. Don't just hire the one your broker recommends or one who sounds good on the phone (I'm sure you have received many calls). Maybe call the New York Apartment Association for a referral.
2. Contact your lender. Flushing might work with you. But expect that they will apply the proceeds to the mortgage as is their right. You will then need construction financing. A mortgage broker like GCP or Meridian will be very helpful.
3. Decide if you want to go through with this. It may make sense to sell the burned out building to someone else with more experience. In that case you need to hire a broker to sell it. You still have to proceed with restoration until you sell it.
4. Hire a lawyer with real estate litigation experience. You most likely have the right to cancel the stores' leases but they may, particularly if they have term at low rents, fight you.
5. Notwithstanding that your rent stabilized leases say they can be canceled due to casualty, they can't. Your rent stabilized tenants (and any rent controlled tenant), have a right to be restored to possession.
6. It isn't clear to me whether the remaining residential tenants, who are most likely covered by the Good Cause Eviction law, have a right to be restored to possession. RPL Sec. 216(h) gives owner a right to demolish but I'm not sure whether a Housing Court judge will find it applicable (I am unaware of any cases).
7. Your residential tenants (particularly if they are represented by Legal Aid) or HPD will likely sue you for restoration. They may ask for money to waive their rights to be restored. It may make sense to pay them.
8. Considering 5 to 7, call your L&T attorneys. I know some owners with quiet buildings use general practitioners in Housing Court. Use someone who specializes in L&T work.
9. A good L&T firm will have someone who has a DHCR practice. You need to consult them. The stabilized tenants will file for rent reduction orders and pay you $1/mo. until restored. If you spend more the insurance proceeds, you might be entitled to MCI or IAI rent increases (and your tenants' attorneys will try to get you to waive them). Ask whether (I'm not sure how it works today) substantial rehabilitation applies.
9. Talk to your accountant. The building is currently titled in a corporation. NYC doesn't recognize S-Corps. It may be a good time to get it to an LLC. I've seen one Section 1033 deferral of gain (sort of like 1031) in my career. I don't know if that applies here but it's something to check.
10. Hire a good architect who has restored similar buildings.
What obvious advice did I miss?