Affordable Housing Institute : US

From Gotham City comes another episode of “Spot the Good Guy” as a landlord and tenants battle over that question:

 

 

Tenants of a rent-stabilized building at 47-49 East Third Street in the East Village; the building’s tenants are fighting a decision by their landlords, Alistair and Catherine Economakis, not to renew their leases.

 

Although judicial uncompensated rent control begins its existence seeking solely to cap rents, it very swiftly must extend its reach to the question of who can occupy the homes?  Can the owner:

 

By law, said Andrew Scherer, the author of “Residential Landlord-Tenant Law in New York” (West Group, 2005) and executive director of Legal Services for New York City, which represents poor people in civil cases, a building owner can recover an apartment or apartments for use by himself or herself, a spouse, a child or stepchild, a parent or stepparent, a parent-in-law, a sibling, a sibling-in-law, a grandparent or a grandchild.  And the apartment must be occupied by the family member for at least three years.

 

Which leads then to the philosophical question, what constitutes an apartment?  Especially given that buildings can change configurations.

 

 

“How long is a piece of string?”

 

NEARLY two years ago, Alistair and Catherine Economakis became the owners of a six-story tenement building at 47-49 East Third Street, between First and Second Avenues, in the East Village.

 

Nice location!

 

The building has 15 apartments, with tenants paying rents of $500 to $950 a month.

Within weeks, the Economakises began notifying tenants that their leases would not be renewed, even though the apartments were rent stabilized, because the couple planned to live in the building with their infant son and take over all 11,600 square feet.

 

In my town of Cambridge, we reached the reductio ad absurdum that it was a criminal offense for an owner to leave a rent-controlled apartment vacant, or to occupy it himself.  New York hasn’t reached that stage:

 

Under the law, landlords have the right to terminate the leases of rent-stabilized tenants if they plan to use the space for themselves.  They must notify the tenants at least four months before their leases expire.

 

Does this make the landlord the building’s economic owner?  The landlord’s lawyer thinks so:

 

“It needs to be remembered that an owner owns his or her building and has a constitutional right to reside in that property,” said Sherwin Belkin, a landlord lawyer in Manhattan. “A tenant, on the other hand, has a privilege to occupy.  And rights are superior to privilege.”

 

The residents disagree:

 

The tenants at 47-49 East Third Street are fighting hard against being evicted. “We were absolutely stunned when we got the first nonrenewal notice,” said Ursula Kinzel, the president of the tenants association. “It was totally unbelievable that someone would get a 15-unit, rent-stabilized building in order to turn it into a private home. The natural thing would be to just go out and buy a house.”  [In $1,000-per-square-foot Manhattan? — Ed.]

 

So suddenly, the courts are going to have to adjudicate, how much home is enough?

 

 

“Sorry, Caped Crusader, it’s absurd that you would need 11,500 square feet.”

 

 

“What?”

 

Does size matter? 

 

No, says the landlord’s lawyer:

 

The rent-stabilization law does state that an owner can claim one or more apartments for his or her personal use.  “I don’t believe the law is vague,” said Todd Rose, the lawyer for the Economakises.  “It says that the standard for recovering all the apartments in a building is the same standard employed by the courts if a landlord is going to seek only one apartment - the landlord must prove that he has a good faith intention to live in the apartments.”

 

Yes, says the tenant’s lawyer:

 

But Andrew Scherer, the author of “Residential Landlord-Tenant Law in New York” (West Group, 2005), said: “The size of the space that somebody claims they intend to live in must pass what lawyers call the ‘giggle test’ - the notion that the claim is believable and will not cause a judge to start to giggle. The idea that someone would take 15 units with 60 rooms as a primary residence is absurd.”

 

May the Farce be with you!

 

Evidently not, if one believes the landlord:

 

In an interview, Mr. Economakis, a real estate management consultant, said, “Absolutely, I intend to make 47 East Third Street my home for my family.”  He said he had offered to post a bond to assure that he would occupy the building, “and, to date, we have never had one response from the tenants to our proposals on how we can guarantee our good faith.”

 

What about the claim that 11,600 square feet is ‘unbelievable’?

 

They decided to live in the building, Mr. Economakis said, after looking for a new home and finding nothing that appealed to them. “When my wife became pregnant, we began looking for a home,” he said. “It is at that point it dawned on me that we already own a building. Once we decided to make this building our home, quite frankly there was nothing else that compared.”

 

Mr. Economakis said the tenants have refused to meet with him. “I believe my wife and I have approached this whole process with sensitivity and respect for the tenants affected,” he said.

 

Mr. Dobkin said, however, that he and several members of the tenants association did meet with the Economakises. “We’ve listened to their settlement proposals,” he said, “which always involve all the tenants giving up their apartments, which is something that the tenants will not do.”

 

Whose apartments?  Who owns them?  What would otherwise be a market dynamic is thrust before the courts:

 

The fight has taken its toll on the tenants, many of whom have lived in the building for decades, and who were planning a rally in front of the building on June 25 to call attention to such battles. “It’s pretty much been a nightmare, the insecurity,” Ms. Kinzel said. “It’s really turning our lives upside down.”

 

“I wake up around 4 in the morning and I can’t sleep,” she said.  “My thoughts are just turning around. How are we going to sustain the legal bills?”  So far, the 11 tenants represented by Mr. Dobkin have paid equal shares of the approximately $85,000 in legal fees.

 

In the end, it comes down to money — a transfer payment from the landlord to the tenants to regain occupancy of the landlord’s property:

 

But of the 75 to 100 cases that Mr. Himmelstein has handled in the last eight years, he said, about one-fourth resulted in the landlord losing on procedural grounds. Almost all of the others, he said, were settled, with the tenants moving out after receiving payments of at least $10,000 (and, in six cases, more than $200,000).  

 

Covers the moving costs!

 

Judging from these landlords, the owner-removal option can be — and has been (markets always clear) — expanded into a loophole behind enough to drive a moving van through:

 

There were, however, no settlements in a convoluted case, won by three Manhattan tenants last year, in which the legal standard that the owner prove his intention to occupy the apartments was sorely tested.

 

In that case, Mr. Himmelstein originally represented four tenants at 450 West 57th Street, where the landlord, Abe Haruvi, sought to recover all of their apartments so that he and his wife could create a 6,000-square-foot quadriplex. (For technical reasons, the Haruvis soon dropped one of the four cases.)

 

During the trial, Mr. Himmelstein demonstrated that the Haruvis had a long history of owner-occupancy petitions.  “Other than the four at 450 West 57th Street,” he said, “there had been six prior owner-use cases commenced by the Haruvis in three other buildings.”

 

It’s just so hard to find one we like …

 

In three of [Mr. Himmelstein’s] earlier cases, the owner [Abe Haruvi and his family] simultaneously sought, in 1996, three apartments in different buildings for the same family member, Mr. Himmelstein said.  In one of those cases, he said, “they actually recovered possession, but never moved into the building and subsequently re-rented the apartment at a destabilized rent of at least $4,000.”

 

Changing one’s mind after recovering a rent-controlled apartment seems a New York habit.

 

Since then, the Haruvis have brought two other owner-use cases, he said, “and in only one case did a family member, a daughter, actually take occupancy.”

 

In her April 2004 ruling denying the Haruvi eviction requests at 540 West 57th Street, Judge Maria Milin of Housing Court wrote that the Haruvis had “engaged in a pattern of commencing meritless owner-occupancy proceedings.”

 

“To our knowledge,” she continued, “of the five apartments that the landlord obtained under owner-use, two have gone to new tenants who are not family members; one has gone to the landlord’s daughter, who already lived in the building but expanded into the next apartment; a fourth apartment is still being renovated; and the fifth apartment, the tenant hasn’t left yet.”

 

Indeed, landlords discovering a yearning for a homestead seems epidemic in New York:

 

In a four-story, 20-unit building in Borough Park, Brooklyn, six tenants received nonrenewal notices from the landlord, Harry Stern, in late 2003 and early 2004, so that Mr. Stern could give apartments to his two sons, two daughters, his wife’s sister and her brother, even though four apartments were already vacant.

 

Mr. Stern’s lawyer, Scott Gross, said: “Each and every owner’s-use case brought by my client was settled amicably without the need for a formal trial.  In each situation, my client has complied with his obligations under the rent-stabilization laws, and continued to comply with these laws.”

 

Asked how many of Mr. Stern’s family members have moved into the building, Mr. Gross said he had to check with his client, but then did not respond to four telephone messages.

 

“Sorry, Commissioner, fighting crime.”

 

More fun with judicial rent control here, here, here, here, and here. 

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