Affordable Housing Institute : US

[Continued from yesterday’s Part 2.]

In Part 1 of my idle speculative exploration of the Trump SoHo’s Restrictive Declaration we heard the property’s critics complaining that:

“The restrictive declaration is a sham, a fig leaf designed to cover up the obscene decision of allowing this monstrosity where the law clearly prohibits it,” said Andrew Berman, executive director of the Greenwich Village Society for Historic Preservation.

Yet the actual language, much of it cited yesterday in Part 2, sounded strong enough. Where then might be the loopholes?

You may not be able to see the loopholes, but I can

Start, first of all, with that most precise of elements, the Defined Term, as explicated by Mr. Dumpty, Esq., of the condo-conversion firm of Dum and Dee:

‘When I use a word,’ Humpty Dumpty said, in a rather scornful tone,’ it means just what I choose it to mean, neither more nor less.’

‘The question is,’ said Alice, ‘whether you can make words mean so many different things.’

‘The question is,’ said Humpty Dumpty, ‘which is to be master - that’s all.’

My dear Miss Liddell, my billing rate for tax advice is a low, low $850 per hour

As we examine the defined terms, we find an extraordinarily expansive precision in the most critical term of all: the Unit Owner.

Every time we turn around, another galaxy of potential Unit Owners

Who is a Unit Owner? As set forth in Section 1 (Definitions), it is:

1.08 “Unit Owner” means the record owner of a Unit from time to time and shall include, if the record owner is a natural individual, such individual and such individual’s parent(s), spouse and unemancipated children.

Wait a minute! Did you catch the dissonant phrase in there?

if the record owner is a natural individual

What other kind of Unit Owner might there be?

We poke around the “Form of Annual Unit Owner Filing,” Exhibit B of the Declaration, and find this modest sub-note:

“Where a Unit is owned by an Entity, any particular individual employees, member, agent or invitee of the Entity shall be treated as an individual non-Unit Owner.”

You had me at ‘invitee’

By now you should have heightened sensitivity to any word that is Capitalized, since it is a Dumpty-esque word that means what its author chooses it to mean. Off we go, therefore, searching for the definition of “Entity.”

When we find the definition, we’ll put it in this box

Curiously enough, “Entity” is not defined where you think it should be — in the Definitions section — and instead we find the definition as a throwaway inside a parenthetical in Section 2.06(c):

Each particular individual employee, member, agent or invitee of a corporation, a partnership, a limited liability company or partnership, and/or an association (any one of which is referred to as an “Entity”) that is a Unit Owner shall be treated as a separate non-Unit Owner for the purposes of paragraph (a) of Section 2.02 and this Section 2.06;

An “Entity” is thus a legal formation, which may include large entities like these:

· Columbia University (13,250 employees)

· Goldman Sachs (20,000 employees)

· Wal-Mart Stores (1,600,000 employees)

Nor is it limited to pre-existing entities. Some English investors seeking to spend those two-bucks-apiece pounds might form:

· Windsor Limited Partnership, consisting of Elizabeth, Charles, William, Henry,

None of them are Unit Owners either!

Nor are we done expanding the range of people included within a non-Unit Owner, for it includes anyone who is an agent of a Unit Owner:

He’s not a Unit Owner either

Or an invitee of a Unit Owner:

She’s not a Unit Owner either

Now let’s revisit that seemingly tight occupancy language we saw earlier:

Section 2.02(a). No Unit may be occupied by its Unit Owner or by any other individual (i) for a continuous period of more than 29 days in any 36 day period, or (ii) for a total of more than 120 days in any calendar year.

What about roommates? I am the Unit Owner; I have several friends who are roommates, and we take turns being the occupant of record. Who is to say who slept with whom?

Or what if we (say, a large company) buy multiple Units within the property? If we own four Units, then once every 28 days, Elizabeth moves from 101 in 102, Charles moves from 102 into 103, William from 103 to 104, Henry from 104 back into 101. We could do this endlessly and we would not violate our occupancy agreement at all.

Does it really matter who sleeps with whom in whose Unit?

We could take this to an extreme policy case. A pimp with a string of ladies would have an ideal arrangement. He is the Unit Owner, and each lady in turn is a non-Unit Owner; every 115 days he moves one out and another in. So long as he has at least four ladies, he could carry this on indefinitely.

Does the City of New York really want to be in the position of enforcing transience over permanence?

For that matter, how does the City enforce against a non-Unit Owner? You will recall that we found the Entity definition in the second sentence of Section 2.06(c). Here’s the first sentence:

To the extent permitted by applicable law, the Unit Owner of a Unit in which an exceedence –

“You keep on using that word. I do not think it means what you think it means.”

– by a non-Unit Owner occurred shall not be responsible or liable to the City for any charges, cost, or expenses arising out of or by reason of such exceedence.

So I, the Unit Owner, allow someone else to reside in my apartment longer than I should. The Management Company duly sends me notice of the exceedence (Section 2.06(b)) but I do nothing about it because I am not obligated to do anything about it. (Did you notice that 2.06(b) does not impose any obligations on me, the Unit Owner?) Then eventually the non-Unit Owner moves out, with all these charges owing — who enforces against him?

What if you haven’t seen me in decades?

In fact, that’s the whole question within this Restrictive Declaration: if someone fibs, in whose interest is it to catch the fib?

Whose interest, in whose interest, know what I mean, nudge nudge?

Who is penalized for fibbing?

· Yes, the Unit Owner is signing a declaration. (By now I’m so paranoid I note that the declaration is neither notarized nor signed under pains and penalties of perjury, as is commonly used with Federal declarations.)

· The Management Company is required to maintain software records, but these are predicated on things the Unit Owners (or non-Unit Owners) tell the Management Company. Will the Management Company send its staff snooping in the hallways? Checking the trash?

Snoopin’ in the shiznit

In fact, everyone in the building will have the same incentive — let sleeping dogs lie, accept every certification at face value.

I’ve turned a blind eye to the exceedences

In that vein, consider this prospectively exculpatory paragraph:

4.11 Notwithstanding the provisions of Section 4.03 of this Declaration, the terms, provisions, covenants, obligations, restrictions and agreement in this Declaration shall be modified to the extent permitted by the Zoning Resolution on the effective date of any amendment to the Zoning Resolution that permits residential as well as or in place of commercial and manufacturing uses on Parcel A;’ provided, however, that any actual change in use of the New Building permitted pursuant to this Section 4.10 [sic] shall comply with all applicable laws, rules, and regulations.

If the zoning changes, this entire house of cards collapses as if it had never been.

The zoning restrictions were just a bad dream

This renders the entire document an interesting exercise in the alternatives of enforcement:

· If it’s not enforced at all, it’s valueless.

· If it’s visibly flouted, its enforceability becomes a laughingstock.

So much for your occupancy rules!

· If it’s sternly enforced, it will engender massive ill-will, and create absurd preferences (e.g. transients over citizens).

In short, it’s likely to be practically unenforceable or politically unsustainable.

Enforceability is not my problem!

As I wrote earlier:

After the Trump SoHo is built, it will be occupied full-time by people who signed the restrictive declaration and then ignored it. The critics are right — the declaration will prove unenforceable in practice. The new residents will want to be in the city year-round (except when they’re jetting off somewhere), and they’ll be earning money, spending money, paying sales taxes, paying property taxes, and voting. Not only will the city have no incentive to enforce, it will have many financial and political incentives — votes and city revenue — to waive it or grandfather it in as a proper condo.

So there I was, livin’ illegally in my own condo!

But the city council’s gonna bail me out!

Useful principles of agreement drafting. From all this careful documentary review, there emerge a few policy lessons:

1. Words matter. When facing a contract or commitment, read the words very carefully, paying particular attention to Capitalized Terms that are Defined Elsewhere. They usually mean more, or less, than common sense will tell you they do.
2. Zoning is destiny is definitional. When establishing appropriate zoning, pay very close attention to distinguishing size from usage. Here Mr. Trump’s opponents object to the building’s scale, but the zoning controls only its use.
3. Have a motivated monitor. Here all those on-site at the property have a shared economic incentive not to enforce the externally imposed rules. (This problem arises consistently in affordable housing income certification, about which I shall post sometime.)
4. Reality trumps theory. Rules that cannot be administered cannot be enforced. And rules you don’t enforce are worse than useless.

Indeed, if there’s an extract out of this maze of interpretation, that’s the key principle: write only things that you intend to enforce, and can enforce, because otherwise the illusion of enforceability without the reality leads to destructive cynicism and increased non-compliance all around.

“Rules you don’t enforce are worse than useless,” as Holmes shall expound one day.

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