Fighting an MCI Increase: PAR and Article 78 Insights

According to Fact Sheet #24 on the DHCR website,

“Will violations affect the granting of an MCI?

DHCR can deny the application in whole or in part, if the owner is not maintaining all required services, or if there are current immediately hazardous violations outstanding pursuant to any municipal, county, State or Federal law relating to the maintenance of such services. Certain tenant-caused violations may be excepted. An MCI rent increase will not be approved if there is a DHCR finding of harassment outstanding on the building or if there is a DHCR issued building-wide rent reduction order in effect, based upon a decrease in services. DHCR will expedite any owner filed rent restoration applications. A tenant whose apartment has an individual rent reduction order in effect, based upon a decrease in service will be exempt from the MCI rent increase until the rent is restored by DHCR.”

However, it is important to note that, if the HPD violations are issued after the MCI is approved, the violations will not retroactively bar the MCI rent increase such as in the Petition for Administrative Review (PAR) of  900 Riverside Drive: DHCR Adm. Rev. Docket No. XD430030RT.

The decision was as follows:
The landlord applied for MCI rent hikes based on gas and water repiping. The District Rent Administrator (DRA) ruled for the landlord, and tenants filed a PAR. The tenants claimed that the landlord’s costs weren’t sufficiently proven and that a DHCR building-wide rent reduction order barred the MCI increase. The DHCR ruled against tenants. Landlord submitted all required documentation proving the work performed and its cost. The rent reduction order in question wasn’t issued until after the DRA granted the MCI application, so it didn’t bar the MCI rent hikes. So, the date when violations and rent reductions are issued is important.

An Article 78 proceeding is a special proceeding initiated in New York State Supreme Court under Article 78 of the Civil Practice Law and Rules to overturn the determinations of administrative agencies like the DHCR. It is the final venue to object to the MCI rent increase order. This proceeding should be filed by an attorney.

In the matter of Tenants Committee of 36 Gramercy Park v. DHCR: 968 NYS2d 82, 2013 Slip Op 04984 (App. Div. 1 Dept.; 7/2/13; Friedman, JP; Sweeny, DeGrasse, Richter, Feinman, JJ.), the DHCR granted landlord’s application for MCI rent hikes. The building’s tenant association filed an Article 78 appeal, challenging the rent increases. The court and appeals court ruled against tenants. One tenant, who was a member of the association, claimed to represent the association and filed on its behalf  but the tenant wasn’t an attorney and a voluntary association can be represented in court only by an attorney and not by one of its members who wasn’t an attorney licensed to practice law in New York.  So, the tenants’ appeal was summarily dismissed.

Rent Stabilization Code Amendments Approved

On January 8th, 2014, the DHCR officially adopted amendments to the Rent Stabilization Code. The amendments, which are effective immediately, are the same as the proposed version that was released on April 24, 2013.

Below is a brief summary of the most significant amendments that were adopted by the DHCR, as well as a link to a complete summary of all adopted amendments as well as the revised DHCR Fact Sheets and Updated Procedures.

IMPORTANT AMENDMENTS ADOPTED

  1. Tenant Protection Unit:
    The TPU is formally designated as a unit of DHCR “to investigate and prosecute violations” of the rent laws.
  2. Individual Apartment Improvements:
    a. Lease riders are required detailing the calculation of rent, including IAI increases.
    b. Owners are required to provide tenants, upon a tenant’s request, with documentation
    to support the IAI increase.
    c. Rent overcharge proceedings can result from the failure to provide the lease rider and/or the IAI documentation.
  3. Major Capital Improvements:
    a. MCI rent increases will not be allowed for conversions from master metering to individual metering (electrical wiring for the building will remain allowable).
    b. MCI applications will be rejected with leave to renew if the building has one or more immediately hazardous violations.
  4. Statute of Limitations:
    The four-year overcharge period will be pierced where there is an allegation of fraud, an outstanding rent reduction order, a willful overcharge, a vacant or exempt unit on the base date, or a preferential rent.
  5. Rent Registrations:
    To amend a rent registration, owners will be required to commence an administrative proceeding, upon notice to the tenant.
  6. Decrease in Services:
    a. A tenant’s complaint will not be dismissed due to the tenant’s failure to first provide notice of the condition to owner.
    b. Service decrease orders will preclude future MCI and vacancy bonus increases.
    c. An owner will have 20 days to respond to a service decrease complaint where the tenant provides prior notice or if the complaint relates to heat or hot water.
  7. First Deregulated Tenant:
    a. Owners are required to provide the first deregulated tenant with an exit notice stating the basis for the deregulation, the rent computation and the last regulated rent.
    b. The owner is required to provide the first deregulated tenant with a copy of the rent registration indicating the deregulated rent.
  8. Preferential Rents:
    Preferential rents are required to be set forth in the lease.
  9. Deemed Leases:
    Tenants who do not execute renewal leases will be treated as month-to-month tenants and will not be subject to an automatic lease renewal based upon a deemed lease.
  10. Default Formula:
    Where the rent on the base date cannot be determined or was the result of fraud, the lowest rent for a comparable unit in the building will be used to establish the legal rent.
  11. Harassment:
    False filings and false statements by an owner which interfere with a tenant’s rights are included within the definition of harassment.

Rent Stabilization Code Amendment Complete Summary

Revised DHCR Fact Sheets and Updated Procedures

 

Pinnacle RICO Settlement Upheld by Federal Appeals Court

Published: October 1, 2013 in the New York Times

Court Upholds a Settlement Affecting 20,000 City Renters
By MIREYA NAVARRO

A federal appeals court has upheld a settlement affecting more than 20,000 rent-regulated tenants in New York City, clearing the way for them to seek individual compensation from their landlord for rent overcharges and other complaints.

In its decision on Monday, the United States Court of Appeals for the Second Circuit ruled that the 2011 settlement of the tenants’ class-action lawsuit against the Pinnacle Group, a large New York landlord, was “fair, reasonable and adequate.”

Under the Pinnacle settlement, the court concluded, all class members benefited from new procedures and “best practices” that the company agreed to follow in carrying out rent increases and evictions. The company also agreed to have a court-appointed administrator hear the tenants’ individual complaints of illegal rents and harassment and determine compensation.

The amount could reach more than $10 million, depending on how many tenants make claims, said Richard F. Levy of Jenner & Block L.L.P. who negotiated the settlement on behalf of the tenants and who said he was “exhilarated” by the court decision.

“These people have been waiting for a long time,” he said.

The tenants’ suit against Pinnacle, filed in 2007, made novel use of a law typically associated with the Mafia and other organized crime groups, the Racketeer Influenced and Corrupt Organizations Act, known as RICO. The tenants accused the company of engaging in a conspiracy to fraudulently increase rents in more than 400 buildings that it owned in the city. The appeals court called the tenants’ original racketeering case “a daring and unconventional effort” that achieved important benefits for the tenants under the settlement “against significant odds.”

Crooked Man

There was a crooked man, and he walked a crooked mile.
He found a crooked sixpence upon a crooked stile.
He bought a crooked cat, which caught a crooked mouse,
And they all lived together in a little crooked house,
His crooked cronies he would meet, not that far from crooked creek.

How To Organize a Tenants Association

Some of the tenants of the buildings listed on the Property Profiles page (linked on the tab, above) have already organized. However, if you have not started your tenants association yet, the following (reprinted from the Tenants & Neighbors web site) may be of assistance to you. Eventually, all tenants of these buildings will have the opportunity to join a building-wide alliance.

Step One: Examine your building carefully – get a feel for it
• How many units are there?
• How many tenants in the building?
• What kind of tenants are they
(rent controlled, rent stabilized, Section 8, etc.)
• Are repairs being neglected?
• Does the building lack heat, hot water or other basic services?
• Is there are a problem with building staff?
• Are there security issues in the building?

Step Two: Involve Your Neighbors
Start talking to your neighbors, both people you know and those you see in the elevator or hallways. You may find it difficult at first, but don’t be afraid or embarrassed. Chances are that people share your concerns. The worst that can happen is that they will not be interested. If you are really serious about organizing a tenant association, you will have to talk to people you don’t know at some point, so you might as well start now.

Tell your neighbors that you want to discuss whether the building can benefit from a tenant association. Ask them if they are interested in attending a meeting and ask them to start thinking about common needs and problems. Exchange names and telephone numbers and let them know when you will contact them about the meeting. (Keep a list so that you don’t leave anyone out.) Call the meeting within one or two weeks following these conversations so that interest doesn’t wane.

Now that you have a core group of people (4-5 is a good start) who have expressed an interest in talking about organizing your building, you are ready for a preliminary meeting to discuss forming a tenant association.

Step Three: The Preliminary Meeting
This meeting can be held in your apartment. Offer some refreshments if you can – coffee, tea and cookies are fine. Don’t start “business” right away. Let people have the opportunity to talk to each other first.
When you’re ready, introduce yourself and ask others to tell a little about themselves: how long they have lived in the building, what their interests are, and why they came to the meeting. You may be the only person to have spoken to everyone, so it’s important to share information. Give an overview of what you noted about the building. Encourage everyone to speak, but at this stage discourage people from discussing priorities.

Key Questions To Raise
• Why organize a tenant association?
• Are there common needs/problems in the building?
• What would be the purpose of a tenant association?
• What does each person want the tenant association to accomplish?

Keep in mind that this meeting is only a beginning. You may all decide that the time is not ripe for a tenant association. If, though, things seem to be moving along well, discuss calling a second, planning meeting. Ask each person to bring one additional person to the planning meeting, ideally to be held the following week. (Try not to wait more than two weeks for the next meeting.) Ask if someone else would like to host the meeting.

Step Four-A: The Planning Meeting
Basically, the process at this meeting will resemble the first, but because new people will be there, it is important to encourage their participation and ideas. Ask the new people to identify what is important to them in the building, and as a group rank issues in order of importance. Make a written list. Include any issues raised during the first meeting. Keep in mind that though this group is setting priorities it is still a small group, and these priorities are only tentative.

With this larger group of people you have the makings of a steering committee for the tenant association, though you still don’t have a tenant association yet. Begin thinking about calling a full meeting of all the tenants in your building.

Step Four-B: The Planning Meeting
How Will The Meeting Be Advertised?
Generally, a flier – a one-page announcement – is the best way to publicize the meeting. Someone on the steering committee may have an artistic skill and can design the flier. A computer can make creating fliers easier but you can do it by hand. If you’re really having trouble, you can ask a Tenants & Neighbors organizer for assistance.
In designing the flier, make sure that the DATE, TIME and PLACE of the meeting jump out at the reader. Try not to make the flier too wordy – people should know what the meeting is about by just glancing at the flier. Use simple phrases, such as:
‘Tenant Alert: Meeting to discuss forming a Tenant Association
Or
Come and Meet Your Neighbors!’
It’s a good idea to include the name and telephone number of a steering committee member in case your neighbors want more information.
Make enough fliers for everyone in the building. Ask someone in the group if they are able to duplicate the flier at their job. If this isn’t possible, look for a local printer who could reproduce the flier for free. (You can reward the business by putting its name on the flier: “Printing services donated by Joe’s copy joint”) Or look for a community center or neighborhood agency that could print the fliers.

Step Four-C: The Planning Meeting
How Will The Fliers Be Distributed?

Depending on the number of people on the steering committee, you can:
Ask members to post fliers in the hallways on their floor and leave one under the door of each apartment.
If all the floors are not represented on the steering committee ask members to do extra floors.
Once again, you have the right to distribute and post fliers in your building. However, in some buildings the management rips down the fliers or tells the tenants that such postings are not allowed. If the building staff is tearing down your fliers you just have to keep putting them up. The best way to do this is to carry a few extra fliers with you and some tape, so that when you see that a flier has been removed, it will be easy for you to replace it with a new fresh one.
If the building management is giving you a real problem with this let your Tenants & Neighbors organizer know.
In addition to distributing and posting the flier, the best way to get people to attend your meeting is to speak to them personally. You can organize a door-knocking excursion to remind tenants of the meeting and urge them to attend. Don’t forget to remind your neighbors of the meeting when you run into them, inside or outside the building.

Step Five: The Full Tenant Association Meeting
The full building meeting is the real start of a tenant association.
At your first full meeting, a planning committee with a slate of officers (president, vice president, secretary & treasurer) should be elected to lead the association for six months to a year.

Tenant associations normally hold elections annually, and some impose term limits for officers. (Tenants & Neighbors can provide by-laws and help in planning your elections.) Once officers are elected, those attending the meeting should outline possible activates and projects for the association, including later meetings. The number of tenant association meetings should be determined by the by-laws. Some tenant associations’ meet monthly, though it is better to meet about four times a year unless there is an emergency.

In addition to officers, you might want to recruit volunteers for other tenant association activities i.e. floor captains to spread the word about future meetings, door knockers to recruit more members or an artist to design posters and leaflets. Try to get as many people involved as possible.

I would also add that collecting email addresses for updates, news, meeting reminders, and fund raising can be very helpful.

 nyctenants

Upper West Side Slumlord Pollution

With all the controversy and debate at the June 1, 2010 Manhattan Community Board 7 meeting about the bicycle lane on Columbus Avenue from 96th Street to 77th Street, there was little time to address a few other important issues. One Brockholst tenant emailed me one of several documents objecting to the proposed community facility in the cellar of the Brockholst building at 101 West 85th Street that was submitted to Community Board 7. Here is the first page:

Gulf Oil Spill on the Upper West Side for CB 7 June 1, 2010
Financing a Slumlord with Taxpayer Money Who Does Not Provide Essential Services and Pollutes the Environment

The owners of the Brockholst are planning to construct a Community Facility in the cellar. With landmark status, the building at 101 West 85th Street was originally built before 1900. It is a combustible brick and wood frame building using #6 Fuel Oil. There are two restaurants on the Columbus Avenue side with two kitchens as well as the boiler in the cellar of the building where, currently, there is not even a sprinkler system in place.

Burning #6 Fuel Oil creates “a rain of toxic soot that aggravates asthma, increases the risk of cancer, exacerbates respiratory illnesses and can cause premature death” according to the Environmental Defense Fund’s December 2009 study, titled: The Bottom of the Barrel: How the Dirtiest Heating Oil Pollutes Our Air and Harms Our Health. The EDF study describes #6 Fuel Oil as “unrefined sludge laced with pollutants” and concludes that “Each gallon of No. 6 burned creates 18.8 times more soot (PM) pollution than No. 2 heating oil according to the EPA emission standards”.

Even the  NYC Community Air Survey Winter 2008-2009 issued by Mayor Michael Bloomberg office states that residential, commercial and institutional heating systems release 50% more fine particulate matter (PM2.5) and 17 times more SO2 than cars and trucks on New York City’s roads. The sludge-burning buildings in the city contribute 87 percent of the city’s heating oil soot pollution. There is proposed legislation to phase out the use of #6 and #4 Fuel Oils. Eventually, this dirty oil will be banned. The city is already converting some of its own heavy-oil-burning boilers to natural gas, after identifying 100 city school buildings burning No. 6 oil in neighborhoods with high asthma rates.

On the upper west side, the owners’ non-profit family trusts hold a total of 19 buildings under various DBA names with a total market value of approx. $2 billion. All boilers burn #6 Fuel Oil. With 1247 apartments and more than 300 HPD complaints, these buildings are burning approximately 776,511 gallons of #6 Fuel Oil, resulting in a huge failure to protect the community against toxic chemicals. In addition, the building owners and management only perform repairs relative to serious complaints of mold, heat and hot water, vermin including mice, rats, and bedbugs, serious leaks through the ceilings and walls described as “cascading waterfalls” when such complaints are reported and listed as violations or when tenants withhold rent to present their case in housing court under retaliatory threat of eviction. When repairs area performed, they are often self-certified and rarely re-inspected. The lack of concern for their tenants’ and other upper west side residents’ health and welfare is astonishing.

According to the DOB web site, several of the boilers in these buildings have not been inspected for years and do not have Certificates to Operate. The Brockholst certificate, for example, expired on October 28, 2009. Most previous inspections were certified by their own boiler installer, Irving Bauer, who inspects boilers in most if not all of their buildings.

Permission to construct the community facility in the cellar at 101 West 85th Street would further enable and subsidize slumlord management and the production of pollution via the resulting tax break which would be financed by taxpayers. The proposal should be scrutinized with an awareness of the entire building portfolio’s complaints, violations, mismanagement along with the pollution production.

The complete 25 page document may be accessed here.

rickeisenbergpollution

Eisenberg Retter Schreiber Pollak Families’ Property List Update includes Manhattan, Queens, and New Jersey

Ownership of all properties remains within the families of the four sisters, while Mary Schreiber is listed as Head Officer and Richard Eisenberg is listed as Officer of the Manhattan and Queens real estate. The updated list now includes their following properties, mostly managed by Ari Paul under RCR Management LLC at 155 Riverside Drive, New York, NY 10024:

Manhattan:
Regina Estates at 100 West 86th Street, 85 Columbus Corp at 101 West 85th Street, Embel Realty at 102 West 86th Street, Ennismore Apartments, Inc at 120 West 79th Street, Riverside Syndicate, Inc at 155 Riverside Drive, Bedford Apartments Co, LLC at 166 West 86th Street, Regina Metropolitan Co, LLC at 21 West 96th Street, West 88 Street, LLC at 205 West 88th Street, Georgia Properties, Inc at 275 Central Park West, Oxford Towers, LLC at 280 Riverside Drive, 290 Riverside Co at 290 Riverside Drive, 305 Riverside Co at 305 Riverside Drive, Tulip Apartments at 412 West 110th Street, Mayflower Development Corp at 425 Riverside Drive, Hitchcock Plaza, Inc at 610 Amsterdam Avenue, Kent Equities at 760 Amsterdam Avenue, Atlantic Realty Apts, LLC at 900 West End Avenue, and West 122nd Street LLC at 515 West 122nd Street and 521 West 122nd Street. Most Manhattan properties are registered with HPD with Ari Paul as managing agent.

Queens:
Neilson Gardens Inc at 1014 Neilson Street, Far Rockaway, ABK Apts Inc at 209-30 43 Avenue, Bayside, WPH Apts Inc at 211-01 42 Avenue, Bayside, SHR Apts Inc at 42-11 Corporal Kennedy Street,
42-41 Corporal Kennedy Street, 210-01 43 Avenue, and 210-02 42 Avenue, Bayside, Arizona Holding Corp at 84-50 Austin Street, and Braddock Garden Apts. Inc at 89-39 221st Place and 221-35 90 Avenue, Queens Village. Queens properties display HPD registration of Ohad Badani, RCR Management as managing agent.

New Jersey:
Dumont Terrace Apartments Inc at 110 Dulles Drive, Dumont, Marble Court Apts LLC at 121 Ayers Court, Teaneck, Elmwood Terrace Inc at 216 14th Ave, Elmwood, Sunnyside Village Inc at 216 N 4th Street, Vineland, Franklin Gardens Inc at 257 7th Street Clifton, Eldorado Village LLC at 302 High Street, Fairlawn, Glenwood Plaza Inc at 42 Elmwood Terrace, Elmwood Park, Maybrook Gardens Inc at 6 Maywood Drive, Maywood, Rosen Terrace Inc at 8900 Blvd East, North Bergen, and Jefferson Gardens Inc at 90 Day Street, Clifton.

The additions have been added to the Property Profiles page.   More detailed research is on the way, including Brooklyn.

Special thanks to Lovely Rita.

Google Legal Opinions Research of Court Case Decisions

As an option of the Google Scholar tool (a search portal for scholarly literature), there is now a separate search function option which taps into an indexed collection of millions of freely available legal decisions provided by Google and other Web sites.

It is interesting to view cases related to properties held by the Chiel Rosenblatt Family Trust (and managed in most cases by Ari Paul of RCR Management LLC) “DBAs (Doing Business As)” LLCs. For example, here are the results pages for searching on “Georgia Properties”, “Riverside Syndicate”, and  “Mayflower Development”. Of special interest are the cases involving a real estate broker “Rita Citrin” who has rented many of their apartments and whose creative legal malpractice lawsuit is described on the NY Attorney Malpractice blog as she instantly morphed from defendant in one case to plaintiff vs. her former counsel immediately after a stipulation in the first case. There are cases of a few attorneys they employ such as “Horing Welikson”, “Fleishell”, and “Kucker & Bruh” . Using quotes around the words narrows down the search results relevancy. Trying variations of the DBA names such as dropping the LLC is worth experimenting with as well. Don’t forget to click on the legal opinions radio button first, as seen in the picture at the end of this post.

The tool is intended to make critical legal opinions more accessible and understandable for ordinary people curious about the decisions that shape and clarify the law of the land. From the Google Scholar home page, users can enter the name of a case, its number or a key phrase, like “primary residence holdover” or “luxury deregulation”, dhcr, +dhcr +mci, +dhcr +mbr (both without quotes) and retrieve a list of results that include the full text of the decision from all available sources.

While Google offers links out to other sites like Justia or LII, it also provides its own copies of decisions. Within those decisions, Google’s tools find any mention of other cases and statutes and provides hyperlinks that take users directly to cited decisions. Advanced search options also allow users to return only results from federal courts or from any selected state courts. Users can also opt to return decisions written within a particular date range.

Each result lists how many times that particular case has been cited in other decisions. By clicking on the “How Cited” button next to the case title, users can view a list of excerpts from other decisions where that case is cited, as well as links to those and similar opinions, as determined by Google search algorithms that connect cases based on topic and related citations. The tool also taps into a collection of legal journals available through Google Scholar. Depending on access restrictions, users can either view a passage or full article.

For legal professionals, it also provides a new option for finding legal documents when case titles or citations aren’t readily available and drawing connections between cases and how they are employed in subsequent opinions. How often cases are updated varies from court to court, as Google Scholar is still in beta, but Google is collecting feedback from users to fine-tune the functionality and explore new features to improve the service, which might eventually displace some of the high-end paid providers like Lexis and Westlaw.

googlescholar

J-51 Program and Rent Re-Regulation

According to the lists available on the NYC Department of Finance web site, the following buildings receive or have received J-51 tax abatements: 100 West 86th Street (Regina Estates Inc.), 27 West 96 Street (Regina Metropolitan Co, LLC), 305 Riverside Drive (305 Riverside Corp.), 425 Riverside Drive (Mayflower Development Corp.), 205 West 88 Street (West 88 Street LLC) in Manhattan and 10-06 Neilson Street (Neilson Gardens Inc.) Far Rockaway, 209-30 43 Avenue (ABK Apartments Inc) Bayside, 211-01 42 Avenue (WPH Apts Inc) Bayside, 210-02 42 Avenue (SHR Apartments Inc) Bayside,  and 89-39 221st Place (Braddock Garden Apts) Queens Village in Queens.  These were taken from the Department of Finance published lists.

Any tenant that moved into a building as a “deregulated” tenant might instead actually be rent stabilized, if either (a) the building is now getting J-51 benefits, or (b) the building used to get J-51 benefits during the tenancy of the current tenant, and the tenant did not get notice, in the first lease and in every renewal, saying that the apartment can be deregulated when the benefits expire. In addition, a stabilized tenant might be exempt from high-income deregulation if either (a) the building is now getting J-51 benefits, or (b) the building used to get J-51 benefits during the tenancy of the current tenant and the tenant did not get notice, in the first lease and in every renewal, saying that the apartment can be deregulated when the benefits expire.

Tenants who would be in these categories but who have left their supposedly deregulated apartments are affected too: if they left less than four years ago, they can sue for overcharges.

At a minimum, the legal rent for affected tenants will be based on the rent paid four years ago, and that rent will be considered a stabilized rent, even if it is above $2,000. Tenant attorneys will be arguing that the rent should be set even lower, however, since this situation might fit within an exception to the “four year rule,” the rule that normally sets rents at the amount paid four years ago. The argument is that an exception should be made because the rent four years ago will in some cases clearly be the product of the illegal deregulation of the apartment. To get a rent adjustment, a tenant will have to file an overcharge complaint, bring a lawsuit, or join a lawsuit in progress. Attorney fees and treble damages can also be sought.

Tenants who take no action at all risk having their rent permanently set at a higher amount than they could have gotten and never being able to recover some of their overcharges. They may also be forced to deal with the issue anyway, if the landlord ever tries to evict them as supposedly free-market tenants.

This type of action really necessitates at least a consultation and probably representation by a tenant-centric attorney. It is my understanding that several law firms are currently handling a J-51 Rent Regulation cases.  At least one of them includes tenants from one of the buildings listed above.

money-11at500