Philadelphia Skyline

This is What happens When You Give a Defaulting Tenant a Mountain of Leverage

November 6, 2017

I get substituted in for other landlord’s counsel a lot - I mean no disrespect to other counsel by that statement. The problem is that most firms that represent landlords have a low-price-volume-case-load business model. That actually makes perfect sense for most 
non-payment cases. But not for all cases.

In this cluster-mess of a case in Brooklyn[1], the owner got four pieces of terrible legal advice. 

First, the lawyer told the owner that the tenant had no right to have two roommates. Well, that may be true (see the booklet on this topic on my Booklets page). But, the two occupants were not both roommates. One was the same-sex life-partner of the tenant. That person was the tenant’s family and had every right to be in the apartment - and the family had a right to a roommate.  

Second, the lawyer was trying to force a backdated Rent Stabilized lease on the tenant. That is not legal. 

Third, the lawyer told the owner not to accept an $11,000.00 HRA arrears payment check. You can’t do that! A defense to a nonpayment case is…hello?...payment. Not to mention that this is possibly source-of-income discrimination. 

Fourth, the tenant was always in arrears. There were no repairs issues. Yet every time the case got close to trial, owner’s counsel told her to settle with a large abatement. 

The tenant took his case to very-experienced-tenant’s-counsel. What did very-experienced-tenant’s-counsel see? They saw a tenant who was being hassled about the occupancy of her spouse, who was being hassled over her Rent Stabilized lease date, whose welfare payments were being baselessly rejected by landlord, and who was getting sued all the time, even though she was getting abatements! Very-experienced-tenant’s-counsel brought a discrimination case against owner!

That’s when owner came to me. I had to give them lots of tough love. They were fighting all the wrong fights, and in doing so, they had given this perpetually defaulting tenant a mountain of leverage. 

It took about two years to extricate owner from the situation. I started from the beginning and did everything by the book, from the lease forward. It is difficult in these situations to recreate trust between the parties. Opposing counsel typically needs to see me walk the walk, as well as, talk the talk. Ultimately, the tenant and her counsel decided that she really could not afford the unit and she decided to move in with family elsewhere. Owner helped her on her way with a fair buyout. 

What’s the lesson? The lesson is that owners and their volume-priced-counsel need to identify when a case is no longer a good fit for a volume practice. 

Respectfully submitted,

Michelle Itkowitz

[1] Identifying details changed to protect the innocent. 

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Itkowitz PLLC Helps Couple Keep Wilson, the Emotional Support Animal Kitty

October 19, 2017

We helped a couple keep their cat, Wilson[1], on the basis that the cat is an Emotional Support Animal.

This case was a little different, only because the unit wasn’t Rent Stabilized. That exposed the family to the vulnerability that their rent could later go way up, allegedly based on market conditions and not on landlord’s resentment over the ESA letter I was sending. Moreover, the tenant was provided the apartment as part of her compensation package for her job with a large corporation, making the situation even more delicate. 

The lesson here is that in such cases it’s important to keep the tone of an ESA letter positive, as opposed to confrontational, and let the landlord know that the tenant takes his or her responsibilities as a member of the building community seriously. The person just really needs the animal, because of a duly diagnosed disability, in order to use and enjoy the unit, and one little cat is a reasonable accommodation for that disability.

Respectfully submitted,

Michelle Itkowitz

[1] All feline names were changed to protect the innocent. 

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Itkowitz PLLC Wins for Client in Federal Court on Case by Tax Credit Broker on Deal Gone Bad

October 5, 2017

We recently had to travel to Federal Court in Virginia, to try a case. We represented a developer who was being sued by a tax credit broker.

Why does one buy tax credits? Well why not! I like any sentence that adds the word “credit” to the word “tax”. In this case, the developer had entered a long-term lease for an historic building that wasn’t really worth developing after Hurricane Sandy. But it came with the possibility of tax credits. Such deals are brokered.

The trouble here started when the IRS changed its regulations governing tax credit investments, due to an appellate case coming out of the Third Circuit federal court. After the change, a passive investor with no real stake in the running of a project could no longer take advantage of such tax credits. The investor would need to be “at risk” in order to reap the benefits. Here, this particular investor had no money “at risk” because it was only obligated to put up its investment until the project had been satisfactorily built. Ultimately, the developer terminated the project. Thus, no tax credit was available. 

Nevertheless, the tax credit broker sued the developer, claiming it was entitled to $1M on its commission. The broker was a company headquartered in Virginia with an office in Washington. It sued our New York developer client in federal court in its home state of Virginia, on the basis of diversity of citizenship. 

My law partner and husband, Jay B. Itkowitz, tried the case.

The jury decided the broker was only entitled to $2,800.

Respectfully submitted,

Michelle Itkowitz

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Itkowitz PLLC Gets Eviction of Seller Who Refused To Leave after House Closing in Brooklyn

September 21, 2017

Our clients were a family that had just bought their first home.[1]  At closing, their lawyer (not us!) did not think it was important that the seller was not ready to get out. Of course, an escrow was held, which would cover a steep per diem for the seller to remain for two more weeks. We were hired, however, after the escrow dwindled, and the seller was still there six weeks later! Our clients were heartbroken; they had waited so long for this closing. Their mortgage payments were now due and they were still paying rent.

I had to do an RPAPL § 713(8) predicate notice (“The owner of real property, being in possession of all or a part thereof, and having voluntarily conveyed title to the same to a purchaser for value, remains in possession without permission of the purchaser.”)

It was tricky though, because the house was divided into two apartments and the seller’s adult family members lived in the downstairs apartment. So…what was the legal status of those people with respect to the downstairs apartment after the sale? I mean…they weren’t the seller, now were they? So, were they RPAPL     § 713(8) tenants? Or tenants-at-sufferance? Or something else? I always say step one of any landlord and tenant litigation is figuring out the legal status of the occupant. I gambled that 718(8) applied to the whole lot of them. Well, the world will never know if I was right. The downstairs occupants defaulted and I got a judgment against them easily. 

However, the upstairs occupants, the sellers, remained to become one of the most contentious evictions I have ever seen. On eviction day - yes, it got to eviction -  when a tow truck arrived to take away seller’s vehicles parked on the lot, the seller chained his poor angry dog to the tow truck door as the tow truck operator was attempting the hook up. The police were called and arrest everybody - even the tow truck driver. Ugh…you can’t make this stuff up.

Here’s the lesson for all your transactional lawyers out there. Don’t close if your don’t have possession. 

Respectfully submitted,

Michelle Itkowitz

[1] Details changed to protect the innocent.

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Itkowitz PLLC Does Rent Stabilization Due Diligence on 140 Sponsor Units

September 7, 2017

I did a big Rent Stabilization Due Diligence on a big sponsor package.[1]  

There was a problematic unit. It came with a nine-year old, two-attorney stipulation of settlement in a non-primary residence case. It said that the tenant acknowledges not being Rent Stabilized and that she may stay until she moves or dies. Sounds good for the new landlord? Nope. 

The tenant was, of course, still Rent Stabilized. Stabilization is a legal status. Rent Stabilization isn’t an item to be bargained with for individual gain. A current or former tenant may have signed a document acknowledging that an apartment is not subject to Rent Stabilization. But, this does not make it so. Parties may not contract in or out of Rent Stabilization coverage. Thornton v. Baron, 5 N.Y.3d 175 (2005).

So, what happens if the tenant leaves permanently for a nursing home, but has resided for more than a year in the unit with her daughter - who, by the way, lived there at the time the stipulation was executed!? Family members residing in the premises often have succession rights to the leases. 9 NYCRR § 2523.5 (b)(1); 9 NYCRR § 2520.6 (o). 

Even if a tenant could bargain with her Rent Stabilization status (she can’t), she sure can’t bargain with a successive tenants. 

There was no remedy for the current owner (or prospective purchaser), but to wait and see if the lady left peacefully without installing a successor. 

The lessons here is, once again, that Rent Stabilization Due Diligence is worth doing. And – there are no binding contracts out there taking a unit out of Rent Stabilization. That isn’t up to the landlord and/or the tenant. Rent Stabilization is a status, based upon objective factors. Those factors should be carefully examined and documented when attempting to determine an apartment’s legal status. 

Respectfully submitted,

Michelle Itkowitz

[1] Details changed to protect the innocent.

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