Philadelphia Skyline

Itkowitz PLLC Helps a Building Emerge from AEP, Avoid a 7A Administrator, and Get Back on Track

July 24, 2017

I had a young, out-of-town client come to me after buying her first multifamily property(1). She and her closing attorney did not do Rent Stabilization Due Diligence before the purchase. Therefore, she was surprised to find out that she just bought a building in AEP Program (worst buildings in NYC), on a rent strike, with a motion to appoint a 7A administrator looming.

It was a long year. But my client did everything right. She fixed the building top to bottom. She gained the trust of the tenants. I developed a nice working relationship with Legal Aid. Repairs were done, the number of violations dwindled, a lead violation was removed, the cooking gas and hot water were restored, and AEP went way. As a new chapter ushered in for the building, Legal Aid and I struggled to normalize things. It is a fascinating phenomenon to watch a building come back to life like that. Things work – water flows, heat comes on, things function. The landlord and the tenants communicate again. The rent actually gets paid! The balance of this post is about the boring, mundane, but important details of a building emerging from the brink of disaster, from the point of view of a landlord’s lawyer.

Arrears and the abatements. The tenants were supposed to be paying into an escrow for over a year. Not all of them did, and no one was monitoring the account, so some were pretty far behind. In any event, the tenants were owed abatements. Synching the arrears to the abatements was an exercise that was not fun. But it was still nice for the landlord to finally get a small infusion of funds on a building that it had yet to have any cash flow on. 

The legal rents needed to be agreed upon. Records were scant. There was, of course, the obligatory $78/month rent control tenant that DHCR has no paper work on, or worse, different paperwork on for each FOIL request. But the parties agreed upon the legal rents based on available lease and DHCR documents and memorialized our conclusions in a stipulation.

Leases and riders needed to be prepared and executed.

One tenant of the building was not in the Tenant Association (“TA”) and, therefore, she was hard to contact. Although this tenant was not in the TA, she was taking advantage of the situation at the building and not paying her rent. We had to get her attention (via a nonpayment proceeding) so that she too would pay rent. 

It is absolutely imperative in situations such as this that any lingering DHCR Rent Reduction Orders be dealt with. Legal Aid agreed to give me letters (that I drafted) to send to DHCR to get the rent restored. A Rent Reduction Order has the effect of freezing the rent, no matter how many years ago it was entered. Cintron v. Calogero, 15 N.Y.3d 347 (2010).

All other loose-end DHCR proceedings, motions, and Housing Court matters had to be discontinued.

An application for a 7A Administrator comes along with a Notice of Pendency. Such Notice of Pendency (a lis pendens) needs to be lifted of record, or a building can never be refinanced. This requires affidavits and an ex parte motion.

Finally, it is good to ask Legal Aid for confidentiality in these matters. Specifically, I asked them not to write a hyperbolic blog post for their funders about how they brought my client to her knees. The truth was -- we cooperated. I told them they could write a blog post about the cooperation and success story for both sides. Looks, however, as if I beat them to it!

Respectfully submitted,

Michelle Maratto Itkowitz

(1) Details changed to protect the innocent.

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Itkowitz PLLC Gets Absent Rent Stabilized Tenant Out on Illegal Airbnb Case – But Not Without Having to First Deal with Her Creative Excuse!

June 26, 2017

I represented a multifamily building owner in Brooklyn(1) and I was hired to begin a holdover against a Rent Stabilized tenant who had clearly moved out and was utilizing the apartment as an illegal hotel via the Airbnb platform.  

There was no camera, however, to demonstrate whether the guests were, “living within the household of the permanent occupant” (as required by the statute that limits short-term sublets), i.e. there was no camera data to demonstrate whether the tenant was at home when the guests were subletting from him. Nevertheless, my client was very confident because we had identified many Airbnb listings for the apartment where the tenant was offering to rent the “whole apartment”. OK, so, against my better judgment, I agreed to bring the case without first insisting that the client hire a trained and licensed private investigator and install a proper surveillance camera outside of the subject unit. 

This tenant was represented by a clever young tenant’s attorney, for whom I have mountains of respect. This attorney called me and said, “Michelle, the tenant works nights, so he slept in the bed during the day and his guest slept there at night. Thus, he rented the “whole apartment”, while the guest was living within his household.” 

Now that’s clever! 

It also wasn’t true. Our investigation revealed that this tenant had moved out of the Rent Stabilized unit and in with a new partner. But you can’t blame the tenant for taking a shot. He was making a fortune on the apartment as a hotel unit, with its depressed Stabilized rent and no hotel tax, what’s not to love?! 

Yeah, I could have done discovery and depos and vetted this creative excuse in the course of litigating this holdover and I think things would have broken my way and we would have won the case, if the owner wanted to drop bags of money on my legal fees and spend a year plus on the case. 

Um…We settled. 

What’s the Lesson? The lesson is, as I have oft said in these pages – a picture (or a video) is worth a thousand words, or a thousand guesses and speculations.

Cameras are cheaper than legal fees. If a landlord is not willing to pay for cameras, he is not going to be willing to pay legal fees for a protracted trial that landlord is likely to lose. 

Cameras should be set up by a professional licensed private investigations and/or security firm. The more experience the company has with this type of work, the better. 

The camera must be set up so that it does NOT look into the tenant’s apartment when the door is opened, thus invading tenant’s privacy. Courts in New York have ruled that tenants have an expectation of privacy inside their apartment behind the closed entry door. Otero v. Houston Street Owners Corp., 2012 WL 692037 (Sup. Ct. NY. Co.); see also People v. Mercado, 68 N.Y.2d 874 (1986) (“Once the door is closed, an individual is entitled to assume that while inside he or she will not be viewed by others”). On the other hand, New York courts have found that residents in multi-family buildings lack a reasonable expectation of privacy in the building’s common areas, such as lobbies, stairwells and hallways because it is accessible to other persons. People v. Funches, 89 N.Y.2d 1005, 1007 (1997). 

The camera must be set up so that it gets a clear view of the subject apartment, but not so that multiple apartments are under surveillance, because then there will be a lot of unnecessary footage to review.

The camera should be motion activated; otherwise, it will be difficult to review all the footage.

Landlord’s counsel needs to work closely with the surveillance camera technologists to streamline both the technical and legal process involved with utilizing cameras, or the evidence obtained from the cameras might not be admissible. A videotape must be “authenticated” before it can be used as evidence in a court proceeding. Testimony from someone who has knowledge of the circumstances and who actually reviewed the footage is usually sufficient. See Zegarelli v. Hughes, 3 N.Y.3d 64, 69 (2004).

I strongly prefer that the same person:

install the camera;
maintain the camera (i.e. changes its batteries);
retrieve the data card from the camera and take it to where it will be stored;
superintend the storage system;
review the footage; and 
produce a detailed log of what each incident reveals. 

This person is your witness in court!

Finally, I do truly respect the creative argument offered by this tenant and his attorney. I could see how, if true, such a circumstance might actually prove to be a great defense for a tenant accused of violating the prohibitions against short-term subletting. I will keep it in mind for my next case where I represent a tenant in this situation!

Respectfully submitted,

Michelle Maratto Itkowitz

(1) Some details changed to protect the innocent.

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Itkowitz PLLC Helped Retailer Exit from Unprofitable Operation Without Triggering Oppressive Effects in Good Guy Guarantee

May 29, 2017

Itkowitz PLLC helped a prominent clothing retailer(1) exit from an unprofitable retail operation without triggering oppressive effects contained in the applicable good guy guarantee. Notwithstanding that the Tenant paid one year's advance rent as required by the lease as a condition of the exit, the Landlord was still threatening the tenant and its guarantor "to go after them", even though the Tenant and Guarantor had satisfied all the preconditions to vacating without triggering the guarantee provisions. 

What’s the Lesson? The lesson is that retail is not doing well in the age of Amazon Prime. Thus, proving to you, Dear Reader, that my command of the obvious is excellent. Let me add that when exiting a lease with a good guy guarantee before the end the term, scrupulously follow all the good guy obligations to safely protect the guarantor from future liability.

Respectfully submitted,

Michelle Maratto Itkowitz

(1) Some details changed to protect the innocent.

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Itkowitz PLLC Gets Nonprimary Residence Tenant Out

May 18, 2017

I got a non-primary residence tenant out in Queens(1)

My client bought the building and the seller said this tenant was gone. My client observed the apartment and it seemed that the tenant was, indeed, gone. We installed a camera; no activity. No one was there.

Then we served the Golub notice. Lo and behold, the tenant appears and asserts her rights to the apartment.

People don't understand that a nonprimary residence analysis has two parts. Part 1 is whether the tenant is there. If the tenant is there, landlord loses; no case. If the tenant is not there, then we move to Part 2. Part 2 is this -- does tenant have a good excuse for not being there. 

Good excuses include:

Temporarily taking care of sick relative
Traveling for work
Temporarily exploring a romantic relationship
Forced out because of conditions in the apartment
Away at school

I once saw a case lost because the tenant, who was gone for 2 years, claimed she was living in her country home because she was suffering post-traumatic stress syndrome two years after 9/11. Her apartment was downtown. That's not a crazy excuse.

Here, however, tenant had too many excuses -- her mom, her boyfriend, her job, alleged mold in the apartment...she was all over the place. The judge was not finding her credible.

We settled. Tenant began a new chapter with a little buyout money. Landlord refurbished the unit for the next Rent Stabilized tenant at a higher but legal price point. And the world continues to spin upon its axis.

Respectfully submitted,

Michelle Maratto Itkowitz

(1) Details changed to protect the innocent.

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Itkowitz PLLC Gets “Free Market Apartment” Back In To Rent Stabilization!

April 17, 2017

I represented a residential tenant in what he thought was a free market apartment.(1) I was hired to investigate whether it was actually subject to Rent Stabilization.

It was! 

My client was the first deregulated tenant. The Individual Apartment Improvements (IAI's) that the landlord claimed got the apartment over the Deregulation Threshold, however, seemed suspect. If you want to know more about this topic, in general, read my article on illegally deregulated apartments

In any event, we asked landlord for the IAI backup. It didn't add up. Landlord was attributing the full amount for invoices for work covering the restoration of several kitchens within the building to just my client’s apartment. In some cases, the dates of the invoices and the dates of the work claimed therein also didn't support landlord's claim. The whole thing was confusing. Finally, some of the work claimed was done after my client moved in, which would mean that it does not qualify for getting the rent to the Deregulation Threshold.

It is rare that a landlord actually has their act together to the extent I would like to see it with respect to IAI’s. Here are some examples of what I see frequently:

The cancelled checks do not indicate what invoices were being paid.  
There are no invoices marked “paid”.
The amounts of certain expenditures do not match up with the invoices.  
The invoices are chronologically discordant with the alleged work.  
Landlord does not provide signed contracts; they have paper, but not contracts.  
Landlord does not provide contractors’ affidavits.  
Landlord does not provide before and after pictures of the apartment.  

So I asked landlord for a Rent Stabilized lease and a refund on the overcharge, which was small. Landlord gave it to us without the need for any DHCR Proceeding or court case. My client got his Rent Stabilized apartment!

What's the lesson? The lesson for landlords is to get your IAI back up in order. The lesson for tenants is that you should check with someone like me about whether your free market apartment is really Rent Stabilized!

Respectfully submitted,

Michelle Maratto Itkowitz

(1) Some details changed to protect the innocent.

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