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Itkowitz PLLC Gets OUT Illegal Short-Term Leasing Company for Foreign Students that Chopped Apartment up into Four Separate Rooms! With Just a Letter!

February 10, 2017

I represented a residential landlord in Manhattan who had just purchased a multifamily building[1].  I was hired to do Rent Stabilization Due Diligence

Security footage showed that one of the railroad apartments had four different young men coming in and out of different doors.  The young men would change frequently, coming and going with suitcases and back packs.  An inspection of the apartment revealed that the apartment had been altered into four separate rooms, with locks on the doors.  This apartment had been changed into an illegal hotel. 

The usual discussion ensued with the landlord, about whether the illegal alterations or the short-term illegal sublets would be the more fruitful case.  I am not going into it here, because I have written so much about these topics elsewhere, but both cases present challenges.

Luckily and strangely, however, the Rent Stabilized lease was in the name of a corporation!  I looked up the corporation online and found their website, in a non-English language.  Thanks to Google Translate I was able to see that this was a company that placed young foreign people into these rooms, like a hostile.  Of course, this is completely illegalBut we did not need to get in to any of that.

My position was that, because the tenant was a corporation, and a corporation cannot be a Rent Stabilized tenant (but for a very few circumstances and this was NOT one of those exceptions), that this was not a Rent Stabilized tenancy.  I simply served the corporation with a thirty-day notice of termination and I wrote them a letter, saying the game was over.  The corporation was quite nice about it actually, and surrendered at the end of the month, leaving no tenants behind and the place was broom clean. 

Ironically, I offered to advise this company on how they could tweak their business model somewhat, and do what they do with placing the foreign students legally.  I advise other companies on the topic of co-living. 

What’s the Lesson?  The lesson here is that a good lawyer looks for the path of least resistance to the goal.  Not everything is a big litigation. 

Respectfully submitted,

[1] Some details changed to protect the client’s privacy.

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Itkowitz PLLC Gets $185k buyout for Tenant-Client for only $3,000 in Legal Fees…or…Maybe You Don’t Always Need a Contingency Fee Lawyer?

January 30, 2017  

I represented a residential tenant in Brooklyn[1].  She was the last of two holdouts in a ten unit building.  The particulars of the case are not that interesting.  I am featuring this story because I want to chat about contingency fee tenant lawyers. 

I told this tenant what I tell everyone – I have yet to take a tenant’s case on contingency.  I feel funny about it.  Real estate cases are susceptible to many types of resolutions that could work for a tenant, many of which do NOT involve a big chunk of money changing hands.  What if the landlord offers alternative, better housing at the same rate, for life, in another building in a same or more desirable neighborhood?  I just had a case resolve that way.  If the only way that a lawyer gets paid is a buyout, that could put the tenant’s best interests on a direct collision course with what’s best for the attorney.  That is not where we, as attorneys, are supposed to be. 

I am not just speculating about this.  I have represented landlords in buyout negotiations and had the tenant’s contingency fee attorney tell me that he or she would not communicate my alternative apartment offer because then, “How will I get paid?”  Really?  That’s malpractice.  So, I warn tenants about my discomfort about being on contin.  Not that I think that I would be corrupted by it.  It’s more the appearance of impropriety that leaves me feeling cold. 

In fact, when I represent a tenant in a buyout negotiation the FIRST thing I tell landlord’s lawyer is that I am NOT on contingency.  This greases the wheels of a negotiation because counsel then knows that I am not negotiating for myself and they don’t have to figure in a cushion on the number for my fee.

Here, I very correctly told tenant this, “I am going to write landlord’s counsel a letter.  They know me and I know them.  They are going to offer you a couple hundred thousand dollars very quickly.  You might want to take that and not holdout for more.  If you do, are you going to be comfortable giving me a $66k contingency fee for my letter and the paperwork?”  The answer was no, and tenant retained me for $3,000.00.  I never had to ask for any more money.  I got it done for that. 

I understand that there are plenty of people who can’t afford a lawyer and who are simultaneously turned away by Legal Services because Legal Services is tremendously busy.  Surely, you say, those folks are happy when a lawyer takes their case on contingency?  Maybe.  But we owe it to ourselves here to examine that assumption at least a little.  These cases are VERY different from personal injury cases and other cases where lawyers typically operate on a contingency fee basis.  An insurance company will offer you a certain sum after your car accident.  Once you hire lawyer, lawyer & lawyer, however, you get ten times that much.  Those stories are anecdotally common.  Personal injury is complex and mercurial.  In the New York City rent regulatory space, however, a tenant with a right to remain in her apartment has a right to remain in her apartment.  Frankly, not much a lawyer does will enhance or detract from that.  I notice that many tenants are realizing this and deciding to either go unrepresented by counsel, or to pay someone like me to help them at key points in a buyout negotiation.  People say to me, “Why should I give a lawyer hundreds of thousands of dollars that COULD go into my pocket?”  Consider also that a buyout is eaten into by taxes and that a tenant has to secure alternative housing, which is not cheap. 

What’s the Lesson?  There are many lessons here, but I will leave us with a suggestion instead.  When a lawyer takes a Rent Stabilization or Rent Control potential buyout case on contingency, they should be required to file a special notice of that fact with the NYS Division of Housing and Community Renewal, who will monitor, in some way, the negotiations, to make certain that the tenant is protected.  At the very least, the DHCR could be making sure that all offers, including non-monetary alternative housing packages, are received by the tenant.

Respectfully submitted,

[1] I change some of the details to protect the innocent.  Not the buyout amount or the fee.    

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Itkowitz PLLC Causes Stay of Commercial Eviction to be Vacated in Kafkaesque Battle When Landlord Purchased Building Out of Foreclosure and Receiver Stuck Him with an Illegal Ten-Year Lease

January 20, 2017  

We represented a commercial landlord in Brooklyn who had purchased a building at a foreclosure sale.  The receiver went and made a ten-year lease with a tenant, even though to do so far outpaced the receiver’s authority.  What a mess for the new owner when he discovered this sweetheart deal. 

The Kafkaesque case (you will see what I mean) involved a landlord who purchased a building out of foreclosure in February 2015.  Upon purchasing the premises, the new owner learned that the tenant had signed a five-year lease with a five-year option to renew.  The problem?  The court appointed receiver was only authorized to enter into leases with a term no longer than one year.  Here, the receiver inexplicably violated the terms of his appointment by, in effect, granting a ten-year deal to the tenant.  Not surprisingly, the rent for the space was fifty percent (50%) of the fair market value.

Last spring, we obtained summary judgment invalidating the lease on the grounds thatits execution exceeded the receiver’s authority.  The tenant then filed a notice of appeal.  The landlord then commenced a holdover proceeding.  In July, the tenant applied to the Appellate Division for a stay of eviction proceedings pending the outcome of the appeal.  The stay application was denied.  The tenant then applied to the Supreme Court seeking to stay the eviction proceedings.  That stay application was denied.

In the meantime, the tenant had defaulted in the Civil Court eviction proceeding and in September moved to open the default on the ground that the tenant was never served with the notice of petition and petition and did not find out about the potential eviction until a notice of eviction was served by the marshal.  (My office did NOT handle the Civil Court part of the case.)

In November, the tenant again argued for a stay of eviction proceedings in the Supreme Court.  This time, the Court actually granted a stay against the eviction proceedings pending the outcome of the appeal.  Itkowitz PLLC then moved to reargue the decision.  In the meantime, the Civil Court denied the tenant’s motion to vacate the eviction in part on the ground that the tenant and the tenant’s counsel had misrepresented to the Civil Court that the tenant had no notice of the eviction proceeding until a marshal’s notice had been served.

At oral argument on Supreme Court re-argument, the tenant argued the stay should be maintained and the Civil Court eviction proceedings should be stopped until the outcome of the appeal of the Supreme Court decision invalidating the lease with the Court-appointed receiver.  However, the Supreme Court Justice determined that the Civil Court proceedings should proceed.

See what I mean – Kafkaesque!    

What’s the lesson?  The lesson is that when you buy a property out of foreclosure it’s like opening a present on your birthday when you have no idea what’s in the box!  Sometimes you like the contents of such packages, and sometimes you get tent-year sweetheart leases that the receiver had no business making, and tenants who will do anything to hold on to such great deals as long as possible. 

Respectfully submitted,

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Itkowitz PLLC Gets Retail Tenant to Pay in Full Before Surrendering Retail Store in Manhattan

December 7, 2016 

I represented a commercial landlord in Manhattan on a retail space.  Retail is not doing so great these days, and this was a specialty store.  The landlord had given the tenant many chances to catch up.  It just wasn’t meant to be.

Tenant’s attorney announced that tenant was leaving and they gave us the requisite six months’ notice under the Good Guy Guaranty.  Thanks for that, but you are also several months behind in the rent. 

I pointed out to tenant’s counsel that the Good Guy contained this important language:  “[Guarantors] guarantee to Landlord…the full and timely payment…[of] the ‘Obligations’”.

“Obligations” was defined in the Guaranty as, “the full and prompt payment of all Fixed Annual Rent, Additional Rent, and all other charges and sums due and payable by Tenant under the Lease….”

The Guaranty lasted, “through and including that date that Tenant…shall have completely performed all of the following”….

The “following” included not only handing in the keys buy also included, “paid to Landlord all Obligations to and including the date which is the later of (x) the actual receipt by Landlord of the Obligations (y) the surrender of the demised premises, and (z) receipt by landlord of the Demised Premises.”

In other words, surrender was not enough to cut off the Guarantors’ obligations.  Tenant would also have to be paid up fully on the date of surrender.

What’s the Lesson?  The lesson is that words in contracts matter and if the retail rental market is soft (like now) tenants should be negotiating for Good Guy Guarantees that don’t require payment in full as a prerequisite to cutting off liability.  The other lesson is that both landlord and tenant must read the Good Guy Guaranty with a fine tooth comb before a surrender.  My partner, Jay B. Itkowitz, has written extensively on Good Guy Guarantees.  

Respectfully submitted,

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Itkowitz PLLC Gets Hot Water Restored to Couple with Baby in Last Apartment in Building Being Sold as Part of Estate

October 17, 2016 

Here’s a story for you.  My clients were a young professional couple with an eleven-month-old baby in a $3,000/month apartment in a small building in a nice neighborhood in Queens[1].  They were the last tenants left in the building.  The elderly owners had recently died and a daughter in another state was taking over. 

One of the brokerage houses (the name you would recognize, but I am going to give them a break here) told the daughter that the building would sell much faster if it was empty.  Fancy that advice?  So, the daughter asked the couple to leave.  Now this couple was not adverse to moving, they just needed some time.  I guess the daughter did not like waiting so she had her contractors turn off the hot water.

The couple was referred to me and I immediately sent the landlord a letter.  I included in the letter the cutest picture ever – a picture of the baby being bathed in a bucket with water heated in the microwave, because there was no hot water in the apartment.  The picture was included for the purpose of shaming the landlord.  The baby, however, was having a grand old time playing in the bucket, safe with her mother’s hands around her midsection.  If only we could all stay that innocent and not have to grow up and realize that the reason we are bathing in a bucket of microwave-heated water is that the landlord sabotaged the gas lines. 

The problem here was that the absentee landlord was…ok…I can’t sugar coat this one -- just stupid, and really couldn’t get the gas back on.  Thankfully this was August and not the winter.  I did an HP action. 

Unfortunately, many New Yorkers are suffering similar deprivations of services and the HP case lingered, about which I was not happy.  Of course, the landlord’s counsel was not happy about it either, because, remember, their ultimate goal was to sell this building, and now here I am throwing a wrench into the works.  Now, if the landlord started the end-of-lease holdover that she was entitled to start, I was surely going to scream, “retaliatory eviction”.  That is a presumption we would be entitled to and the landlord would have to overcome it.  Could they?  I wouldn’t want to bet against me on that one. 

So most of my loyal readers can guess the word that is going to come out of my mouth next – “buyout”.  The funny thing here, however, was that this couple did not want a buyout.  They were willing to leave; they just didn’t feel it was fair to ask for a big chunk of cash to go.  They were not unsophisticated people, and they understood the concept of a buyout, they simply didn’t want it.  And they were paying my legal fees, which aren’t cheap!  I couldn’t convince them to let me do my thing and get them a much deserved windfall.  Yet, indeed, I can respect tenants who are not comfortable playing the buyout game.  This couple was smart and well informed and simply made a different choice than many others would have. 

I suggested that we ask for a modest buyout that would cover my fees in full, provide them with an abatement for the lack of essential services, pay for their transition – moving truck, new security deposit, and first month’s rent, etc., and maybe a little something extra for the baby’s college fund.  They agreed and I got it for them. 

What’s the Lesson?  I am including a new feature in all of my “Our Stories” Blog Posts called “What’s the Lesson?”  What are stories good for if they don’t teach us something? 

The lesson here is that landlords should never turn off the hot water on a tenant, obviously.  Besides being evil, crap like that only slows the landlord’s agenda down, in this case it delayed the sale.  But the more subtle lesson is that not every tenant wants the same thing.  I often say that tenants are like snowflakes – no two are alike.  These people wanted what they wanted, and after I was satisfied that I had apprised them fully of all their options, I got them the exact compensation that they desired.  Frankly, tenants that I have gotten ten times as much money for were ten times less thankful to me than this couple!  You would think they had hit the lottery.  In some senses, they approached life like their baby being bathed in the bucket – they looked at the bright side of everything and rolled with the punches.  Maybe that’s the lesson? 

Respectfully submitted,

[1] I change some of the details to protect the innocent.  

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