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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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