huge news - sty town tenants win

jojo10, i think we're discussing different things here. i agree TS will just give up the keys, most likely. i can't imagine what additional headaches they'd be willing to put up with here. but where the potential liability for the damages then rests is far from clear.

i think nyc10022 is correct. there is little reputational backlash to losing in business, as long as you emerge alive. i think rob speyer has been despondent, but he's probably well along the path to acceptance.

hsf, a new asshole. or not. welcome to the party.

How many assholes do you have now? Did you start with just one and people kept ripping you a new one, irregardless of any other considerations?

glad to the see the little guys get the win

Why do poor people have to live in Manhattan?

You know you've won the argument when they have to go after your spelling/typos/etc.

Wonder where you learned to communicate, hsfcomm1? Wherever it was, you obviously had your nose up a ripped asshole during the class in which you were supposed to have learned that "irregardless" is a word no competent speaker of the English language would ever use.

good eyes hfs, i don't know what's funnier here, irregardless or wonderbra? irregardless is not about spelling nor competence, just logic. kind of like wonderbra.

marco_m - "glad to the see the little guys get the win"
I don't get it - why does anyone think this is a win for the little guy? This ruling helps 2 groups. First, it helps the few market rate renters who were lucky enough to live in a unit at a building that receives the J51. This is about 40,000 apartments worth and for some of them they won't get anything.
For the 1M other market rate apartments they get to pay higher prices now because we've just lost 40,000 market rate units.
So the second group that gets help is landlords (with 2,000,000 rental apartments and only 80,000 affected by this ruling it's clear that most landlords aren't affected by the ruling). For most landlords this ruling is a win - with 40,000 fewer market rate units demand for their market rate units just went up - higher rents for all market rate apartments -great.
For most stabilized tenants this doesn't affect them at all - but for the ones who live in buildings with a J51 this is bad. Their landlords will have significantly less money to work with - in fact some with lose their buildings - less money means less maintenance - it's a simple equation. Don't people realize it's the rents of the market rate tenants that subsidized their stabilized apartment?

To recap the only groups who are helped are those people living in one of the 40,000 market rate units in J51 buildings and most landlords. Why does anyone think this is a win for "the little guys."

admin, lord, it was just an error. remind me to critique your grammar.
nice to support the haters.

jazzman, in this specific instance the rent stabilized tenants feel it will stop TS's relentless efforts to destabilize apartments. in this complex it is great. the tenants will have a new landlord and the debt will have been reorganized so that there is no need for inflated rents to make a profit or be able to maintain the property properly. and maybe the place will be maintained properly. this ruling is for the little guy. it will discourage landlords from purchasing properties with the intention of driving out RS tenants by any means possible.

for years metlife ran this complex well and with primarily RS tenants. that's the way the complex was designed. the only reason the huge increase in market rate tenants was needed was because TS was stupid and greedy. they were stupid enough to spend $5.4 billion assuming a certain rate of destabilization. when that rate didn't occur, they did their best to force it to occur. and their renewal rent increase rates were breathtaking. as 30yrs and i pointed out, in many cases the rent reductions here won't be huge. although in some instances they will be substantial, but those were very recent increases.

jazzman, market rate rents are cratering anyway. 4 percent of the RS apartments exited the program last year. 5-6% likely will this year, give or take a few due to this ruling. in terms of immediate effect, this isn't likely to have much. where do you get the 40000 number? there are 40000 market rate units in j-51 buildings? that seems high to me. this complex i'd think has the most by far, and we have 4300. even so, i'd bet if you ran the before and after numbers here it wouldn't be so stark. the primarily effect is going forward.

http://www.nytimes.com/2009/10/23/nyregion/23stuyimpact.html?ref=nyregion

NY Times had good comments. Short term this will keep rents low, long term it means properties will not be maintained or improved.

Despite the lack of clarity, the ruling by the New York Court of Appeals had an immediate chilling effect on real estate in New York: Landlords questioned whether they could raise rents, and some even went so far as to cancel plans to buy more apartments in buildings with tax subsidies.

“It’s terrible for the industry,” said Ed Kalikow, whose family owns 2,000 apartments in the city. He did not know how many of those units would be affected. “A lot of people bought property with the thought that they would get the rents up. People made decisions on that. Banks made loans. This decision is another nail in the coffin.”

“A lot of people bought property with the thought that they would get the rents up. People made decisions on that."

once again, this development was maintained far better under metlife than TS. with far more RS tenants. even before they began destabilizing ANY of the apartments.

maybe yes, maybe no, i've heard nothing but a singular opinion that this was "well run" what ever that means. However Metlife probably was making a subpar return which is why it was sold. This doesn't just affect shareholders, it affects the ability of the company to fund retirement plans, insurance agreements, etc.

MetLife's return was irrelevant. The incentive to sell was the insane $5.4 billion. MetLife's gain on the sale (net of income tax) was $3 billion, per their 2006 annual report. Whatever chump change they have to shell out because of this ruling will be immaterial to them.

Does this ruling mean if i call up and ask to rent an apartment it will be rent stablized??? WOW...

rs that's bullshit. Metlife built the complex with huge subsidies knowing full well that it was intended to be subsidized housing. They certainly weren't losing money they just saw an opportunity/sucker. And the place was much better run. It's amaZing how many corners a ll will cut when they so hideously overpaid. TS would fuck over the tenants in a heartbeat if they could.

AR -some estimates of the number of market rate units in J51 buildings are as high at 80,000 (I've seen as low as 30,000). So this ruling is much bigger than Sty Town. But I totally agree that for buildings who have gone through the foreclosure process the foreclosure process will be good, but that really only applies to you guys and you would have gone through the foreclosure process anyway.
Other landlords will lose their life's work. They might have recourse debt etc. They will fight for their properties which means no repairs no heat etc. If and when the banks take back those other properties then everything will be fine again for those tenants, but many of the buildings that will get ruined by this decision aren't over leveraged like Sty Town -this ruling will force some to bleed a painful death.
I agree though -very little will happen soon -this will all play out over years. My guess is that new legislation will be passed as well. For instance, let's say that 10 years ago a banker making $1M has his rent go above $2K and moves out of his 3 bedroom in a building that was getting a J51. He then goes and rents a $10K/month three bed for the last ten years. His lawyers claim he was illegally evicted and that he wants his old apartment back and at the lower rent. Plus he wants treble damages. The damages would be approximately $8K per month for 120 months times 3 or = $2,880,000 - plus now there is a family of 6 who has been living in the apartment for 10 years - the kids are in school but our millionaire banker wants what he thinks is rightfully his and wants those people out.
With 40,000 apartments certainly there will be cases like this - does he deserve nearly $3M? Does he deserve a lower rent? Is this example extreme (yes)? Should legislation be passed to prevent this guy from getting a penny and his old apartment back (yes)?

"rs that's bullshit"
surprised?
a sweet trade for met life, who i think ran stuy town pcv reasonably well for a number of years--it did take them a bit long to get ac
and the market approved: there has be a 5-10 year waiting list to get an apt there at times over the years
the admin of that wait list was of course a bit sleazy--those who knew someone in the exec suite at met were always able to jump to the top of the list "irregardless" (have you done your penance yet ar?) of its length
truth be told, we got my uncle (a retired priest with no dough) in there in a week in the early 90s
i mean ar, met was a decent ll prior to the current mess, no?

Ar - "Metlife built the complex with huge subsidies knowing full well that it was intended to be subsidized housing"

Are you sure or is that urban legend? I read the other day that it was market rate for the first 25 years until rent stabilization came into play. Sure it may have been subsidized by the government when it was built and the intention was to provide housing for war vets, but it was still built as market rate housing. There was just so much supply that it helped keep prices down.

Now in fact it turns out that it ended up as an affordable place to live for the first couple decades but not because of any regulations.

good question--my understanding has always been that it was subsidized and always subject to rent regulation--whatever the case the project can , until now, only be said to have been a great success--met made a fortune, and still was able to provide reasonably priced housing (that was always in great demand) for >50 years---regulated or not, met sertainly cant complain

AR here's my take on this whole thing. - TS paid too much -everyone knows it now and about 80% of the world knew it back then. They bought the buildings thinking there was a lot more illegal sub-letters than there really were. But there was one sleazy landlord and hundreds of sleazy tenants so I don't see why landlords get the bad wrap here. TS also miscalculated the backlash from tenants and tenant groups. Their entire PR department should be fired. They REALLY messed this up and they will pay (unless they get a bailout from Obama like the bankers, car dealers, homebuilders etc etc did). History will remember the worst housing deal ever. That will be their legacy despite the many other successful deals they've done.

It's too bad that the current tenants suffered a decrease in services - they didn't do anything to deserve that (other than perhaps turning a blind eye to the illegal subletting of their neighbors which ultimately lead to greedy vultures circling the place waiting to buy it and evict everyone). I don't feel bad for the people who got evicted. I don't feel bad for the people who got taken to court and had to prove their primary residence - I mean really, how hard is it to prove where you live if you really live there?) I don't feel bad for market rate tenants who rented a vacant 2 bedroom for $4K. I do feel bad for market rate renters who rented a 2 bed for $2,700 until MetLife and then had their rents raised to $4,000 in a matter of years. Clearly TS charged too much for their market rate rents but most likely it was their only hope to stay solvent (in other words I think the high market rents were an act of desperation not greed)?

The J51 ruling is joke. Even MetLife (who everyone loves) was destabilizing units illegally. So can't people just admit that it was standard practice and not greedy at all. Either admit that or start calling MetLife greedy land barons as well.

Anyway - I hope you get your repairs - I hope you get a reduced rent - I hope the money you spent in rent before is seen as an overcharge but I want to see the funds given to a program that will build affordable housing (no treble damages).

when i lived there as a 2 yo my family was very pleased to be there, and it was a great community of young families with little money trying to get a start in the big city--we still hav close friend from those days

jazzman: TS is only on the hook for about $50 million here; the rest of the loss will come from the layers of debt holders. blaming tenants for not doing something about alleged illegal neighbors is absurd. do you think this is a prep school with an honor code?

according to you, illegal destabilization is OK because many were involved? you gotta be kidding.

obviously, you don't like RS. why not leave it at that?

Ubottom - I wonder who the person/people at MetLife is who made the decision to sell. What a genius. Certainly doesn't get his/her credit in NY real estate circles. Complete genius. What if it was some low level analyst who went to his boss and said "You know what, the NY market is overheated, we should sell this thing."

I wonder (and assume) that because we (meaning the government -Freddy/Fannie) own the first layers of debt that we will approach MetLife to buy the buildings back and ask them to manage them again. Imagine if they could sell it at $5.4B and buy it back a couple of years later (with a much higher rent roll) for $2.5B or so. WOW. This project is such a political nightmare that it would be nearly impossible to sell it to another private equity/real estate company (like Avalon or Related) no matter how good their reputation. No one other that private equity companies could afford it so it will be interesting to see what happens. Perhaps TS puts in more cash in an effort to save their reputation - we'll see.

the only inteligible words from redbaiterliar: However Metlife probably was making a subpar return which is why it was sold.
completem idiocy yet again--if one thing is clear mets entry/exit and ongoing experience of this project has been one of the best real estate trades of all time
betcha some "talented" banker is taking credit for the sale of st pcv--a banker who likely fought the concept!!
when worked out, st pcv will likely be quite viable for whomever takes it on--this taxpayer wouldnt mind owning it, if priced properly--tangible asset with real intrinsic val

CC - you missed my points entirely - I don't like RS of course I don't the system doesn't work it hasn't worked it won't ever work. We have the worst, most expensive housing stock in the country and RS, other government regulation, and a corrupt construction industry are the reasons.

BUT - it's here -it's not going away - and it shouldn't go away. It can't go away. The city would be ruined if we tried to eliminate it.

"blaming tenants for not doing something about alleged illegal neighbors is absurd." I'm sorry you feel this way - but when I see a crime I report it. And can't you admit that the reason their were so many vultures here was because MetLife turned a blind eye to the illegal subletting? This deal attracted the greediest most aggressive real estate guys out there. They all had the same business model. They all were planning to go on a witch hunt (let's just hope they would have done it in a more civil manner).

"according to you, illegal destabilization is OK because many were involved?" what has now been ruled illegal destabilization is not ok after this ruling - reread my posts I told AR she should get her rent reduced - I told AR the landlord should pay an overcharge fee - what I said was that you can't call a landlord greedy for following that industry standard. A ruling by the DHCR had been made. And remember one court ruled unanimously in the favor of TS and this final ruling was 4 to 2. So plenty of reasonable people (who had nothing to profit from their decision), even after the microscope was put on the issue, still ruled in the favor of TS. This was not an "obvious" case of greed as so many are portraying - it's also not an obvious win for the little guy - it's amazing how this story has been spun by the press and the politicians. It's really too bad.

the only inteligible words from redbaiterliar

when posts begin like this, means the person has nothing intelligent by which to back up what he's saying..

thanks for the analysis from the moron who produced this:
However Metlife probably was making a subpar return which is why it was sold.

you should stick to what you know--on beck's blog

for all the RS tenants out there who are cheering this decision, i think this is a case of 'be careful what you wish for, it just may happen'.

The new owners will want to make an ROI. If they can't raise prices, they'll lower costs. The RS tenants in this complex or others along with our officials, will need to consider this. Price Controls under Nixon didn't work too well either. I cannot imagine the owners of these buildings doing pro_active maintenace. A reasonable conclusion is the properties will not be maintained ship shape bristol fashion.

you remain a moron.

the single biggest cost here is debt service. should that come before maintaining the buildings?

The LL's did maintenance on their bldgs.before and made profits, but much smaller profits...their greed got them and now their profits will go back to rs profits, not crazy profits.

CC - agreed that once the debt service is cut in half the project is much more profitable at current income and expense levels. But that would have happened without this ruling. The market will correct things. That's how cycles work. People pay too much and then the banks sell to people who pay too little. TS gets what they deserve from the market -they didn't need or deserve this decision.
Again here is the language in dispute.

""the law bars deregulating units "which became or become subject to [stabilization] by virtue of receiving tax benefits" under the city's J-51 program.""

These units did not BECOME regulated by the virtue of receiving the benefits they were already stabilized at the time of the ruling.
The interpretation of this sentence shouldn't cost the Sty Town bondholders $200M.

I think the best PCV/Stuy option going forward from an NYC taxpayer's perspective is a tenant buyout. The RS units are worth the most to the people who live there. And for the tenants that don't buy their units, from a public relations perspective, it's different if their fellow LL/tenants pursue non-primary residence/illegal sublet evictions.

I don't know the history of receiving J-51 benefits while receiving MCI increases. But it seems unfair (though not illegal) to have LLs rely on DHCR rulings which are now handily overruled by the courts. On the other hand, the DHCR rulings probably have lots of verbiage to the effect that they may not hold up in court. Sorta like IRS rulings - correct me if I'm wrong, but people rely on IRS rulings/opinions and yet are not protected by those rulings if their case goes to tax court.

nyc10023 - you can receive J-51 benefits at the same time you receive MCI increases - but there is a phase out formula. The more MCI's you take the smaller your J-51 or the larger the J-51 the smaller the MCIs -the system is set up to protect against this "double dipping" that some in the media are claiming.
DHCR opinion letters are just that -opinions - the DHCR doesn't write the laws they just interpret them. But as a landlord what are you to do if you can't trust rulings from the DHCR? And should the bondholders really lose $200M after they relied on the DHCR? The ruling came out years ago and there was no outcry by tenant attorneys. For years no complaints. It's very reasonable for TS (and the owners of the other 30,000 or so affected units and the banks and funds who lent on those units) to have assumed this was a non-issue. I bet it wasn't even discussed in the underwriting as it seemed as unlikely as a meteor hitting the complex. Lot's of really good honest people are going to get hurt by this ruling - it's too bad for them - but it's great for market rate renters at Sty Town and other places so let's just be happy for the market rate renters.

Jazzman: the courts disagree with you on whether you can receive both. Isn't that the point of this discussion? The DHCR was mistaken in its previous rulings (and I reiterate that there was plenty of verbiage around the rulings that said that they were not the ultimate ruling, much like IRS rulings).

Like I said, I don't know the history of receiving J-51, while getting MCI increases. It is entirely possible that this has been a grey area for decades, and LLs just blithely depended on one tiny DHCR ruling that was vaguely worded. I know many other instances where gov't agencies have interpreted various statutes "incorrectly" for decades, people relied on them, and it still came back to bite them in the butt when those gov't interpretations were challenged in court. Yeah, for the small mom-and-pop operations, maybe they were genuinely blindsided. But I cannot believe that no-one at Metlife (or maybe this is naivety) did not have some qualms when they knew that DHCR rulings (in general) are not worth the paper they're written on.

So yeah, I'm always on the conservative side of any IRS ruling because I never want to it go against me, retroactively.

of course the new buyer in workout will want a return, fool--they will buy at a price that accounts for all factors incl that there are rent stabilized apts--and TS etc bought making assumptions re the evolution of rent stabilized apts--this trade is in the sewer for much more than rent stabilization problems--res rental market in NY tanked, and this deal was way too leveraged, and had priced many ludicrously rosy assumptions, a minor one of which involved rent stabization developments

So let me follow up a previous point with an illustration to show how wrong (purely from an equity standpoint, leaving legal issues asside) this ruling is -- for those of you that think this is so wonderful for society.

A Dr. making 400g's a year rents a mkt rate 1 bdr apt for $3,000 a month in, say, January 2007. He could afford it, chose to pay it, no victim. This ruling says his apt should not have been de-regulated so his rent should be $1,500 per month. What is the remedy you ask? His rent theoretically gets rolled back t0 $1,500 now and he is owed 36k by Tisch as of January in rent overcharges (plus possible trebble damages to the tune of another 72k). This rich Dr. now gets tons of cash in his pocket and a below mkt apt that he ONLY got because a middle class person could not afford to rent it for $3,000 a month.

A massive windfall for this specific buyer and all others like him. Yeah, keep talking about what a great victory this is for the working man . . . who will now live in a deteriorating development as revenue tanks to maintain it.

Re: maintaining RS - many subsidized/Mitchell Lama housing required annual income statements from tenants. If income went above certain levels, tenant was not evicted, but paid additional rent.

Considering that many RS tenants in New York own second homes for use as weekend retreats, etc. and are able to do so mainly because of their artificially low RS rents, just wondering if it would be possible to have RS tenants affirm that they do not own any residential real estate. Basically, if someone can afford two homes, they should be paying market rent in New York.

Then, if a RS tenant does own another place, their city apartment becomes de-stabilized.

That seems fair. (Not penalizing the old bubbies, and the real middle class).

And love that Tim McCann (of McCann-Ericcson ad agency) just won back stabilized status - tell me he doesn't have a country house somewhere. LOL

Wasn't rent stabilization supposed to be temporary. like for a few years during WWII?

ph41 "just wondering if it would be possible to have RS tenants affirm that they do not own any residential real estate."
This is a mute point - an RS tenant is allowed by the RS rules to have 10 homes if he wishes. That rule is as asinine as the luxury decontrol rules. The original purpose of RS was to alleviate pressure from a low vacancy. How does keeping a unit vacant for 6 months of the year while someone suns in Florida help with this purpose.
You shouldn't be rich and have an RS apartment. They should be for the needy and not the greedy.

i'll confess that i don't know that much about what was expected generally by landlords in terms of the j-51/RS issue. but there is a very interesting comment by Jeff (i believe the Jeff who posts as well) on UD on the comments re this ruling. I hope UD doesn't mind my reprinting, and that he lets me know if i have a mistaken identity here, because I greatly respect Jeff Bernstein's posts.

"This ruling will have major ripple effects throughout the New York City Multi-Family residential market. When the issue of de-regulating rents, while accepting tax subsidies first came up my partner figured it wouldn't be a big deal and that there couldn't be that many guys dumb enough to attempt this gimick. We wondered how the great and mighty Tishman could have been follish enough to play with fire this way. However, anecdotally we were told that many apartment building owners in NYC had relied on an "opinion" posted on the HPD web site (if I recall correctly) saying that this wasn't necessarily a conflict. OOPS!"

Jazzman, I concur with you that to eliminate RS in one fell swoop would be disastrous. and i've never really been looking for, nor do i need, clearly, a rent reduction or any damages for overpayment. but i think TS deserves every negative thing that can befall them here, for many reasons. and i think, but can't prove, that your predictions of what this will mean for the majority of j-51 landlords is exaggerated. i know of one other huge complex that did the same thing as TS, overpaid grossly and attempted to convert through fair means or foul units as soon as possible, although the name of the complex escapes me. there too i have no sympathy.

mktmaker, this will be an improving development. the new landlord will not have excessive debt servicing and will be able to improve the services without much difficulty. it was the $5.4 billion paid that sunk this investment.

the law's a bitch when you break it and get caught.

RS was legislated in the late 60's stupid

Jazzman - I agree - but even RS laws are not written in stone. Of course, it would take a really brave politician to stand up for change to current RS laws - but a citywide discussion on RS tenants owning residential real estate elsewhere might start the process of really finding out if it is the real "working guy" or "middle class" benefiting from this system (ok that's probably a pipe dream).

Jazzman - Is it actually allowed by RS rules for an RS tenant to have however many homes he wants? Where did you find that?

Also, RS laws are not written in stone - changes have been made and could still be made. If some brave politician or other gutsy soul brought this other unintended side benefit of RS (as in RS tenants being able to afford second homes) to a public discussion, the wrath of the true "working" and "NY middle class" might burst forth to demand change.

ok, here's an ethical question for you. should we not allow people with higher future earning potential to participate in lotteries for middle and lower middle class housing? because sometime in the future they might make enough money for it to be absurdly cheap? or perhaps we should follow the homeowners, and when they do make more money, force them to sell so somebody more "deserving" can occupy their home? or maybe if you're already 45 and you haven't made enough to not qualify that would be OK, because you're probably not going to do that much better in the future.

we keep bemoaning the ownership society. berating those who strive to buy when they should rent. and yet we do little to nothing in this country to allow people who rent to have "homes." a bit hypocritical i think, and very different than many other countries. but entirely consistent with Matt's contention that if you can't afford to buy, fuck you, you have no rights.

AR - sure, but when they reach that "higher future earning" they should give up the benefit given to them when they were not as well off.

Plus, this system keeps people in place - even as their incomes rise, and they could afford a nicer/better place, and one they would like more, the thought of the incredible "deal" they have keeps them from moving on, and releasing the apt. to another young, struggling person.

RS is one of the major reasons that finding decent, affordable rental housing in NY is such a gut-wrenching struggle for so many people (especially younger people).

Doesn't happen in Chicago, or in LA. Boston got rid of their RS system some years back - didn't bring on the end of the world.

OF course there would be protections for those over a certain age who had occupied the apt. continuously for at least what, 15 years? And no more of this "leaving" the RS apt. to your "heirs"

Don't force someone to move- just to pay true market rent as their fortunes improve. And pay damages if they are found to have lied on their annual income statement.

ph41, read the beginning of my paragraph more closely.

when i moved in here the rents for a 2/2 in PCV ran $2450-2750, not rent stabilized. within four years TS was trying to charge $5500-6000 for those same units, and kicking out tenants who were unwilling to pay the increases that they needed. people didn't revolt against metlife because they weren't getting renewal notices yearly that included 20% or higher increases. TS gave people one-year teaser leases and then jacked up the rates upon renewal. there is a tremendous amount of hatred here for TS, and it's pretty unanimously held. many people groused about metlife, but no longer.

O'Neill,(of the restaurant) at the Apthorp, in a 3,000 sf apt. somehow manages to keep his income below the $175,000 cap - clever - and then he keeps taking in lots of stray guests (ex daughters-in-law, random friends) very generous host.

And seriously, if someone can afford a second home, they should not be in RS housing, IMHO

AR: so correct me if I'm wrong. I thought the verdict affected only apts that were taken out of RS due to application of MCI increases. In other words, if an apt was already FM, it would remain so. Also, didn't most of the MCI increases happen during Metlife's tenure? As in TS may have been responsible for very high increases, but not for the MCI-related ones.. Confused here.

ph41: RS has worked to stabilize many parts of NYC, people stayed and provided stability because they had a good deal. Agree that it has meant some wealthy people benefiting from sweet rental deals. I know some people on the block who have not "moved on" with their lives since their 20s (now in their 70s), never married or had children in large part (I speculate, of course) because of their great deal.

that's because, ph41, you don't get why RS existed in the first place.

there are many reasons for a program such as RS. community stability. families and education. and of course economic and other diversity.

the RS progam has always required that the tenant maintain his/her primary residency in the RS unit.

10023, i believe MetLife was receiving benefits under the j-51 program prior to the luxury decontrol regulations being enacted. so all apartments taken out of the RS system were done so improperly. if you receive a tax break for any unit (and they received the break for the entire complex) you can't destabilize it. i don't know exactly how the j-51 program works, but i know that MetLife, and now TS, are to receive tax benefits from the program through 2016ish.

the MCI increases only affect the current RS tenants. the concept would be superfluous for market rate units. the MCI increases pushed some RS tenants closer to destabilization, and raised the rents on the units making it later easier to destabilize, but the vast majority of the units that were destabilized were ones that became vacant for whatever reason (including harrassment) and then had occupany rate increases and credits for renovations added to the rent to bring them above $2000.

the high increases were just those TS felt they could impose on units that were already market rate. but they went beyond market, and life's a bitch when your tenants are a group that can organize and retain counsel that can spot the problem. i have to wonder if any tenant would have bothered to investigate under the old metlife regime and rents.

So does anyone know how the Renters income is verified, or is this something that's next to impossible. The Charles Rangel situation comes to mind, and he got away with it..

The LL doesn't have to take the apt out of RS just because the tenant's income is above 175k(?) for 2(?) years in a row. It just means the LL has the option to do so. So Rangel's LL (for obvious reasons) chose not to take him out of RS. Hmm.

Crain's comes out and says its overblown...

>> Shock! Landlords will survive Stuy-town verdict!
Appeals court ruling against landlord Tishman Speyer and its partners will affect far fewer units, and property owners than originally feared; impact outside Manhattan tiny
http://www.crainsnewyork.com/article/20091023/FREE/910239986/1058/newsletter

AR: I see. Interesting. Not very smart of either Metlife or TS to have taken some vague DHCR ruling to be law. I just looked quickly at the J-51 program on the DHCR website. I'm far from an expert in RE law, and right off the bat it seems to me to be a contradiction to be able to get MCI increases to the level of rent destabilization AND to get a RE tax abatement at the same time for those (or remaining?) units.

Rangel was probably a special situation, but read this...

http://therealdeal.com/newyork/articles/making-rent-stabilization-fair
Spinola noted that there's no way for landlords to verify tenant income, and that it's easy for someone who runs their own business to shelter income so that it doesn't hit the $175,000 mark for two years running.

assume a certain percentage of the tenants make above limits but can't be verified..

Amazing what logical contortions some people try to use to justify the NYC rent stabilization laws. Sad. I can respect them more if they just admit the system is flawed and they are leeching off it.

I understand that RS tenants must have the RS unit as their primary residence.

It just seems to me that New York is almost the only place in the country (SF has a version of rent control) where renting is in some cases (RS cases) the same as being an owner, without having to put your own money in to the property, without having the burdens, as well as the pleasures, of ownership.

And I am sure, 10023, that you know other people on your block who are RS, but are enjoying the benefits of owning something outside of NY, a place they can "escape to", and a place which then benefits from their real estate taxes, the ones they're not paying in NY.

10023 - I agree that RS has probably helped stabilize certain communities, but it has also legitimized a mind-set in many circles of "entitlement" - it's not the "lucky sperm" club, but something analagous.

Yes, inner city Detroit may be the pits, but you cannot say that every other city in the country(in the world?) is destabilized because it doesn't have NYC type rent control.

Why buy real estate if you can get a below market rental....

I think these programs had a purpose and a time I suppose.

aboutready,

I tend to dissagree with your premise (which lurks in many of your posts) that the law was clearly broken here and therefore TS gets what they desserve. This was far from settled law. For some 15 yrs all LL's in NY operated as TS (those w/ these types of units) in large part due to an ambiguos statute that was further confused by the regulatory oversight agency taking a position that, in effect we only now find out, differed from how the court of appeals would finally interpret the statute. Add to that that it was a 3 to 2 split decision w/ very vocal dissent and I fail to see why TS was so clearly "caught" here. If just one more justice agreed w/ TS's position would this all of a sudden have been a frivolous suit by the Tenant group? Hardly. It was a case of first impression -- and a big one. Sorry but can't demonize TS for doing what all LL's believed they could do and were advised they could do by HPD.

"http://therealdeal.com/newyork/articles/making-rent-stabilization-fair
Spinola noted that there's no way for landlords to verify tenant income, and that it's easy for someone who runs their own business to shelter income so that it doesn't hit the $175,000 mark for two years running. "

Yes, Rangel was protected, because he lied about his income to the government (literally forgot to include income on the sheet).

Isn't that funny?

Crime pays... especially if you're a Democrat in NYC.

it was a 5-0 decision in the sppellate division, and it was a 4-2-1 decision in the court of appeals. the appellate division is very anti-tenant.

and i can damn well demonize TS for many things, the least of which is rampant stupidity. but if you can't, then so be it. a defeat is a defeat.

10023, TS gambled, in more ways than one, and lost.

read appeleate decision just, not appellate anti- land lord... wtf

Mktmaker: I don't know how strongly worded the rulings from DHCR/gov't agency were, but I was taught NEVER to rely on IRS rulings. Can always be challenged in tax court to your disadvantage. Again, maybe some legislative relief for mom-and-pop type LLs (though their basis is usually close to nil anyway). No sympathy with large LLs (more Metlife than TS) - they should have done due diligence, in particular TS. What about their other residential holdings?

"renting is in some cases (RS cases) the same as being an owner, without having to put your own money in to the property, without having the burdens, as well as the pleasures, of ownership."

I respectfully disagree. Understand that prior to the 1980s ownership was not widely available to apartment dwellers (Manhattan coops tended to be the Park/Fifth/CPW strata financially and socially) and renters often invested significant sums (to them) in maintaining and improving their residences. My parents paid every few years to have our (always cracking) walls patched and floors sanded. They had built ins built, put down new linolinuem (I know but it was the 70s) in the kitchen and purchased several at least one refrigerator without financial help from the landlord. In fact one of my motivations for eventually purchasing the apartment after conversion was to get some return for the 65 years of rent and other investments my parents had made in the place.

Also, I'm not defending Charlie Rangel or the Lenox Terrace landlords but would be the first time a celebrity be from entertainment, sports or politics received preferential treament for the a lanlord's right to say "he lives there". Its hard to imagine in 2009 but go back 20, 25 years and but there wasn't exactly a high demand for luxury (or semi-luxury) apartments in Harlem...A friend of mine moved up there (to the same complex Rangel lives in) in 1989 and she was afraid to go to the grocery store for soda in broad daylight (an African American woman btw, albeit one raised in an affluent area and always previously living south of 96th street). I'm only suggesting that the Rangel's apartment was not exactly in high demand at any price.

liz, yes, i have made improvements myself, including purchasing a new refrigerator, adding cabinets, etc. I'm about to redo the floors and stain them. and many of the people here have been here for decades. they stayed with the city through blight, near bankruptcy, horrible crime, remained when huge numbers of people were fleeing the city. i'd say those were burdens. this neighborhood has not always been the safest, in fact was quite horrible, in the past. until the bubble they could hardly give these apartments away at 30% below market.

these aren't the people affected by this decision, directly now at least, although going forward some families of four won't have to worry in the short-term about being told that making $175k is too wealthy to continue to live near the schools their children attend, in homes they've occupied for often decades. but they illustrate what long-term rental tenants can offer to a city.

lizyank - right, your parents did the things (built-ins, etc) that made their rental into their "home" - as did my parents. And the cost of those things, amortized over 65 years really probably amounted to very little. The money they may have been saving on rent went into making their apartment more to their liking.

Then, you put your money down (I believe in some past thread you said you got a very good deal), and bought, and made money.

Perhaps in those 65 years, your parents liked what they had better than what they could have bought.
(I remember going to look at a house with my parents and being upset that my room would be smaller than the one I occupied in their rental - I was very happy they didn't buy back then).
Though when my mother, then widowed, chose to move into Manhattan, she bought a coop, smaller than the old apartment, but comfortable.

And there are many other cities in the world where ownership is not considered the be-all and end-all, as it never really was in NY.

And AR - will those improvements now tie you to the apartment forever?

If you leave, the LL gets the benefit. (which would,I think, really annoy you, no?)

no, ph41, of course not. what would annoy me is that they would charge me to return the apartment to its prior unimproved state. but even that wouldn't annoy me for long. i'm cheap and calculating. i figured out how much my improvements would cost over a three to four year period and determined it was worth it to me. and if i were to leave earlier, well, that's one of the joys of not overspending on housing. it wouldn't really matter.

I don't think my parent's situation and ARs are anything equivilant. AR has stated many times that they are choosing to rent at this time, have owned and will probably own again in the future. As for my parents...the only choice they had was Mitchell Lama housing and my father preferred the "tired and true" (my mother so very much wanted a "new" "modern" apartment). Yes, I did get an amazing deal on the apartment given how upmarket the location had become, and I was able to reap the benefits of ownership--but that was me not my parents.

AR, I absoultely agree that those who stuck with NYC through thin should now not be tossed out of fat city (I'm sorry healthy, low fat, purrell on the hands city) but many of them didn't necessarily make a concisous choice. It was more "where would we go?" Don't forget many, like my parents didn't know how to drive and thus the 'burbs were not an option.

"So does anyone know how the Renters income is verified, or is this something that's next to impossible. The Charles Rangel situation comes to mind, and he got away with it.."
Each year the landlords of people with rents over $2K send a form to the tenants - they must certify their income within I think 60 days of receiving such notice.
If the landlord is unsophisticated then the tenant has no obligation to divulge this information and if the landlord happens to have a tenant who is a US Senator, Governor, or City Councilwomen then the landlord is under no obligation to evict the tenant.

AR - you can call TS greedy - they were, everyone knows it. But you can't say that this ruling proves how greedy they were. This ruling is all about a poorly written statue. The only guidance on what the law actually said was written by a state agency and said landlords could deregulate. Even after hearing days and days of testimony on what is says the judges couldn't agree on what it said. This isn't proof of TS's greed - there is plenty of that elsewhere though.

And 10023 all of this has nothing to do with MCI's.

Someone posted the form's URL the other day. Tenant doesn't specify income; just checks a box to indicate above/below $175K in each of the two prior years. Up to the LL to call them on it, and then the fun begins.

Everyone - this is the sentence in question:

""the law bars deregulating units "which became or become subject to [stabilization] by virtue of receiving tax benefits" under the city's J-51 program.""

I know the lawyers were fighting over the word "of" but I would argue that the word "become" is the most important. TS's apartments didn't "become" stabilized because of the J-51 these units had been stabilized for 18 years prior to them receiving the J51.

I wonder why we haven't heard from the people who actually wrote the law. Why didn't they give testimony on what this sentence meant when it was written?

liz, i wasn't saying the situations were analogous. i was saying that renting hasn't, and ideally shouldn't, prevent putting down roots. and actually, i have said that i'll probably own in the distant future, most likely retiring elsewhere. my home here will probably be a rental, unless i buy this apartment. but you're correct, i have options.

here, along with where would we go, i think you had a fairly cohesive community. i don't know if it started that way, but it certainly became so.

one of our elevators wasn't working the other day. i good-naturedly joked to an elderly woman that at least one was working. she very sincerely said, i'm just so glad i can live here.

jazzman, the crain's article indicated there were approx. 140,000 units in buildings where lls utilized j-51 breaks in 2005, with only 22,000 of them in manhattan (which it indicates is important because rarely do those outside of manhattan reach the $2000 destabilization level).

PCV/ST consists of over 11,000 units, or half of the 22,000 at issue. doesn't that number seem high to you? if, as you claim, landlords of RS units are using j-51 left and right so they can afford improvements, why aren't the numbers higher? it would seem to me that the majority of the landlords made the decision to stick with RS and not go for j-51.

Can someone post a link to the opinion? Thanks.

One reason why this situation will have much less impact than everyone is talking about: In PCV/ST, there's an organized group of tenants that WILL start a group action now. Remember this ruling DOES NOT give them anything but the right to start an action over the issue. In the vast majority of buildings, you don't have this (especially smaller buildings with smaller landlords: if you own a building with lots of apartments like this, odds are you own a building worth over $10 million, and a good chance a lot more than that). A lot of tenants won't even bother to look because they won't even think the ruling applies to them. Al ot will not look because they are too lazy, a lot will not start their own "one off" action because they don't want to spend the money it will take.

Also, there's another thing which may come into play: before this ruling, you could generally only go after the LL for overcharges if you were the FIRST tenant after the RS tenant. This is because if a tenant "accepts" a registered rent as valid, it becomes valid even if the LL is overcharging. It's why DHCR sends every registered tenant a form once a year confirming what the registered rent is. So if the first tenant leaves, the second tenant comes in, is being overcharged but accepts it, the overcharge rent become the real RS rent. A third RS tenant comes in, they can only go after the LL for overcharges from the previous tenant as a result. With the turnover due to deregulation, my guess is that there are lots of cases where this WOULD have been a problem, but the unit has turned over a bunch of times and the tenant who is currently in place has a claim which is worth so little (or nothing since almost all of the newest rents are LOWER than the prior rent) that it just isn't worth pursuing.

AR - "jazzman, the crain's article indicated there were approx. 140,000 units in buildings where lls utilized j-51 breaks in 2005, with only 22,000 of them in manhattan (which it indicates is important because rarely do those outside of manhattan reach the $2000 destabilization level)."
I saw that and was relieved. The fewer apartments this affects the better. Of those 22K it's safe to say that some aren't paying a rent that is higher than what the legal rent would have been anyway. So it will be interesting to see what happens.
I wonder where the others quoted in the press got their estimates?

nyc10023, here you go: http://www.nycourts.gov/ctapps/decisions/2009/oct09/131opn09.pdf

30 yrs - to your first paragraph above -the landlord tenant attorneys are all over this - they will hunt these would be plaintiffs down -

to your second paragraph - as AR points out the Crain's article suggests that only about 22,000 units would be affected. I would think that this would constitute fraud and thus any statute of limitations afforded a landlord would be thrown out. But you allude to apartment turnover. In market rate units the turnover is indeed much more frequent and each time there is a turnover the legal regulated rent will go up approximately 17%. If the legal rent was over $2K to begin with you only need a couple of vacancies and the legal rent becomes close to or even exceeds the actual rent being charged.

With only 22,000 units (if true) this just becomes much less of a big deal than otherwise thought. But certainly this will force some landlords to lose their buildings. It's sad - a guy with a 20 unit building may have $2M in overcharge judgements. Money that he would owe market rate tenants (go figure) -and he could/would lose his building and others if his debt is recourse debt. Too early to tell - I just hope there is some legislation that helps mitigate any real hardship to landlords who have proven they acted in good faith.

30yrs, i agree. one point, the action already exists. i believe this decision stems from a motion to dismiss a complaint filed in a class action. the class action complaint is still extant, although obviously a class has not been certified. as you pointed out earlier, now is the time for settlement negotiations. plaintiffs are coming from a fairly strong position, however, and TS may just want to kick the can down the road.

you're absolutely correct that this could have occurred under very few circumstances. even if metlife and TS were aware of the possibility, i would imagine they believed the likelihood of tenants realizing the issue and then subsequently prevailing in court were slim. and litigation is costly, for this to be worth the while of the plaintiffs' attorneys they needed volume. one of the many reasons higher-quality pro-tenant litigation rarely occurs.

jazzman, yes it is good that it won't be a wide-spread train wreck.

Check this out - this is what the court says about the word "become"
"Contrary to PCV/ST's and MetLife's
argument, there is nothing impossible, or even strained, about
reading the verb 'become' to refer to achieving, for a second
time, a status already attained."

Have any of you ever -even once - used or even heard the word "become" used to mean "for a second time" without clarifying it with the phrase "for the second time." In other words if my brother became a champion wrestler how many times has he been the champ - once, only once. You would never hear me say "my brother became a champion" if it was his second time as a champ. If it was the second time as a champ I would say "my brother became a champion again or a champion for the second time."
I can't think of one instance where I've ever used the word become or became to mean that it was the second time it was occurring unless I also clarified the word become or became with a clarifying phrase like again or for the second time.
WOW - this just seems so wrong.

jazzman, of course. one condition subsequent to another may obviously have the same effect, or cause the same restriction.

further from the decision.

Here, we conclude that defendants' interpretation of
the exception to luxury control for units that "became or become"
subject to rent stabilization "by virtue of receiving" J-51
benefits conflicts with the most natural reading of the statute's
language. Defendants essentially read these words as recognizing
two categories of J-51-benefitted buildings -- those, like the
properties, that were rent-stabilized prior to receiving J-51
- 12 - No. 131
-12-
benefits, for which luxury decontrol became available in 1993;
and those that only became rent-stabilized as a condition of
receiving J-51 benefits, for which luxury decontrol is
unavailable (at least during the benefit period). But there is
no language anywhere in the statute delineating these two
supposed categories, and we see no indication that the
Legislature ever intended such a distinction -- one that never
occurred to anyone, so far as this record shows, until after the
present lawsuit was brought. Contrary to PCV/ST's and MetLife's
argument, there is nothing impossible, or even strained, about
reading the verb 'become' to refer to achieving, for a second
time, a status already attained.
Even assuming that the reading given to 'became or
become' by PCV/ST and MetLife is a possible one, the RRRA's
legislative history better supports our interpretation of the
statute. The RRRA's sponsor stated that luxury decontrol was
unavailable to building owners who "enjoy[ed] another system of
general public assistance" such as J-51 benefits.

AR - I knew I shouldn't have read the decision - I just think it's criminal what happened hear - the logic just doesn't flow. The reason the law doesn't allude to the two classes of buildings receiving J51s is because everyone back then knew that it did. It was so obvious that it wasn't mentioned. As stated in the opinion. Little is more negotiating in Albany that rent regulations. No one had ever brought up the tenant's argument before. Why, because it was so obvious what was meant. Fast forward 15 years and people forgot and now the bondholders are screwed. Years and years of no complaints (in one of the most complained about arrears of law). Years and years of government action and inaction on the subject. Years and years of changes to the RS laws and no one even thought to clean up the language. No one said - Hey look what's going on here - this isn't what we meant - let's clean up the language.
This is legislating from the bench. Doubt the Supreme Court takes it on but maybe. Perhaps the angle is what's spoken about regarding the sunset clause - If a law is not enforced as written for over a decade then can it's enforcement change without a change in the law?
Again, I'm just happy this isn't more widespread.

Years and Years of greedy landlords choking the life out of the middle class in Manhattan.

julia - your anger is misdirected - if landlords were responsible for high rental rates then why have market rate rents fallen 20% in one year? Landlords price rents according to the market and this year's rental rates are proof.

Over-regulation and under-building are the reasons we have such high rents.

Hmmph. Just read the majority opinion. No-one here has talked about the court not ruling on whether damages should be retroactive.

10023, this was just on the motion to dismiss. now it goes back to supreme court. there is still an underlying active action, in front of Judge Lowe, whom the hubby tells me is atrociously awful and frequently overturned. that's where you'd get a ruling or jury verdict on damages.

Yup, I know. You think it will settle?

if tishman weren't just about dead here, i'd say yes, and soon. but given the circumstances, i have no idea. i'd be very surprised if tishman didn't default shortly. they've been defaulting all over the place, btw.

Julia;"years and years of greedy " actors and sportstars ,and ins companies,and auto companies,and -and -and,etc.,"choking the life" out of ALL PEOPLE IN NYC ,and across AMERICA;LET'S BE FAIR to everyone:TO EACH ACCORDING TO HIS NEEDS,FROM EACH ACCORDING TO HIS ABILITY!

"admin, lord, it was just an error. remind me to critique your grammar.
nice to support the haters."

AR, if my grammar is as funny as "irregardless", please do. don't take yourself so seriously, is not healthy.

This is just one more victory for the lazy entitled class. Tishman or Met Life may have wronged with some overcharges, or Tishman certainly bought too high as if being a foolish buyer with their own money on the line is a sinner. But there's no true loss by any but a small handful of individual tenants who might have had to leave because rents became higher than they agreed, AND the biggest loser who is the government who agreed the J51. There's no aggrieved class of people, legitimately.

You have ladies like aboutready who believe government is for her, taxation is for her benefits, she can stay at home all day but for a two hour workout, all on someone else's dime, both the taxpayer and the landlord. And damned if you disagree, her husband will sue you. These are the welfare queens, the limousine liberals, the reasons your taxes are so high. They hide their rhetoric behind support for the working poor, but they are really only out for their own interests to be comfortable enough with everyone ownng them, but with little contribution to society other than a pretend care for the poor who they actually enjoy because they can look like heros trying to save them.

Boohoohoo to all the fakers, aboutready and the rest of the leaches.

LEVGLUE: First time poster? wow! you may be on the third rail! peace....good luck.

http://www.nytimes.com/2009/10/23/nyregion/23stuyvoices.html?scp=5&sq=stuyvesant%20town&st=cse

It really sounds like a fair number of the renters are enjoying a J-51 benefit at tax payer expense. When you hear about second homes and able to afford the $3300 rent, it just sounds an entitlement program for those that don't need one.

*******************************************************************************

Stuyvesant Town and Peter Cooper Village, long a middle-class refuge for civil servants, nurses and retirees, has lately been coping with the housing equivalent of a multiple-personality disorder. The market-rate tenants are generally younger and wealthier than the rent-stabilized tenants, many of whom have been there for decades and could not afford to pay $3,300 for a one-bedroom apartment.

“It will enable me to stay in Stuyvesant Town,” Mr. Lim said of the ruling. “I really couldn’t afford $3,300 a month. I could afford it, technically, but I didn’t want to continue paying that much.”