It has been said that experience is the best teacher, but for savvy landlords and property managers, vicarious learning is certainly less painful. Consider New York City property owner Baruch Singer a master professor from whom a very expensive lesson can be learned.
In 2002, Singer (under his company 98 Morningside Inc.) had been leasing his Harlem apartment building to a couple for $436 a month, restricted under New York City’s rent stabilization program. While in the apartment, the couple experienced a fire which resulted in the need for massive renovations and the couple’s temporary relocation. Singer estimated renovations to take approximately one year and the City made arrangements for the former tenants to pay a $1/month holding fee while renovations were underway. Holding fees are customary in situations such as fires and other natural disasters which render residents homeless and in need of temporary shelter during renovations, especially in rent stabilized residences.
Apparently it took Singer approximately four years to complete the renovations. In 2006, instead of alerting the former tenants they were able to move back in at their previously stabilized $436 a month rent, Singer advertised the apartment on the open market for $2,100/month by way of Craigslist. The ad was answered by David Lieberman, who did not know he was about to become the luckiest renter in the world. Lieberman moved into the apartment in 2006 paying the market rent of $2,100 on a two-year lease term. Shortly after moving in he received notice of a lawsuit filed against him by the previous tenants who were seeking a return to the residence.
Lieberman reacted by withholding his $2,100 rental payments and filing a lawsuit of his own against Singer. In his lawsuit, he admitted knowledge of the previously stabilized rent of $436, but says he was led to believe the rent was no longer stabilized. The case settled in 2011 with Singer (98 Morningside Inc.) agreeing to pay Lieberman $104,000 in overcharges and legal fees and continuing the $1 monthly rent.
The lawsuit filed by the couple was subsequently dropped.
Singer reportedly has approached the Division of Housing and Community Renewal (New York’s governing agency for rent control) on at least two occasions requesting the apartment be returned to either the original stabilized rent of $436 or to its’ market rental price of $2,100. To date, DHCR has yet to approve this request.
It should also be noted that Singer has a history of violations and fines related to his various properties.
While only a few states in the US have rent stabilization programs, there are a number of other programs and regulations of which to be aware and prepared.
Learn to navigate bureaucracy – It is unknown why the DHCR allegedly refused to return the $436 stabilized rental amount to the unit, or to allow the owner to charge market rent. What is known is that bureaucracies can be a nightmare to navigate, often leaving behind frustrated and disillusioned citizens in their wake. It is not unusual for landlords and property managers to have similar experiences with government voucher programs, for example.
Do your due diligence and research the organization via their website and perhaps even a telephone call. Map out a follow-up schedule to execute weekly until a resolution has been reached. Find out if there are special forms required to accomplish your goal. Get a contact person’s name, if possible. If all else fails, solicit the help of your local congressperson. There is often congressional staff or interns who can help you navigate through the bureaucracy.
Know the laws regulating landlord-tenant affairs – Mr. Singer may or may not have been fully aware of his obligations and the tenant’s rights under the rent stabilization program, however some landlords and property managers fail to educate themselves on all the rules and regulations in their states, cities and neighborhoods (research local rent control information here). Further, landlords and property managers should ensure their residential leases effectively address fires and natural disasters. While all states and municipalities address the landlords’ responsibility to provide fit and habitable premises, very few spell out the landlord-tenant process following disasters.
Require renters’ insurance – At no time is the need for renters’ insurance more obvious to both landlord and tenant than in the aftermath of a disaster. Why wait until it is too late? Make renter’s insurance mandatory for all of your residents. This should be done at lease signing with a provision that the landlord or property manager are also named on the policy as an additional insured, whenever allowed. Doing so will ensure you are made aware of any policy changes like cancellations.
Always operate ethically – Being properly equipped with the “how to” knowledge should be paired with the willingness to always do the right thing for the right reason. Just as ignorance is no excuse for not operating properly, neither is immorality – a lesson Baruch Singer should have learned as a child but which ended up costing him hundreds of thousands of dollars as an adult.
Let the experience (and mistakes) of others teach you to be the best in the business.