The Real Deal New York

Rent and lease complaints by tenants spike

August 29, 2008 11:28AM
By Adam Pincus

Despite the gleaming new kitchen appliances and marble bathroom, Barbara Kopcho didn’t think it was possible her landlord spent what it claimed — $42,100 — to rehabilitate her one-bedroom unit in a rent-stabilized building in Elmhurst, Queens.

So Kopcho, an information technology specialist who moved into her apartment in May, researched the appliance prices, as well as estimated costs for labor and materials for the kitchen, bathroom and other work. The cost of the rehabilitation is critical in such a case, because it determines by how much the owner can increase the rent.

“I don’t even think they spent $20,000,” said Kopcho, who pays $1,450 per month in a building where residents said the average was about $900.

Kopcho filed an overcharge complaint August 25 with the Department of Housing and Community Renewal (DHCR), the state agency that oversees the more than 1 million rent regulated apartments in New York City.

She joined a growing number of tenants accusing their landlords of charging too much for rent or not renewing leases in New York City. Complaints have climbed by 37 percent over the last 18 months, DHCR figures obtained by The Real Deal showed.

Some real estate professionals saw the jump as evidence of a weak economy and better government outreach. Tenants and housing advocates tied the rise to an increase in the number of apartments owned by partnerships backed by private equity dollars that have bought an estimated 66,000 rent-regulated units in recent years.

Residential and commercial property broker Aaron Jungreis, president of Rosewood Realty Group, said a sour economy would lead more tenants to file complaints.

“With rising costs everywhere I think it is easy for them to complain and possibly get a rent reduction and/or hold off paying more rent,” he said.

Brandon Kielbasa, a housing specialist with tenant advocates Cooper Square Committee, said tenants had filed a lease violation and an overcharge case against landlord Westbrook Partners. The company, in partnership with other firms, bought 17 buildings in the East Village last year.

“Many tenants have filed complaints with DHCR because of problems getting lease renewals,” he said. A spokesman for Westbrook declined to comment.

DHCR spokesman James Plastiras said the average number of monthly lease violations and overcharge complaints combined was running at about 358, a rise from an average of 223 in fiscal year 2006 under the administration of former Republican governor George Pataki.

Plastiras attributed the overall rise in complaints to increased outreach, more media interest and the economic downturn.

An overcharge complaint is filed when a tenant claims the rent has been raised more than permitted legally. A lease complaint is filed when a tenant believes a landlord has unfairly refused to renew a lease or disputed the validity of lease.

Tenants claim landlords are using a rule in the Rent Stabilization Code which allows landlords to raise the rental price in a unit by 1/40th of the cost of a major renovation, known as an individual apartment improvement, to unfairly increase rents by hundreds of dollars.

The Real Deal spoke with tenants and activists representing eight overcharge cases and several lease complaints filed over the past year against five different landlords.

Harold Shultz, senior fellow at the Manhattan-based policy group Citizens Housing and Planning Council, said an increase in the number of complaints may be driven by policy changes, as well as outreach, and the economy. A perception of better results on the part of tenants could push filings up, as well

“With the transfer from Republicans to Democrats, that itself could foster that impression and generate additional complaints,” he said.

But he saw some indication that some owners were more aggressive in their pursuit of individual apartment increases.

“I believe on anecdotal evidence we are seeing more individual apartment increases,” he said.

Kopcho’s landlord, private equity-financed real estate investor and manager Vantage Properties, planned to use the 1/40th increases to raise rents by more than $1,000 per month per unit in select portfolios, according to documents filed by their financiers with the Security and Exchange Commission.

Vantage has joined with banks and private equity firms to buy about 9,500 units in Manhattan and Queens since 2006.

Vantage Properties spokesman Bud Perrone said in an emailed statement that the company spent $42,000 to repair and renovate Kopcho’s apartment. He added that no tenant has won an overcharge case against the company.

“It is a certainty that the rent will be upheld,” he said. “While any resident can file an unsubstantiated complaint, DHCR has not once found that we overcharged a single resident as a result of a renovation. We meticulously document our work. We maintain receipts. We are transparent, and we act according to precise DHCR guidelines.”

Benjamin Dulchin, deputy director of the Association for Neighborhood and Housing Development, said it was difficult to identify when an overcharge occurred because the renovation costs do not need to be proved unless they are challenged by a tenant.

“We hear anecdotally that there is a pattern of private-equity developers using the self-certification provision of the 1/40th [rule] so that they can raise rents without actually making the investment,” he said.

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