City fails to gather sensitive SRO ownership data on investors
Mayor Michael Bloomberg, Terrance Oved and Stephen Meister
Elected officials and advocates praised a new law passed by the City Council last week that requires far more disclosure from apartment building investors, and predictably, real estate insiders criticized it as overkill.
Yet there is one puzzling question with the new law: It was justified by and based on a decades-old law that the city has not adhered to in years.
In the 1980s, when real estate investors were snapping up single room occupancy hotels and converting them to standard apartments, the city passed legislation that required individuals who own more than 25 percent of an SRO to register with the city’s Department of Housing Preservation and Development. However, for at least nearly 20 years, the agency has never tabulated the information. In fact the current form the city uses for the required registration of multiple dwelling buildings does not even contain a field to enter such data (see the registration form below).
An official from HPD made the surprising admission in city council hearings in June that its computer system, called Premises, would have to be reprogrammed to contain the additional data.
“I don’t believe that our current registration system, the computer system… could hold all of that information if it were provided,” Deborah Mansfield, deputy counsel at HPD, told the city council’s housing and buildings committee June 22.
The new measure passed by the City Council Aug. 25, known as Intro 87, expanded that registration requirement to all multi-family properties, not just SROs. Currently, in multi-family buildings the legal corporate owner and its main officers, along with emergency contacts, are registered and published online.
HPD estimates it will take about six months and $325,000 to implement the new database, which requires changes to citywide and agency computer systems.
“HPD supports the idea of increased transparency, but is concerned that requiring additional owner information might have the unintended effect of dissuading owners from registering at all,” an agency spokesperson said in an e-mail, adding that the additional information was not needed to enforce the city’s Housing Maintenance Code.
City council members defended the new law as a way to assist the city in identifying property owners for enforcement of the code.
Additionally, “The contents of these registration statements also provide valuable information to the public,” a city council report on the legislation says.
One of the city’s main landlord representatives, the Rent Stabilization Association, opposed the legislation, calling it unnecessary, citing the corporate information that is already provided.
The mayor is expected to sign the new regulations into law this month, a spokesperson for his office said.
Real estate insiders are broadly opposed to the registration requirement.
Sam Suzuki, who was sent to jail in July after refusing to identify the investors who owned one of the Bronx apartment buildings he managed, told The Real Deal in an e-mail that the law likely would have helped keep him out of jail by making the names of investors public.
But if enforced, there is the unintended that risk it could actually decrease transparency, as owners may spread out their holdings to keep below the 25 percent threshold.
“The new legislation may have the inadvertent consequence of forcing residential landlords owning in excess of 25 percent interest in one entity to simply diversify their holdings among multiple corporations,” said Terrance Oved, a partner with real estate law firm Oved & Oved.
Others see the possibility for some attorneys to chase down named owners in lawsuits.
“While the city council says they are looking for transparency, this law will pave the way for… lawyers to sue minority building investors for rent overcharge claims,” Stephen Meister, a partner with real estate firm Meister Seelig and Fein, said.
Property Registration Form HPD