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August 3, 2009

Heights Rent-Controller Out on a Technicality

"Rob a bank, and if the federal government doesn’t catch you in five years, you’re off the hook," said Josh Barbanel in a Times story this weekend, but for Robert Nocco, no statute of limitations could save him: the new owner was able to rummage back to 1976 to challenge Nocco's right to a rent-controlled apartment in Brooklyn Heights, at 222 Henry Street. Mr. Nocco's parents moved into the apartment about fifty years ago, the article explains, and until June, Mr. Nocco, who was paying $212 in rent every month, had thwarted several legal attempts to remove him from the apartment. The current owner (who paid $386,566 for the five-story building in 2005, according to Property Shark) took his case to state housing regulators and noted that in 1976, Mr. Nocco rented another apartment in Brooklyn, while his parents moved to Florida. Since regulations would require Mr. Nocco to have lived with his parents for two years prior to taking over a rent-controlled apartment, this was enough for a housing officer to rule in the landlord's favor. The two parties reached a settlement (“in the very low six figures”), and Mr. Nocco moved out in June.
Rent-Control Rights Stripped Away [NY Times]

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on one hand i want to feel bad for this guy but then on the other hand im like ugh. 212 dollars a month in rent? and then a huge buy out just to move!? ah well, jealousy is a disease i guess.

*rob*

Posted by: PitbullNYC at August 3, 2009 9:18 AM

I think it's fun that folks have money to throw around... hundreds of thousands of dollars.

This has very little to do with the case and someone paying $212/mo should not be surprised that a landlord will do anything possible to get rid of you... but to have the ability to throw a huge wad of cash at someone to get them to leave. Well, that's an ability I can't even fathom ever having.

Vivre les riches... i suppose.

Posted by: tybur6 at August 3, 2009 9:19 AM

tyburg, rich people are morons. always have been, always will be. millions of dollars to live in brooklyn? :-/

*rob*

Posted by: PitbullNYC at August 3, 2009 9:21 AM

Rob, that owner is pretty smart, too. He bought the place for 386k - a price even more regular people could've afforded.

Tybur6, this is great example of deals/bargains do pop up once in a blue moon but you need to be in position to capitalize on it. Do you part on prep and save up a ton of $$$ cause nothing generates more regret than oppty appears and you aint in position to take advantage of it

Posted by: more4less at August 3, 2009 9:28 AM

Is there anything about rent control that isn't absurd, awful, or both?

I realize the original intent was somewhat noble and even reasonable, but the way it has been implemented is terrible.

Those apartments are basically winning lottery tickets or prison cells for the people who have them, depending on whether or not the place and neighborhood suits them.

Posted by: northsloperenter at August 3, 2009 9:29 AM

i have no problem with rent control per se. it's basically the same thing as living in the projects, except you dont really live in the projects and the income level isnt absurd. i think they seriously need to raise the income level for people to get an apartment in the projects as well as allow people who dont have kids. i dont think having a kid should be someones lotto ticket to benefits and crap, but it is.

*rob*

Posted by: PitbullNYC at August 3, 2009 9:32 AM

i think there's something weird with that 386K figure for the house. not only is it almost unbelievable, but the article states that the owner paid 2mil. not sure whether this was an extraordinary deal for the buyer, so much as a record keeping anomaly.

Posted by: perhaps at August 3, 2009 9:33 AM

if he settled for 100K, the owner actually paid $486K for this house.

Posted by: dittoburg at August 3, 2009 9:35 AM

The owners are far from stupid. A floor through apartment in this area can sell for $1MM and can rent for a hell of a lot more than $212. Seems like not a bad business move to pay $100K or $200K to free up the space. And it appears to me the renter (and his family) made out incredibly well too. He had a very sweet deal for decades and then gets a nice windfall on top of that. Win-win situation.

I have to agree with perhaps that there is something bizarre about that $386K figure.

Posted by: Biff Champion at August 3, 2009 9:37 AM

486K for a house in Brooklyn Hts was still a great deal. I think the owner benefited morefrom rent control than the tenant.

Posted by: Bob Marvin at August 3, 2009 9:38 AM

Ditto, if you're doing that kind of math, you might as well add in the legal bills too but guy still pay a super bargain price if that figure is correct

Posted by: more4less at August 3, 2009 9:39 AM

"if he settled for 100K, the owner actually paid $486K for this house."

ditto, you can also add to that the opportunity costs associated with not collecting market rate rents. Regardless, if we are to believe that $386K figure, I would still say the owners got a curiously good deal. They're in the business of selling brownstones, so maybe they saw or knew something that nobody else did at the time.

Posted by: Biff Champion at August 3, 2009 9:41 AM

By the way, I never suggested it was a "bad business move" or that the owners were "stupid."

I only suggested that it is very interesting to me that folks happen to have the ability to throw a big wad of cash at someone... a VERY large wad.

Posted by: tybur6 at August 3, 2009 9:43 AM

"i have no problem with rent control per se."

I don't have a problem with the concept, but the way it has been implemented in NYC is so bad and full of abuse and unintended consequences that if I heard tomorrow it was being systematically phased out and that no new tenants would get a controlled or stabilized apartment, I'd think it was a good thing.

Posted by: northsloperenter at August 3, 2009 9:43 AM

He did get it for a bargain, but its still part of the price. He may have anticipated paying it and accounted for that, but he didn't get the place for $386. RC issues are normally priced in.

Posted by: dittoburg at August 3, 2009 9:58 AM

media and anti- RC love these stories. They are anomolies to typical/average rent control. Certainly there are people that scam the system...and there will always be.
Also, when I read these stories and I see these rents I also think there is more to story. I know /know of plenty of people with rent control/ and yes rent control and not rent-stabilization living in modest apts...and their rents are not this cheap at all.

Posted by: Petebklyn at August 3, 2009 10:08 AM

Some "technicality"!! the whole system is a technicality....the guy got the RC under false premise - hardly a technicality - the headline is another B'stoner anti-LL slant. The only "technicality" (which implies unfairness) - is that this guy won't have to pay back all the improperly subsidized rent he took advantage of for THIRTY YEARS.

Pete - it is possible to get rent increases under RC but it is not easy and additionally this guy's legacy in the apartment apparently goes back to the 1950's - which helps account for the low base.
Yes - this is an anomaly but it is still wrong for our city to force private LL to subsidize tenants (who have to show nothing in terms of need) to live in an apartment for at least 10x less than the market - think of all the worthy people that could be helped if only 1/2 this subsidy was taken away.

Posted by: fsrg at August 3, 2009 10:21 AM

Two things I'm amazed about:

1) the gamble the LL took when buying this house, thinking or hoping that he might be able to get rid of the rent-controlled tenant. Most of us would walk away even with the low price.

2) the tenacity of the LL or his private investigator digging up records from the 1970s. plus, there must have been $$$ poured into this investigation. i guess this was figured into the all-over price of the house

Posted by: tiptoe at August 3, 2009 10:37 AM

increases under rent-control come every year. Not set by same board as rent-stabilization but they do occur annually.
There were several years in the 70's where they also got fuel adjustment increase on top of regular increase.

Posted by: Petebklyn at August 3, 2009 10:42 AM

Tiptoe, unless that tenant occuppied 4 out of the 5 flrs, 386k + buy + legal bills is still a very good price for a bldg in Bk Heights. in 2005, a small 2 bdrm cost as much or more so doubt many buyers would back away from this deal simply because of the RC tenant

Posted by: more4less at August 3, 2009 10:44 AM

quote:

Yes - this is an anomaly but it is still wrong for our city to force private LL to subsidize tenants

so, what's your opinion about Section 8? the program that has detroyed communities across the country.

*rob*

Posted by: PitbullNYC at August 3, 2009 10:55 AM

I don't consider having a separate apartment a technicality. Them's the rules. (This is the issue that comes up whenever Maxwell/Apartment Therapy posts interiors of his own place)

Posted by: Ringo at August 3, 2009 11:03 AM

Rob I have no issue with Sec 8 as a program (I do with its administration) - if the Government choses to subsidize the poor or lower income in our society I have no issue with that and if done properly (which it isnt) it is a good idea.

Pete - while RC does have periodic increases the administrative costs of applying for them is fairly high (for tiny increases) so many small LL dont file for the increases and you end up with guys like this with a $200 a mo rent.

Posted by: fsrg at August 3, 2009 11:14 AM

the 2005 seller is listed as st. george realty LLC, which appears to be the operating entity of george spanakos, who owns a bunch of properties under his own and corporate names in brooklyn heights. my guess is mr. guerrieri's and mr. spanakos' mutual involvement in the townhouse business led to a deal on this place that appears to have been not quite arm's length.

i do love guerrieri's lawyer's faux-naive surprise at having to pay the RC tenant a settlement despite a victory with housing authorities. shocked, absolutely shocked he was, i'm sure.

Posted by: i disagree at August 3, 2009 11:14 AM

Screw this tenant. Screw all rent controlled tenants. What, I'm supposed to feel bad for him because now - *gasp* - he's going to have to pay market like the rest of us? Rent control was a cheap trick to make a one-time wealth transfer from owners to whoever was renting at the time the laws took effect. I applaud any and all attempts by owners to claw back what is rightfully theirs.

Posted by: lechacal at August 3, 2009 11:49 AM

This owner was recently in the NY Times in a couple of other stories, one being he negotiated the sale of a $15MM brownstone on the UWS to Bob Weinstein. I assume his commission on that one sale more than covered the payment to get rid of this tenant.

http://www.nytimes.com/2009/06/14/realestate/14deal2.html

Posted by: Biff Champion at August 3, 2009 11:55 AM

If the courts found in the LL's favor, why did the LL have to pay the tenant "in the low six figures" to move?

Posted by: mopar at August 3, 2009 12:02 PM

"If the courts found in the LL's favor, why did the LL have to pay the tenant "in the low six figures" to move?"

Insurance against the possibility of the ruling being overturned and being able to avoid the hassle and annoyance of having to fight this for another few years.

Posted by: Biff Champion at August 3, 2009 12:08 PM

When rent control / stabilization started, the rents were already in place at market value. They were not artificially lowered, as lechacal implies. The problem is that stabilized rents haven't risen on par with market rents - not even close. The original idea was to protect tenants from landlords jacking up the rent unreasonably and unfairly. While I agree it is a poorly designed system to say the least, landlords really haven't been screwed by it. Anyone buying a building with below market / rent stabilized tenants knows what they are getting into and pays considerably less for the property. Taxes are lower, too, based on rent roll.

And eventually all the RC and RS tenants are gone. Since there is an effective vacancy decontrol in effect, the landlords are the ones who reap the most benefit, like the one in this story.

Posted by: Kris at August 3, 2009 12:11 PM

courts didn't find in his favor. it was the housing authorities - an administrative decision that the tenant probably had some avenue to appeal or review in housing court, where a win for the LL was far from guaranteed. from the article, it appears both sides calculated that litigation risk - issues with locating and the admissibility of favorable evidence, litigation costs, tenant-friendly courts, etc., made it worth the $100K for both sides to settle.

Posted by: i disagree at August 3, 2009 12:12 PM

Kris - please explain to all of us dummies how "eventually all the RC and RS tenants leave"? - b/c as far as I know there is no vacancy decontrol - only a rent level decontrol @ vacancy

Posted by: fsrg at August 3, 2009 12:16 PM

also Kris - while this:
"Anyone buying a building with below market / rent stabilized tenants knows what they are getting into and pays considerably less for the property. Taxes are lower, too, based on rent roll."
is mostly correct - the RS/RC laws are not static - nor are the increases, administration or the interpretations of those laws. Therefore LL of such buildings are taking on Policy Risk along with the market risk. And so while I certainly do not think anyone should feel sorry for LL of R/S properties, I also think a totally anti-LL view (which many in Govt -and here - propose to take) is dangerous path if you want to maintain the city's housing stock.

Posted by: fsrg at August 3, 2009 12:22 PM

Kris - You're missing the plot. Those who owned property when the laws took effect experienced a forced wealth transfer from them to whoever they were renting to at the time. That loss of wealth is evidenced by what you correctly identify as a lower market price for rent controlled buildings. Now the renters who benefited from the initial wealth transfer - who might have actually been deserving at the time - are largely undeserving of state aid while rent controlled housing is largely unavailable to those who actually need it.

It's yet another example of well intentional socialist thinking failing to account for follow-on consequences. Never trust a legislature to manage something as important as the economy.

Posted by: lechacal at August 3, 2009 12:37 PM

fsrq: Kris - please explain to all of us dummies how "eventually all the RC and RS tenants leave"? - b/c as far as I know there is no vacancy decontrol - only a rent level decontrol @ vacancy

I wasn't implying anyone is a dummy, just thought it was obvious: eventually they die or move out. The vast majority of Rent Control tenants are pretty old. The dude in this story is an exception - and a scammer who illegally took over his parents' place. Rent stabilized folks are usually younger, but also pay a closer-to-market rent than the RC peeps. And sometimes they move on and give up their RS apartments, because said apts are usually crappy walk-ups. I gave mine up, and so have a lot of my friends.

When a RC/RS tenant moves out, the landlord can renovate and then raise the rent through Major Capital Improvements (MCI). Once the legal rent is over $2000, the apartment becomes deregulated. It doesn't matter how low the base rent is, a determined landlord can do enough reno to get the legal rent above $2k.

I am not taking a totally anti-landlord view at all. I rent out a house myself, so technically I am a landlord. I think I am actually right in the middle on this issue. There are entitled jerks who scam the system as tenants, and there are also unscrupulous slumlords who kick little old ladies out of their homes for greed.

Posted by: Kris at August 3, 2009 12:39 PM

lechacal, are you talking about people who bought in the 1930s? I think if they bought during the Great Depression, they probably did OK.

Regardless, I thought we were talking about the current situation. Rent laws have been in place for almost 70 years.

Posted by: Kris at August 3, 2009 12:48 PM

Kris, I beleive rent control goes back to WWII. In any event I disagree with the premise that it's OK to steal from people as long as you get away with it for long enough (sort of like how liberals view Cuba). Rent control is almost universally viewed as economically descructive. But there is a classic problem that prevents it from being fixed: a lot of people a hurt a little by rent control and a few people benefit a lot. Guess whose voice is louder?

Posted by: lechacal at August 3, 2009 1:13 PM

I live in a rent stabilized apartment that is just shy of $2000, can someone explain what happens when the rent reaches 2000?

Posted by: boofer at August 3, 2009 1:19 PM

We're talking about two different things: I'm talking about how things are, and you are talking about how things should be.

In any case, Rent Control was abolished long ago for new tenants. Rent Stabilization is also basically over because of vacancy rules and MCI. So we are moving towards a non-rent-regulated city, it just takes time. Doesn't this mean the problem is being fixed?

Posted by: Kris at August 3, 2009 1:34 PM

boofer, you are protected as a tenant as long as you make less than $175k/year. When you move out, though, your apartment will be market rent.

Posted by: Kris at August 3, 2009 1:35 PM

I just moved into an apartment building with about half RC tenants in place > all of which have been there 35 years +. These folks are in their 80s and MOST of them have their middle aged children (and their spouses) occupying the apartment with them...... solely so that it will roll over after the parent kicks

Posted by: bowl of dicks at August 3, 2009 1:37 PM

Kris - everything you say is more or less right - EXCEPT - RS and RC have certain rights of survivorship (which is what was at issue here) . So they do not "eventually move or die" - they often - pass it on and even when the "passing" is not legal, a holdover could cost your thousands and not even be successful.

Also maybe not relevant to this situation (in Brooklyn Heights) the vast majority of housing in the outer boros are at marketrate - below $2000 and 2. Often starting from such a low rent that no amount of capital improvements could bring the rent to $2000 anyway.

If an apartment rents for $1000 upon vacancy you would need over $40,000 of qualified improvements in order to get a 'decontrolled' rent. Which is near impossible.

The overall point is that - outside of Manhattan and a couple of high end neighborhoods - there is no decontrol possible - and so while the LL probably bought knowing the 'deal', the deal is sudject to change and the individual LL has little or no say in it.

Posted by: fsrg at August 3, 2009 1:43 PM

Well, I guess it depends on the building. In my building, none of the middle-aged kids of RC parents were there. Of course, my building was also a dilapidated crap hole.

Posted by: Kris at August 3, 2009 1:48 PM

" Rent control is almost universally viewed as economically descructive" -- universally by lassaizfaire capitalists types maybe.
" just moved into an apartment building with about half RC tenants in place > all of which have been there 35 years +. These folks are in their 80s and MOST of them have their middle aged children (and their spouses) occupying the apartment with them." - this one is really really difficult to believe. 50% have lived there for over 35 years? and MOST of them have adult children living with them? very very difficult to believe. Never ever have I seen or heard of such a stable tenanted building of renters.

Posted by: Petebklyn at August 3, 2009 1:58 PM

petebklyn - my building has only 16 apartments. Yes about half of the 16 apartments are occupied by the elderly and their offspring. One apartment just turned over to the 3rd generation. Location is Bay Ridge - maybe that clears something up for you.

Posted by: bowl of dicks at August 3, 2009 2:17 PM

Nobody wants to see the poor and the elderly kicked out of rent control apartments. I agree with those who say a LL knows what they're getting into when they buy a building with RC tenants. But the ability to inherit a rent-controlled apartment, with no other requirement than to be related to the original tenant is absolutely absurd. The descendant in question could be a millionaire and they inherit a rent control apartment? They need to change at least that part of the program and require descendants prove they are low income, and have that income level be truly low, on par with requirements for section 8 housing.

About abuse of RC, I know no less than three people who all have RC apts in Manhattan in fashionable neighborhoods who don't even live in the places most the week, they treat them as pied a terre apts. (Who somehow manage to evade being busted by the landlord on that). And who make enough money to pay market rent.

Posted by: traditionalmod at August 3, 2009 2:25 PM

Kris "Rent Stabilization is also basically over because of vacancy rules and MCI. So we are moving towards a non-rent-regulated city, it just takes time. Doesn't this mean the problem is being fixed?"

That is just WRONG - for the reasons cited above RS is here and will be staying for decades more everywhere but Manhattan and a few high end neighborhoods in the outer boros - and this would be the case even if the legislature doesn't pass any of the dozens of bills currently under consideration that would raise and/or eliminate the $2000 decontrol threshold, or the recent ruling that ties RS to J-51 tax abatement (which would keep thousands of +2000 apartments RS for at least another 20 years)

RS - is by no means dead or dying and anything said to the contrary is incorrect under virtually every possible future scenario.

Posted by: fsrg at August 3, 2009 2:29 PM

Petebklyn;

Your response to every post that has presented a story or criticism regarding RC/RS is to either call the person a fabricator of facts or a modern-day robber baron.

May we hear your rationale for the continuation of this system?

Posted by: benson at August 3, 2009 2:33 PM

traditionalmod - is it anymore absurd then the "luxury decontrol" limit is set at $2000 a mo rent (if in occupancy then only +$170K earners are subject to decontrol) - regardless of the size of the apartment! - So under the law a 6 room apartment is "luxury" decontrolled at the same rent as a studio apartment (I'd love to see the "luxury" of a 6 room apartment that rents for under $2k)

The law itself is absurd.

Posted by: fsrg at August 3, 2009 2:34 PM

I have a rent controled tenant who also pays $200/mo in an even desirable neighborhood in Manhattan.

The city won't allow me to raise her rent because my expenses aren't high enough according to their insanly complicated "rent increase formula."

Rent control is a complete joke with no low income verification. My tenant has a normal job and has saved hundreds of thousands of dollars having lived basically rent free for almost 40 years.

Go ahead and defend the indefensible. . . morons!

Posted by: IronBalls at August 3, 2009 2:55 PM

FSRG, like I said, it takes time.... and yes, I meant decades. But no one can deny there are fewer and fewer RC apts every year, and there are only 50k of them right now.

There are fewer and fewer of RS apts every year, too (although there are a lot of them). No new construction is Rent Stabilized, so each year the percentage declines

Buildings with fewer than 6 units aren't regulated, either, unless the tenant has been in place since the 1950s. This is most of Brownstone Brooklyn.

Posted by: Kris at August 3, 2009 2:56 PM

Incorrect - many new construction projects built under various Govt programs are in fact tied to R/S.... and
again thousands of the "luxury" decontrolled apartments (like Stuy Town ) now face the prospect of being re-regulated and the likelihood that the $2000 bar will remain is slim. RS is alive today as it ever was and is decidedly not slowly dying off (as you suggest) , despite publicity to the contrary.

Posted by: fsrg at August 3, 2009 3:28 PM

"But the ability to inherit a rent-controlled apartment, with no other requirement than to be related to the original tenant is absolutely absurd. " - wrong, person has to be living in the apt. for some detemined length of time. That rule is that you don't get kicked out of your home just because mom died.
IN a city where renting has always been by far the predominant method to housing , I see the rent stabilization program a benefit to economic stabiliy of neighborhoods, the city, and individuals. There is not much choice economically for vast majority of citizens of this city for housing. Landlords and landowners benefit from this (myself included).
Our economic system is stacked heavily toward those of us who have economic means and capital. So if majority of citizenry see fit to temper that power a bit in certain areas (like regulating a certain class of housing) then live with and work with it. If don't want to invest in that type of housing don't.
We certainly don't object to government regulation when protecting our investments thru FDIC, SEC, etc, etc.

Posted by: Petebklyn at August 3, 2009 3:34 PM

Pete - I (for one) am not arguing that their is no benefit to RS - I agree, effectively administered it can stabilize neighborhoods - but it is administered poorly (for example what sense does it make to force a below market-rate rent for a NEW tenant who may not even come from the neighborhood - or the city), or to Deregulate a longtime tenant whose rent goes to $2000 a mo (regardless of the size of the apt) who makes 170K BUT if the legal rent is below $2000 it doesnt matter if the person makes $1M a month.

Posted by: fsrg at August 3, 2009 4:00 PM

Yup,

The NYC rent laws are joke written by tenant attorneys to steal private property from the only folks who ever PAID for it -- landlords!

Posted by: IronBalls at August 3, 2009 4:21 PM

I am so sick of hearing people complain about rent stabilization. There are 2 vacant RS apartments in my building right now and not one of you people would want to live here. There's too many shootings in the area, not enough restaurants, coffee shops, cute baby clothing stores, no organic groceries. The apartments? Horrifying, no hardwood floors, appliances aren't new, big fat cockroaches that come out when it rains, mice, there's even carpet and linoleum!

Stop pretending that every RS apartment is in a fabulous building, in a fabulous neighborhood, with brand new appliances, perfect hardwood floors, newly renovated, and inhabited by wealthy leeches intent on screwing everyone. None of you would deign to live in half of the RS buildings in NYC, you'd run home with your tails between your legs after the 1st shooting.

Posted by: caseopele at August 3, 2009 5:39 PM

Whatever your thoughts are on the above case: Like I've said before. There is something very "Un American" about government forcing a private landlord/owner to charge below market rents without compensation. Not that I feel sorry for NYC landlords, secretly, they love R/S as it helps keep the vacant housing stock low and the market artificially high plus it keeps the city and state from really doing anything serious about affordable housing.

Posted by: Crownlfc at August 3, 2009 8:14 PM

You all realize there is a difference between rent control and rent stabilization in New York City, right? Rent control was out of control, that is why it didn't last for very long. And that's why people who signed rent controlled leases have clung to them for dear life.

Posted by: serpentor at August 4, 2009 10:29 AM

If anyone doubts that rent control will be around for a long time, I assure you it will be around for a long long time.

The last survivor's pension for veterans of the Civil War was paid in 2003, and those pensions were not transferable from generation to generation.

http://www.infoplease.com/ipa/A0908934.html

Posted by: slick at August 4, 2009 12:03 PM

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August 3, 2009

Heights Rent-Controller Out on a Technicality

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