City Journal

Charlotte Allen
Let the Landlord Beware
How New York City policy foments bitter disputes between tenants and landlords.
Summer 1994

Helen Daniels moved to New York in June 1986, buying a beautiful but badly run-down brownstone on Harlem’s famous Astor Row at 130th Street. She planned to relocate the tenants of the house and live there with her parents and two teenage children. But the tenants quickly organized against her, and she ended up embroiled in a costly legal battle with the city. A year later, a Housing Court judge sent her to Rikers Island—even though, by that time, all her tenants had either moved out (at her expense) or died.

The harrowing experience of Daniels, a tiny, elegantly dressed woman who has worked most of her life for churches and charities (she currently operates an AIDS service organization), represents only one of numerous bloody skirmishes between residential landlords and tenants that take place all over New York, sometimes to the point of forcing thinly capitalized building owners into foreclosure and insolvency. “I’ve spent more than $100,000 in fines and legal fees,” says Daniels, who at one point almost had her building seized because of unpaid repair liens stemming from her battles with tenants.

These landlord-tenant fights sometimes involve middle-class tenants in upscale neighborhoods who do not feel like paying rent and know how to work the legal and regulatory systems. More often, however, the properties in question are in poor areas. Anyone who buys rental property in a marginal New York City neighborhood should be prepared for an onslaught of crime, vandalism, drugs, and nonpayment of rent—and can expect little help or sympathy from the city government.

In some cases, as anyone who has ever been a tenant knows, the landlords are not exactly innocent victims. But in sharp contrast with the stereotype of greedy, sophisticated slumlords, a great many landlords are simply struggling entrepreneurs trying to eke out a living from one or two small buildings. “Sixty percent of our members are immigrants and minorities,” says Roberta Bernstein, head of the thousand-member Small Property Owners of New York, an outspoken ten-year-old advocacy group for small-building owners.

New York’s legal and regulatory systems are so heavily weighted against landlords that they provide official sanction, if not outright encouragement, for the most malicious tenants. Draconian rent regulations prevent many landlords from operating their buildings profitably; other rules prevent landlords, in some cases, from even collecting the rents to which they are legally entitled. A proliferation of regulatory agencies with overlapping jurisdiction means that a landlord can be cited and fined by several agencies for the same violation. Judges, lawmakers, and city officials who are overwhelmingly solicitous of tenants and hostile to landlords make it difficult, often to the point of impossibility, to evict a problem tenant.

Tenants can simply stop paying rent while they pursue their good-faith or bad faith claims against a building owner, who is never relieved from his obligation to pay loan service, property taxes, and maintenance and repair costs. It is not unusual for landlord-tenant skirmishes in New York to involve tenants who have lived rent-free on the premises for more than a decade. And unlike many other jurisdictions, New York does not require tenants to deposit disputed rent moneys into escrow while fighting their landlords. (Housing Court judges can legally order such deposits but almost never do.) That means that even when landlords win, they often cannot collect the back rent due them, and there is a financial incentive for tenants to pursue unmeritorious claims.

The results are devastating not only to landlords but also to residents of the city’s most marginal neighborhoods. The inability to evict drug dealers, vandals, and other disruptive tenants reduces the quality of life for their law-abiding neighbors. Landlords who cannot collect rent have a harder time making necessary repairs or even remaining solvent. Many eventually walk away from their buildings, which the city’s Department of Housing Preservation and Development (HPD) then seizes for nonpayment of property taxes. Though subject to far fewer strictures than private landlords, HPD management of buildings is notoriously poor. A 1987 study found that markedly inadequate maintenance, heating failures, rodent infestation, and broken plaster and holes in the floor were widespread in city-owned buildings.

A look at three landlords’ stories illustrates the perverse results of city policies and suggests some possible reforms.

Deferred Hope in Harlem

Helen Daniels, who grew up in affluent Scarsdale, New York, represented a hopeful possibility: the return of the black middle class from suburbia to the decaying inner city. But it soon became clear that she had bought into a disaster. Her brownstone “had an open door,” she says-landlord parlance for an outside lock broken by drug dealers to permit easy access for customers. “It was being run as a crackhouse. . . . [Prostitutes] were turning tricks in the bathroom. Someone removed the light meter, which put the house into darkness. The tenants had lights, however—they had illegal hookups.” It also turned out that some thirty people were using her nine-room house as an address to collect housing-assistance payments as part of a welfare scam.

As soon as she moved in, Daniels says, the tenants began harassing her. They cursed her whenever they saw her, shouted insults from the street, and even called the church agency where she worked to complain about her. She did not press to collect the tenants’ $215 monthly rent, and when none paid it, she did not take them to court.

In early July 1986, a month after Daniels bought the house, a group of city inspectors arrived and cited her for a raft of building violations, from missing lights to cracked window panes. “The violations had been there for years,” she says. She started repair work, but the department sent in its own emergency-repair people who performed the work, billing her for more than $30,000. (This is standard procedure, according to HPD, but only after the owner has stalled in making ordered repairs.) In August, HPD sued her in Manhattan Housing Court, and she signed a stipulation, again agreeing to make repairs. She thought the issue was resolved, but as she walked out of the courtroom, she was hit with a second HPD suit. While the first suit was pending, someone had called an inspector, who cited her for the same violations. In December, she worked out an agreement to finish the required work and pay relocation expenses for the tenants. All but one accepted her offer, and the lone holdout died the following spring.

Meanwhile, HPD inspectors were arriving at her house almost every day, responding to tenant complaints: missing hall lights (other tenants stole the bulbs), weak floorboards in a bedroom (the occupant drilled holes in them), lack of heat and hot water. There were three separate fires—all suspected arson—inside the house, one stemming from a furnace chimney that someone had stopped up.

By the summer of 1987, when all the tenants were long gone and Daniels was in the process of moving into the rest of the house, HPD was still on her case. When it appeared she still had not cured some of the violations, the department hauled her back to Housing Court on contempt charges.

Though Daniels produced a stack of paid bills and statements from contractors showing completion of repair work, the judge, Lewis Friedman, sentenced her to five days on Rikers Island (she served three). Her troubles were not over when she got home. The city briefly seized the house in early 1988 on a lien for the tens of thousands of dollars’ worth of emergency repairs. And Daniels is still fighting the bureaucracy, which is seeking thousands of dollars in fines from her for allegedly missing a hearing date during the summer of 1986.

Most New York owners do not have to go to jail over violations in their buildings—although Friedman, who now sits on the state Supreme Court, had a reputation for locking up landlords far more readily than other Housing Court judges. Lawrence Schatt, the HPD’s assistant commissioner for code enforcement, insists that court actions and the performance of emergency repair work by the department itself are measures of last resort, undertaken only when an owner fails to cooperate. But he also concedes that only recently did his department, which receives more than 350,000 telephone calls a year reporting violations, start to set up a computer system to help it screen out legitimate complainers from tenants who call in violations every day in order to harass their landlords. “It certainly is difficult right now to pick out the people who are calling for the sake of calling and those who have legitimate grievances,” Schatt says.

Rent Strike

On West 25th Street in Chelsea, Marcy Boucher bought a century-old five-story walkup in 1985. Since then, she has been at war with a tenant, Diane Dowling, leader of a rent strike. The twenty-unit building was in an advanced state of decrepitude (including no water pressure for the upper floors) when Dowling moved in in 1982; Boucher and a partner acquired it for only $325,000 at a foreclosure sale.

Just before Boucher bought the building, Dowling had gotten herself appointed its administrator under Article 7(a) of the state’s Real Property Actions and Proceedings Law. This provision allows courts to take the control of a poorly run building out of the hands of the owner and place it in the hands of an administrator who functions as a receiver, collecting rents and maintaining the building.

The 7(a) program is itself a bone of contention for New York landlords. Although the provision looks fair on paper and 7(a) administrators supposedly operate under close supervision by the New York City Housing Court, it can be problematic in practice. For one thing, the Housing Court has a reputation for being notoriously pro-tenant, often giving inexperienced or power-hungry tenant- administrators generous leeway to roll back rents, install their friends in choice units, and fritter away money on unnecessary building work. The landlord remains liable for all carrying costs and taxes, though he has no direct access to rent receipts and no control of his building.

Dowling remained as 7(a) administrator for two years, and the question of how she performed her duties is one of great dispute between her and Boucher. Dowling renewed leases at reduced rents for herself and other tenants, but she says the prior owners had raised rents to illegal levels for several of the rent-controlled apartments, including her own. (Her rent for a one-bcdroom apartment was $375 when she moved in, and she discovered other tenants were being charged only $140 to $150.) Dowling maintains she performed her 7(a) duties exemplarily and kept meticulous records, completing her task of restoring the decaying building to livable condition before the court released her in 1987.

Boucher contends Dowling deliberately wasted money on overpriced, unnecessary repairs in an effort to force the building into insolvency and Boucher into tax foreclosure so the tenants could buy it for next to nothing under a New York City program designed to promote tenant ownership. “[Dowling] would hold meetings and tell the tenants that they would one day own the building,” says Boucher, who maintains that Dowling spent tens of thousands of dollars for unnecessary work.

Boucher, who also lives in the building, has battled with her tenants on several fronts. She sued several times for unpaid back rent, but the cases were always dismissed because neither she nor the previous owner had registered the rents annually with the state’s Division of Housing and Community Renewal, as the law requires. (Boucher says the division has yet to turn over any of the prior owner’s rent records.) Tenants made numerous complaints to HPD, few of which resulted in citations for violations. They unsuccessfully tried to have her arrested for changing the locks on an apparently vacant apartment, and filed an unsuccessful harassment complaint, alleging that she continually denied them heat and hot water. Tenants won an $8,000 triple-damage award for rent overcharges, which Boucher is contesting, saying she did not receive notice of the proceeding.

It is hard to say who has the moral high ground in this conflict. Boucher and Dowling both claim to have court records backing up their position in the 7(a) dispute, but neither responded to my request to see the documents. One thing, however, is certain: with the exception of a single round of payments in 1987, Boucher has received no rent from Dowling and most of the other tenants during the nine years she has owned the building. Only two of the building’s occupants pay rent, one of them Boucher’s sister, and the $10,000 annual income the premises generate does not begin to match the $30,000 a year Boucher spends on taxes and operating costs.

Given that Dowling is occupying an apartment for free, it is difficult to sympathize too much with her complaints. After all, if things are really so bad, why doesn’t she move? “Where am I supposed to go?” she asks. “To a $1,000 apartment? This is my home.”

“Rent strikes are legal in New York,” says Dowling’s lawyer, Robert Grimble. “But that does not relieve the landlord from the obligation to maintain the premises, even the vacant apartments. The two things have nothing to do with each other.”

Losing Everything

One of the most striking victims of the landlord-tenant wars is Harley Brooke-Hitching, a former art dealer who invested nearly everything she had to buy and renovate 11 walkups on 111th and 112th streets in East Harlem in 1985 and 1986. A little more than $1 million of her own cash went to purchase the buildings, and she borrowed $2 million for repairs. Now she has lost almost everything, including her own Upper East Side co-op, which she mortgaged to secure some of the loans. Of the 11 buildings on which she hoped to turn a profit while providing decent low-cost housing, 10 are in foreclosure; she is $18,000 behind on the taxes on the Ilth.

A feisty redhead in her forties who packs a pistol for self-defense in this drug-infested neighborhood near Third Avenue, Brooke-Hitching works out of a tidy storefront office in a graffiti-covered 33-unit building that she owned until a few months ago. The office is filled with plants and group photos of the employees of her company, Equities Ltd.—photos from happier days, when her staff numbered 13 instead of its current 2.

“New York has a lot of really bad landlords,” she says in the English accent that bespeaks a childhood divided between London and Oklahoma. Brooke-Hitching was determined not to be one of them. She cleaned, replaced broken doors and windows, installed new kitchens, painted the Victorian exteriors in brilliant colors, and tried to rent strictly to young working people—”sub-yuppies,” she calls them—with back-office jobs on Wall Street, a convenient subway trip downtown.

It worked for a while. She was able to charge up to $800 a month for some of the bigger units, and the collective value of her properties soared to $4.5 million by 1989. But with the recession, her working tenants’ jobs disappeared. She started filling her units with less desirable renters: single mothers, welfare recipients, and finally homeless people from the city’s shelter program, which pays private landlords a bonus for accepting former shelter residents. Brooke-Hitching’s affordable-housing empire gradually collapsed under a load of incessant fines, rising taxes and fees, and destructive tenants.

“The drug dealers would break the windows, store drugs on the outside sills, rip out mailboxes so they could store drugs in the slots, break the doors,” she says. “Other windows get smashed by someone’s boyfriend who’s angry. I have to renew their leases. A tenant can walk out on a lease, but I can’t....The tenant has zero level of responsibility.” She started getting $50 fines every day for failing to comply with the city’s recycling laws. “The joke around here is that recycling means paper goods out the front window, canned goods out the back.”

When she was not trying to evict deadbeat tenants—one woman lived rent-free for nearly a year, managing to squeeze in a vacation to Puerto Rico—Brooke-Hitching scrambled to refinance her mortgages, getting caught in the real estate downturn, which wiped out her equity. But financial institutions were less and less willing to lend money on beat-up housing in neighborhoods like East Harlem.

Brooke-Hitching became increasingly frustrated. “The first time you see the graffiti, you paint it over right away,” she says. “The second time, you wait three months, the third time six months, and so on.” At her sole remaining building, every available surface, inside and out, is scribbled with graffiti. Floor tiles are missing, and the ripped-up remains of a kitchen fixture, installed brand new a few years ago, is stashed in a hallway. Brooke-Hitching spells out the building’s economics: annual income, $110,000; expenses, taxes, water and sewage fees, $85,000; debt service, $22,000. That leaves a mere $3,000 profit—if nothing serious goes wrong. City policies make it inevitable that something will.

A Legal Revolution

Helen Daniels, Harley Brooke-Hitching, and others are victims of both New York’s peculiar policies and what legal scholars have called a “revolution,” over the past three decades, in the way the law regards residential landlord-tenant relations. The relationship between landlord and tenant has moved from one based on contract, with responsibilities strictly spelled out in the lease, to one based on status—in which the tenant (but not the landlord) has rights not necessarily stemming from any language in the lease or even dependent on his payment of rent. Residential tenants have become like medieval serfs, who could not be removed from the land they occupied, and who, as the Middle Ages progressed, had fewer and fewer duties to its putative owners. Hardly any jurisdiction has carried out these changes as fully as New York City.

Before the late 1960s, landlords generally had no duties beyond what the lease defined, and they had little obligation to ensure that the premises were habitable or even safe. Even if a landlord violated one of the lease terms, the tenant’s obligation to pay rent continued; his only remedy was to move out and sue the landlord for damages. Rent regulation existed in very few places, New York City, of course, chief among them.

Today, almost every state recognizes an “implied warranty of habitability” that requires landlords to provide safe and livable premises and releases tenants from their duty to pay part or all of their rent if the landlord does not live up to this obligation. Most courts have interpreted “habitability” to mean full conformance with housing code regulations, no matter how minor. At the same time, courts and legislatures have restricted landlords’ right to evict tenants once the lease is up. In New York, even if a tenant stops paying rent for no good reason or stays in an apartment after a judge orders him to move, the landlord cannot lock him out or cut off the water or other services—that would constitute “harassment.”

Given all this, it is hardly surprising that many New York City landlords feel they are at the mercy of both their tenants and the government. A pamphlet titled “What Every Landlord and Tenant Should Know,” issued by the Citizens Housing and Planning Council, points out that tenants can be evicted for such acts as destroying property, dealing drugs, or failing to comply with recycling laws. But in practice eviction is impossible unless the tenant is caught in the act. “Most judges require at least an arrest” before allowing a landlord to evict a drug-dealing tenant, notes L. Jeffrey Roth, a Manhattan housing lawyer. And the law is a double-edged sword for landlords: if their buildings decay when they turn into drug markets, the landlords can be held liable for the harm to tenants.

New York City landlords must deal with two dozen different city and state agencies with overlapping jurisdiction, not to mention the courts. This gives tenants an almost endless array of options for pursuing grievances, justified or not, against their landlords.

Suppose a tenant alleges a housing code violation. He can call in a complaint directly to HPD, which will send an inspector and can sue the landlord if he fails to correct a violation. The tenant can sue the owner, triggering a court-ordered inspection and a possible award of damages. He can refuse to pay rent and, when the landlord brings an eviction suit, ask for an HPD inspection that could lead to a rent abatement, an award of damages, or both. Or he can bring the violation to the attention of the state’s Division of Housing and Community Renewal and get the most recent rent increase rescinded. The tenant can file a harassment claim if he alleges the violation involved a deliberate cutoff of services to force him to move or to retaliate for a rent strike; substantial fines and rent reductions may result.

Exacerbating these problems, the City of New York has for many years pursued a policy of encouraging tenant takeover of marginal buildings by granting special breaks not available to private landlords. (There is some indication that this policy may change under Mayor Rudolph Giuliani.) Tenant associations can buy tax-foreclosed buildings for only $250 a unit. They also receive forgiveness of all back taxes, low-interest loans, and substantial abatements of taxes for the future. Similarly, if HPD operates a building after a tax foreclosure, it not only can raise rents without worrying about rent regulation, but also is exempt from taxes, water and sewage fees, and fines for code violations. One of the most bitter ironies for marginal landlords is that the city spends an average of $420 a month per apartment to operate a tax-foreclosed building—without the expenses of real estate taxes, water, sewage, and insurance. The same building’s last private owner would have been expected to meet all expenses, including taxes, water, and sewage, on perhaps $200 or $250 a month that rent regulation allowed him to collect.

The consequences of all this are plain to see: unprecedented levels of housing abandonment that are likely to accelerate the deterioration of New York City’s housing stock, to the ultimate detriment of the very tenants that the past few decades’ housing policies were designed to protect.

A 1993 Community Service Society report identified some 140,000 apartments in the city as in danger of abandonment. Another 1993 study, by the city’s Rent Guidelines Board, found that one in eight rent-stabilized buildings is not economically viable. The dollar value of real estate tax delinquencies—a sure sign that a building is in trouble—nearly doubled for landlord-owned multifamily dwellings between the 1990 and 1993 fiscal years, from $69.7 million to $127.1 million. Nearly half of this sum came from the small walkup, apartment buildings common in poor neighborhoods.

Many reforms have been proposed: elimination of duplicative enforcement bureaucracies and punitive fines for landlords who act in good faith; tax abatements and more access to low-interest loans for marginal owners facing foreclosure; beefed-up housing assistance to help poor families pay sufficient rents to enable their landlords to stay in business.

Most importantly, the State Legislature should take a simple step to bring fundamental fairness to landlord-tenant disputes and deter tenants from pursuing bad-faith claims: require that all protesting tenants pay disputed rents into an escrow account supervised by a court or administrative agency. Rent strikes may be legal in New York, but no one should be able to live rent-free while carrying them on.

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