Okay, so you’ve heard some of our issues, but some of you may be wondering, “HOW did this all come about? How can a new landlord come in, empty half the building and basically double the rents?”
Well, they had help.
AJ Clarke Realty was the management company for our buildings prior to the current landlord/management agency, Fortune East. Back then we had an actual PERSON to go to with issues, our managing agent, Steve Kaplan. The buildings were well maintained, spotlessly clean, and there was no funny business with rent checks or lease renewals. We thought Steve was, if not the most personable guy, at least somewhat efficient and accessible. Too many NYC tenants were (and are) unaware that a building’s management company (and Realtors and landlords too) may not have their best interest at heart; that they may indeed have a separate agenda that does not include their future living arrangements. Over a period of about seven years, AJ Clarke stealthily destabilized a good number of apartments. We can surmise now that AJ Clarke’s REAL role was to prepare the property for sale.
Here’s how it works:
Say you’re managing a building that the owner is looking to sell and you have X number of rent stabilized apartments. You know the building will fetch a higher price if only those apartments were market rate. What do you do? You take a stabilized apartment and offer it at LESS than the legal rent. This is called preferred rent. A tenant moves in thinking they're getting a deal, but when their lease is up, the preferred rent is rescinded. So they are faced with, not only that rent increase, but the additional percentage tacked on by the Rent Guidelines Board that year. The tenant moves out and the managing agent can now add an additional 20% vacancy increase. For instance; if you have an apartment whose rent is registered as $1300 a month, you give it to a new tenant with the preferred rent of $1000 a month. When it's time to renew the rent is now $1300, plus the RGB approved yearly increase (say, 5%). The rent is now $1365. If the tenant is unable or unwilling to absorb the $365 increase they leave and another 20% is tacked on. The new legal rent is $1638. Now they don’t pass on these increases to the next tenant, maybe they offer it as $1300…until their lease is up. Bang! The cycle starts anew.
This is perfectly legal. Our politicians (our rent laws are controlled by Albany, not the city) have bent to the will of one of the most powerful lobby groups in the state; The Real Estate Board of New York. Their tireless efforts, combined with generous donation from real estate moguls (see: http://www.observer.com/2010/
real-estate/tishman-speyer- lead-pack-cuomo-campagin- contributions
) have effectively eroded our rent laws to the point where we are losing an
estimated 20, 0000 units to destabilization a year!