Lapse of Luxury
A stinging decision from the state's highest court is expected to end a profoundly unfair process that allows landlords to evict tenants and pocket monstrous rents. The decision concerns 'luxury decontrol' of rent-regulated apartments, a practice that began in 1993 and has flourished under the generously prolandlord regime of Governor George Pataki. While luxury decontrol is aimed at ending rent protections for the wealthy, tenants have been kicked out not because they are rich, but simply because they are late in responding to an overwhelming and confusing array of forms.
"Kafkaesque" is how tenant attorney Kent Karlsson describes the process by which the state agency in charge of rent laws, the Division of Housing and Community Renewal (DHCR), has been enforcing the luxury law. "When people get a six-page, multiple-sided form every two weeks and they've already answered it once, they just don't know how to deal with it," says Karlsson, who represents Leona and Leonard Dworman, septuagenarians whose apartment on the Upper West Side was deregulated because they were 11 days late in returning income forms.
In its December 21 decision, the New York State Court of Appeals ruled that DHCR was wrong to deregulate the apartment of the Dwormans, and of Peter Sudarsky, another Upper West Sider, simply because they failed to file income certification papers within the prescribed 60-day period. "We reject the Division's contention that . . . the hammer necessarily and invariably falls at 12:01 a.m. on the 61st day," wrote New York's top judge, Judith Kaye. She also chastised the agency for not giving tenants one iota of leeway while it regularly missed its own deadlines.
Kaye ordered two of three cases back to DHCR, instructing the agency to consider the merits of each tenant's reasons for filing late. In a third case, the tenant admitted that she had simply neglected to return the form; Kaye let DHCR's deregulation order stand.
Attorneys for landlords and tenants alike say the decision sets an important precedent for pending cases. DHCR spokeswoman Donna Ackerman failed to return repeated calls for this story, so it is impossible to say how many deregulation applications are pending or how many have been granted. But attorneys say DHCR has deregulated thousands of units, especially after 1997, when the state legislature lowered the household income base from $250,000 a year to $175,000 a year. The deregulation applies if rent is above $2000.
While the luxury laws have sometimes hit their goal of depriving wealthy tenants of rent protection (Mia Farrow, for instance, departed her under-$2300, 11-room apartment at the Langham on Central Park West rather than pay an increase), attorneys say others have been evicted simply because they were tardy. In fact, some landlords apparently have banked on DHCR's stern 60-day rule, sending income forms to all rent-stabilized tenants paying $2000 in hopes that accidental defaults would liberate apartments to market rents.
"If you were a landlord, wouldn't you do it?" asks tenant attorney Sam Himmelstein, who often handles luxury decontrol cases. "If you have 25 apartments and you send them all notices and you get just one who defaults, you could raise the rent to $6000 or whatever. You've just made $50,000 a year more in rent."
In fact, in a harshly worded September appellate division decision, the owners of the Langham were scolded for just such a practice. The case involved a tenant who was paying about $2500 for an apartment; the landlord wanted $15,000. Tax records show the tenant's income was $74,294far less than the legal limit. But she failed to respond to DHCR, later claiming she never got the agency's notice. DHCR deregulated her apartment. On appeal, a three-judge panel wrote that the case "seemed to emanate from a wholesale repetitive attempt by the landlord to deregulate apartments. . . . It would appear in this situation that the effort is being made regardless of whether there is any reason to believe [a] tenant meets the regulatory [income] threshold." Calls to the Langham owners and their attorney were not returned.
Peter Sudarsky, another Langham tenant, was deregulated after failing to respond to DHCR in time because he was suffering from clinical depression. Sudarsky's 1980s gambit as would-be developer vanished in a sea of bad business decisions, plunging him into bankruptcy from a 1985 net worth of $22 million. When Langham Mansions sent him an income certification form in 1993, his income tax filings show he was living on a pension and family annuity of $113,325.
"They knew that I wasn't earning the kind of money that meets the requirement," says the 71-year-old, soft-spoken Sudarsky. "But what I find extremely strange is that DHCR is carrying the ax for the landlord. They're a public agency and should be acting in the public interest. But they carry the torch for the landlords. It's a shame."
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