CW to tenants: Pay up

Council Member Dan Garodnick (at podium) blasts the latest round of rent hikes. Pictured with him are: Steven Newmark, Tenants Association board member; Kevin Burke, an impacted resident; Assembly Member Brian Kavanagh; State Senator Brad Hoylman (behind Garodnick); Tenants Association President John Marsh and Council Member Jessica Lappin Photo by Sabina Mollot

Council Member Dan Garodnick (at podium) blasts the latest round of rent hikes. Pictured with him are: Steven Newmark, Tenants Association board member; Kevin Burke, an impacted resident; Assembly Member Brian Kavanagh; State Senator Brad Hoylman (behind Garodnick); Tenants Association President John Marsh and Council Member Jessica Lappin
Photo by Sabina Mollot

By Sabina Mollot

On Tuesday night, well over a thousand residents of Stuyvesant Town and Peter Cooper Village were shocked to see notices slipped under their doors alerting them to the fact that their rents would be raised mid-lease. Additionally, in most cases the hikes were for hundreds of dollars and in at least one known case, went as high as over two thousand. Residents were also told that they’d have 60 days to figure out whether they’d be staying (paying the higher rent in two weeks time) or going.

The notices were immediately blasted by local elected officials and the Tenants Association, who at an impromptu rally the next morning, called CWCapital’s actions “crass” and “destructive.”

“A mid-lease rent increase of $900 is nothing less than an eviction notice,” said a livid Council Member Dan Garodnick, who lives in Peter Cooper Village. “Have you ever heard of such a thing from any decent landlord? Or any landlord?”

Garodnick also noted that he believes there have been deceptive business practices on the part of CWCapital’s leasing agents who’ve given tenants the impression that their rents wouldn’t be increased mid-lease. He added that he’s bringing the matter to the attention of the attorney general. “Leasing agents were telling people not to worry,” he said.

Other elected officials at the event, saying they were supporting tenants, were State Senator Brad Hoylman, Assembly Member Brian Kavanagh and Council Member Jessica Lappin, who’s running for borough president.

John Marsh, president of the ST-PCV Tenants Association, said he was concerned the hikes would make living in the complex unaffordable to anyone except “groups of transients” packing into apartments with pressurized walls. “Who will replace these families? The woo-hoo generation,” he said.

He added that if this is being done so CWCapital can sell soon, the TA has approached the special servicer more than once with an offer to buy. “We’re ready to make their bondholders whole, yet they ignore us.”

TA Chair Susan Steinberg added that she thought “This is the most ruthless action in the history of ruthless landlords. They want to eject as many tenants as they can.”

The increases came on the heels of the final approval of the “Roberts v. Tishman Speyer” settlement, in which it was mentioned that CWCapital did have the right to issue the increases, even mid-lease. The TA and Garodnick, who’ve cheered “Roberts” as a historic win for tenants, have also refrained from fully endorsing the settlement due to concerns of possible rent hikes.

In response to the concerns, CWCapital issued the following statement:

“CW Capital took over Peter Cooper Village and Stuyvesant Town in October 2010, nearly four years after the class action suit was originally filed.  Almost immediately we began to work with the plaintiffs to reach a settlement.  Last fall, we agreed to a historic settlement with the impacted residents.
“Those tenants who are affected by these increases participated in a $173 million settlement agreement that was approved by the court and every one of these residents received notice several months ago with respect to the terms of the settlement, including the ability of the landlord to increase the rent mid-lease term.
“They were represented by counsel in that process and their counsel was directed by a group of nine tenant representatives.  The attorneys and tenant representatives were fully aware of these terms and concluded that they preferred this outcome to others that were available to them during the negotiations.  These terms were widely publicized and the tenant attorneys specifically addressed the issue of midterm rent increases during their information sessions in January.  Nonetheless, there were no objections made to the court with respect to these terms.
“Despite these facts, we recognize that the timing of these increases may pose logistical challenges for some residents. In recognition of this, we are extending the date on which increases will go into effect by 30 days.  Rent increases will now go into effect on July 1st and not June 1st as allowed for in the Settlement.  Additionally, the Settlement give residents receiving the mid-term adjustment the option to terminate their lease by providing notice to the landlord within 30 days. We are also extending this deadline. Anyone who gives notice of their intent to terminate their lease by July 1 will have until August 1 to vacate and will not receive an increase during that time. New notices will be distributed confirming these dates.”

Tenants’ “Roberts” attorney Alex Schmidt said that the rent hikes were not a result of the settlement, but language CWCapital had included into new leases after it took over operations of the property. Schmidt said because attorneys became aware of language that would allow the special servicer to raise rents mid-lease, they negotiated to include some protections for tenants should they end up getting the hikes. Had it not been for the settlement, said Schmidt, CW could even sue tenants if they choose to break the lease and leave. But because of the settlement, a tenant can break the lease, penalty-free. He also noted that while around 30 percent of the units in ST/PCV are being hit with rent hikes, “up to 10 percent are getting rent reductions.”

However, this didn’t come as much comfort to tenants who attended Wednesday’s event in front of the leasing office.

Carla Massey, a 28-year-resident and a psychologist, carried a homemade sign expressing her concern that she was going to become homeless as a result of the 21 percent rent increase she received.

She declined to share what she’s currently paying, but said, “I have no place to go.” She hasn’t yet told her two children that they’ll be moving. “I think it’s a little traumatizing,” she said.

Another resident, who’s currently paying $3,900 for a two-bedroom apartment in Peter Cooper, said his rent will be going up by $1,000.

“To add insult to injury, I live in one of the buildings affected by hurricane Sandy and my wife has to do laundry a quarter mile away. There’s no use of the basement.”

The resident, John Beasely, said he does plan to stick out another year in the apartment since he works for Con Ed, but after that, he’s gone. “I’m going back to Oregon. I’m done with New York and I’ve been here five years.”

Kevin Burke, another resident socked with a rent hike, said after he saw the notice under the door he went to the leasing office, demanding answers. But he didn’t get any. “They said, ‘We’re clueless.’ Damn right you’re clueless,” he said. Burke added that he and his wife had spent three months trying to figure out where to send their children to school and were now given “two weeks to figure out where we’re going to live. This is not something New Yorkers should tolerate.”

Arlynne Miller, who was at the rally, said she was there because, “My entire community is being destroyed. It’s like a never ending tsunami of destruction around here. They’re boosting rents and they don’t care if it’s unrealistic or unsustainable. They want to roll rents as high as they can so they can go to potential sellers and get what they can get.”

Mitchell Posilkin, general counsel for the Rent Stabilization Association, a group that represents apartment owners, said the rent move shouldn’t come as a surprise to anyone.

“There were some tenants in Stuy Town and Peter Cooper Village who were paying less as free market tenants than they would have been paying as stabilized tenants,” said Posilkin. “These notices are intended to increase their rents pursuant to the formulas that were agreed under the terms of the settlement.”

The landlord lawyer, who was not involved in the settlement discussions, added, “The settlement was agreed to between the tenants and their attorneys, the owners and their attorneys and, ultimately was reviewed and approved by the court, so it was no secret that there was a potential for rents to go up.”

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8 thoughts on “CW to tenants: Pay up

  1. It seems to me the tenants association and their lawyers really got caught off-guard here; how come? Because they’re just not as sophisticated, hard edged lawyers as those hired by CW Capital. It then leads you to wonder whether they were on top of things during the Roberts litigation settlement. CW Capital’s explanation makes sense to me: the interim rent increases where right there in the leases in black and white. How in the world could the TA and their lawyers be so surprised? Didn’t the TA’s legal team negotiate those interim leases? Yes, it may be cruel for CW to raise rents like that, but business is business and CW Capital is not a charitable organization. What did you expect? That they would build a bonfire in the Oval so that everyone could sing Kumbaya and hold hands? The TA and their lawyers were outmatched and outmaneuvered, plain and simple.

  2. I didn’t think that the TA was involved in bringing the Roberts lawsuit. I thought it was group of market rate tenants who discovered the J31 tax abatement scam. The TA may have supported the lawsuit, but I don’t believe they were involved in it. I know I can rely on being corrected if I am wrong.

  3. The TA is the body that discovered the j-51 exception when it was researching the initial sale/bid process. I can’t speak to whom was involved in the Roberts litigation process, but it astounds me that language would be agreed upon that essentially allows the landlord to keep all their ill gotten rent increases, and then allows them to recoup all their settlement monies, almost immediately. I think it’s outrageous, and the AG should investigate. It is giving these predatory real estate interests a pass on having made such an unsustainable investment, by skirting the rent stabilization laws.

    • I don’t understand who or what you think the attorney general should investigate? CW Capital and the Roberts litigation tenants each had attorneys and negotiated a settlement. It sure appears the Roberts tenants got hoodwinked; nevertheless these are two private parties with smart lawyers representing them. Maybe the Roberts tenants should consider a legal malpractice claim against their lawyers for cutting such a bad deal (presumably; I’m not sure that’s entirely clear yet). Regardless, on what basis should the AG get involved?

  4. CW Capital keeps saying we participated in a lawsuit settlement but that’s not entirely true. They forced us into it by adding this option into our leases. We have nothing to do with Roberts. We didn’t sue anyone.
    We just moved into an apartment that they earmarked for a mid-term rent hike (eviction notice).

  5. The TA was not a party to the Roberts suit, although it supported the tenants and former tenants who brought the case. The TA didn’t negotiate the interim leases. After the suit was brought, it was certified as a class action (with something like 22,000 members, not all of whom still live here) so that anyone who had rented a deregulated apartment became part of the suit. Until the suit was settled, there was no determination as to what the legal rents should be. The suit was settled by the original plaintiffs, and no one knew what was going on during the long negotiations until it was over (even Dan Garodnick, a member of the class but not one of the original plaintiffs knew, as he stated many times at TA meetings). Anyone who signed a lease with a preferential rent (lower than market rate and subsequently lower than the legal rate as determined following the settlement) was taking a risk, but many of those tenants were assured by the leasing office that their rent wouldn’t be raised in the middle of the lease, despite the language in the lease. Now we’re about to lose many good neighbors, which is really a shame. More shameful is the short notice they’ve been given to make a life-changing decision. Just as shameful is that only about a third of those affected have received notices, so we should be asking why this first group was targeted by CW Capital.

  6. Pingback: ‘Roberts’ tenants should soon see checks from Met Life | Town & Village Blog

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