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This Is What New York’s ‘Voluntary Compliance’ For Landlords Looks Like

Tenants overcharged by landlords who received property tax breaks shouldn’t expect much help from state regulators. Many are opting to go to court and, so far, they are winning big.

If you park your car illegally in New York City, chances are you’ll have a $115 ticket waiting for you when you return.

If you’re a New York City landlord and you overcharge tenants in a taxpayer-subsidized building, you may get a polite letter that orders you to follow the rules in the future. It leaves it up to you to decide whether to lower rents or issue refunds.

As we reported in our story on Wednesday, that’s the approach New York state housing regulators are taking against thousands of landlords who broke the law.

In a nutshell, property owners pocketed a tax benefit known as J-51 that requires them to abide by city-set rent limits as long as they receive the tax relief. Twenty years ago, the same housing agency allowed many landlords to get out of that deal, depriving an estimated 50,000 apartments of these rent protections, known as “rent stabilization.”

In January, more than six years after New York’s highest court ruled that this decision was a mistake, New York’s Division of Housing and Community Renewal sent letters to landlords asking them to abide by rent stabilization in the future.

Affected tenants were not directly informed. But the agency says they have nothing to worry about because the letters will spur “voluntary compliance by landlords.”

For anyone wondering how voluntary compliance might play out, the 47-unit apartment building at 945 West End Avenue on the Upper West Side offers a clue.

In May 2014, a tenant at 945 West End Avenue complained to the local Assemblymember, Daniel O’Donnell, about what appeared to be a blatant violation of the law.

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“The landlord has for many years been covered by a J-51 which means that he is not allowed to convert rent-stabilized apartments to market value,” the anonymous complaint said. “He has been making such conversions for many years.”

At O’Donnell’s behest, the Division fired off a tough-sounding letter to the landlord, Paul Bogoni, demanding that he return the apartments to rent stabilization. The approach is substantially similar to the letters the Division is now sending to J-51 landlords throughout New York City.

The August 2014 notice to Bogoni said housing officials were poised “to exercise all rights, remedies, investigations and inquiries” if he did not provide tenants with rent-stabilized leases. The letter did not demand that he roll back rents or refund overcharges. Nor was it shared with tenants, who obtained a copy through O’Donnell’s office.

The result? “Nothing, other than it mobilized the tenants,” said Stephen Townsend, who moved into the building in 2005, when the building’s current J-51 benefit started.

On September 2, 2014, just a couple of weeks after he received the agency’s letter, Bogoni offered a lease without rent stabilization to a new tenant for $4,395 per month, according to copy of the agreement. Bogoni subsequently has provided stabilized leases to tenants, but at the current market rates, Townsend said.

The following year, Bogoni sent Townsend a one-year renewal offer for $5,100 per month, his lease shows. He calculates that because Bogoni didn’t follow the rules, his maximum legal rent under the law should be closer to $962.

A spokeswoman for the Division said because Bogoni has registered his apartments for rent limits going forward, he is in compliance with the terms of the agency’s letter.

Tenants say that’s not nearly good enough. They argue that Bogoni should be required to lower rents to what they would be if he had followed the law.

The spokeswoman for the Division said it’s up to the tenants to make that happen by either filing an overcharge complaint with the agency or through a lawsuit.

Faced with that choice, tenants like the residents of 945 West End Avenue are opting to take their chances in court.

In October 2015, Townsend and several neighbors sued to get Bogoni to reduce rents and pay for overcharges, becoming one of at least eight lawsuits filed by 31 of the building’s tenants. With lawsuits pending, Townsend and many of his neighbors have been withholding rent.

ProPublica sent Bogoni a detailed list of questions but he declined to respond. “We just chose not to answer,” his wife said. In a court filing, Bogoni’s lawyer claimed all aggrieved tenants have been offered refunds where appropriate and rent-stabilized leases as required by law.

Tenants in one apartment have already settled for almost $100,000 in overcharge refunds, plus payment of their attorney’s fees and a 29 percent cut in their rent, according to court documents.

At another building on the Upper West Side, a tenant named Lane Altschuler won an $818,000 rent overcharge complaint against his landlord, Mann Realty Associates, plus 9 percent interest, and a five-fold reduction in rent from $4,040 to a court-ordered proper rent of $784.38.

The dramatic repricing of Altschuler’s 1,500-square-foot apartment next to Central Park prompted the headline “Guy gets insane rent deal on swanky pad after landlord scammed him” in the New York Post. Mann is appealing.

Henry Novoa, a broker for Mann, acknowledges that Altschuler should have been given a rent-stabilized lease but said the new rent — and resulting overcharges — are unjustified.

“He was entitled to that lease, but he was not entitled to that rent,” Novoa said. But so far, courts have disagreed and sided with Altschuler.

The recent legal victories by tenants show there is real money at stake for renters who know their rights and challenge their landlords about the J-51 issue.

The problem is that many are not aware they are living in a building receiving J-51 benefits or let alone what J-51 is. To help inform others, Altschuler wrote a blog explaining how he documented his case and even left flyers at other Mann buildings to tell them about the tax break (ProPublica has also written a guide to finding out about J-51 benefits).

But such efforts pale in comparison with what regulators could do if they decided to directly inform tenants of their rights — which is exactly what some lawmakers want the Division of Housing and Community Renewal to do.

“That’s what the state agency is for,” said Assemblymember O’Donnell, whose district includes Altschuler’s building and 945 West End Avenue. In 2014, O’Donnell sent letters to 44 buildings in his district informing residents that the properties received J-51 benefits.

O’Donnell has sponsored a bill to require the Division to notify tenants annually of their status. Like almost all rent-reform bills this past session, however, it didn’t make much progress in the state legislature.

Absent any new directives from Albany, the Division says it will “continue to vigorously enforce the rent laws” that are already on the books. But neither Altschuler nor Townsend have any faith in the Division’s ability to help them — or anyone else.

“You’re telling the people that broke the law to fix everything on their own,” Altschuler said of the state’s January notice to landlords.

“It’s like having the wolf guard the henhouse.”

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