How Speculative Landlords Work — And How Tenants Can Fight Back

How Speculative Landlords Work — And How Tenants Can Fight Back

Published: 
June 2014

Cooper Square Committee Real-estate speculation comes up very often in counseling and organizing tenants on the Lower East Side. What happens in the first six months to two years after speculators take over a building commonly follows a three-stage pattern. Harriet Putterman, a longtime organizer and board member at the Cooper Square Committee, has defined these three stages as “acquisition,” “renovation,” and “management” (or “mismanagement”).

On the Lower East Side and in many other neighborhoods, speculators look to buy buildings where most of the tenants are rent-regulated, get those tenants out, renovate their apartments, and then rent those units at market rate. It’s highly profitable if they can get away with it, and the current state and city laws are not sufficient to dissuade speculators from harassing tenants. The city Department of Housing Preservation and Development (HPD) seems more on top of things than the Department of Buildings (DOB), but both agencies could dramatically improve their enforcement of the laws.

Organizing quickly is crucial. Rent-regulated tenants in these buildings have the cards  grossly stacked against them. Their best defense is to organize a tenants association and then to connect with others in the tenants’ rights movement. They can then push back against both their own landlord and the real-estate industry’s efforts to dismantle tenant protections in New York City.

 

Acquisition

The acquisition stage begins shortly after a building is sold to a speculator. It can last for more than six months. This is when the speculator tries to drive out as many rent-regulated tenants as possible. If market-rate tenants’ units have not been renovated in some time, they might be cleared out too. The new owner’s goal is simple: Remove tenants and replace them with others who will pay higher rent.

This is where we frequently see landlords blanket entire buildings with “Notices of Non-Renewal,” hoping that the rent-regulated tenants might not understand that they have the right to renew their lease and move out. “Tenant relocation specialists” go through the building delivering misinformation and aggressively offering buyouts, saying things like: “You’re going to be kicked out anyway… you should just take this money and go” to tenants. (Tenants have no obligation to take buyouts, and it is almost always a bad idea to do so.) Landlords take tenants to Housing Court, trying to evict them on bogus charges.

East Fourth Street on the Lower East Side.East Fourth Street on the Lower East Side. Other telltale signs of this stage include the landlord changing the lock to the building’s front door and insisting that tenants meet with the property-management firm and provide copies of their identification in order to get the new keys. Speculators often use the information they gather through this and from documents provided by the previous owner to do background checks on tenants. They look for information that can be used against a tenant. We frequently see cases in which tenants are not violating any provision of their lease, but the landlord has presented personal information about them accompanied with misinformation about their rights. This intimidates tenants who do not fully understand their rights.

Different landlords use different tactics. In any case, it’s important to stay connected to your neighbors and organize when you begin to sense that something is going on in your building. By connecting to your neighbors, you’ll be able to identify that what at first seems like isolated problems is actually a pattern of harassment—and, if you connect to the larger tenant movement, that this is a widespread problem all over the city. Organizing at this stage can be incredibly valuable, because the speculator has to succeed at ousting tenants to move on to the next stage—renovation.

 

Renovation

In the renovation stage, speculators begin gut-renovation construction in the newly vacated units. This makes these apartments cosmetically attractive for higher-paying tenants, and landlords can count the cost of the construction as Individual Apartment Improvements and add it to the rent. They are aiming to raise the rent to $2,500 or more, so they can bring these units out of rent stabilization. (They often fraudulently overstate the costs to do this.)

The rent-regulated tenants who fought to keep their homes and made it through the acquisition stage now have to face more physically threatening conditions. Renovation almost always involves a speculator bringing in low-paid work crews to do the initial demolition work. Although the law requires landlords to give advance notice of any utility shutoff, to mitigate dust, and to clean up properly, speculators often disregard that, trying to get the units demolished and renovated as fast as possible so they can be filled with higher-paying tenants. Their crews work on evenings and weekends, which is illegal except in emergencies or when they have special variance permits to do so.

A collapsed ceiling in a speculator-owned Lower East building.A collapsed ceiling in a speculator-owned Lower East building. The remaining tenants’ apartments get flooded with dust, ceilings frequently collapse, and holes get punched through their walls. Their electricity and water get shut off unannounced and for unexpectedly long periods. 

Regardless of the landlord’s underlying motive—whether he or she views the renovation stage as an opportunity to pressure the rent-regulated tenants to leave, has hired cheap and unprofessional crews, or simply does not care—speculators will rarely respond to tenants’ complaints about construction conditions. Tenants have a right to have building services, habitable spaces, and ceilings that don’t collapse around them, but to a speculator, they are obstacles whose refusal to give up their homes has prevented the speculator from making more profits. 

“My landlord simply treats me with contentious disregard whenever I request a problem be tended to,” one Lower East Side tenant told a Cooper Square Committee organizer.

City agencies grossly fail tenants as well. HPD usually does not get involved if a building is clearly in a stage of mass construction. The DOB is supposed to enforce the law around issues that occur during construction, but it does not view itself as having jurisdiction to deal with tenant harassment, so it typically does not do any special enforcement on these gut-renovation buildings. This creates a major gap in protecting tenants. 

There are cases when a politician’s office or a community-based housing organization can use its connections and ask for additional attention to be paid to a particular building, but in general, DOB acts as if there is only a minor construction project occurring in these buildings. Inspectors rarely arrive in time to issue the violations that would discourage landlords from operating recklessly.

Tenants’ other forms of recourse are to take their landlord to court, or to file a claim for a “Reduction of Rent Due to Reduction to Services” with the state Homes and Community Renewal (HCR) agency. If they file the HCR claim, it must be done early in the renovation stage, as it takes time for HCR to come out and verify the problems the tenants are experiencing. If the tenants are organized and vigilant, and file the complaint when the first sign of run-amok construction occurs, there’s a chance that a HCR inspector will come out in time for them to win reduced rents. Both of these options are complicated and require tenants to put forth a fair amount of effort to get any results. 

 

Management or Mismanagement

The final stage of a speculative deal is the management or mismanagement of the building. Here, the speculators fill it with new tenants, and then either manage it for the long haul or try to sell it quickly.

Some speculative landlords are in the business of building large portfolios. These prefer to hold a property long-term, if possible. Others flip properties as soon as they’ve completed the renovations. In both cases, their decision often depends on how many rent-regulated tenants they were able to get out. If they can’t get as many units as they want vacant, they are more likely to sell.

Speculators who are building a large portfolio generally don’t harass tenants as intensely in the management stage. They will still bring Housing Court cases against long-term rent-regulated tenants or offer them buyouts, but in this stage, they are concentrating on filling the renovated units and on moving on to other buildings. If long-term tenants move out, the remaining residents may experience another round of construction.

Speculators who intend to flip buildings are usually more problematic for rent-regulated tenants. They tend to be worse at managing property. For them, it is more accurate to call this stage the mismanagement stage. They often seem to have no qualified property-management staff, as their skills are more suited for emptying  rent-regulated apartments, and they are focusing on renting the newly renovated market-rate units. They are inept at dealing with problems that arise in the building.

 

Organizing

Organizing early on and maintaining a tenants’ association is important. However, the final stage can be a unique moment for the association to rally. By this time, tenants who have staved off displacement have usually developed some solidarity and are organized. They’ve also frequently compiled documentation, such as lists of complaints to 311 and, ideally, HPD and DOB violations. They can pool their resources and reiterate to the landlord that they are not moving out. Filing HP actions in Housing Court to demand repairs or better services and courting the media are two highly effective tactics.

If some tenants have already been displaced from a building, the goal of organizing might shift towards building a movement and empowering the surrounding community. Throughout the organizing, tenants frequently work to alert their community about what their landlord has done to them. This can be incredibly valuable, as it puts others on notice about what will happen if this speculator buys their building. We’ve seen tenants who learn about their new speculative landlord through media coverage jump into high drive and organize their building within a month after it’s been sold. Tenant associations that come together so quickly are very effective. Organizing immediately when you know an aggressive speculator has bought your building can make the difference between 10 percent of the building’s tenants leaving and more than half or three-quarters being driven out. Speed might be the single biggest factor that determines a tenant association’s success.

Tenants may also be able to use what happened in their building to help develop a much larger case against a speculator and draw the attention of the state attorney general’s office or the Tenant Protection Unit. When large groups of organized tenants document the harassment they are facing, these governmental agencies can be very effective at addressing widespread patterns of abuse.

Tenants should also always consider doing an action or demonstration. Picketing in front of your landlord’s office or holding a press conference in front of your building upon filing a Housing Court case can be a very effective organizing element. Finding creative and strategic ways for the tenants to demonstrate their strength can help shift the power balance against the landlord.

Every time tenants push back against these speculative landlords, all tenants benefit. It helps dissuade speculators and their investors from viewing deals that involve kicking out rent-regulated tenants en masse as safe and/or lucrative. Every time we push back, we show them that we are not going to allow them to harass us and that they are going to lose money if they make deals where their profits depend on displacing rent-regulated tenants and destroying our communities. 

 Organizing at any stage is very important. Remain tenacious—if it doesn’t solidify until the management stage, there is still plenty of good that can come from it. Any organizing efforts will help both tenants in a building and their communities contend with future crises.