Soaring Rents Spark Calls to Expand Tenant Protection

Tenants in three Lower East Side buildings are facing a mass eviction — and they have almost no legal rights to challenge it.

In March, 17 of the tenants in 50, 54 and 58 East Third Street received letters from their landlord, Abart Holdings, stating that the buildings were “under contract to be sold” and that “it has been agreed with the impending new owners that your lease will not be renewed and you will be expected to vacate at the expiration of your lease.”

“They gave us 60 days to leave,” says Sue Palchak-Essenpreis, 38, a hairdresser who’s lived in the buildings for two years. “We’ve had our lives turned upside down,” adds her husband, Greg Essenpreis, a social worker.

The two were supposed to move out by May 14, but refused to leave. They received an eviction notice on May 25. “We’re trying to get the landlord to be decent,” says Essenpreis, but “the landlord’s office doesn’t want to negotiate in any way, shape or form.”

“We all asked for extensions,” says David M., 27, a graduate student at New York University who moved into 50 East Third last year. “We said ‘give us an offer,’ and they wouldn’t give us anything.”

The landlord has no legal obligation to negotiate. Only about a quarter of the 72 apartments in the three six-story buildings are still rent-stabilized, tenants say. That minority is protected by a city law that gives them the right to renew their leases and says the landlord can’t evict them without a cause such as non-payment of rent or creating a nuisance. (In April, the Supreme Court refused to consider a challenge to that law.)

The other tenants, including the 17 who received the letters, have no such protection. In 1997, the state ended rent controls for vacant apartments if the rent was more than $2,000 a month. In deregulated apartments, the landlord can raise rents without any legal restrictions — and can also refuse to renew tenants’ leases without reason.

Deregulation’s supporters argued that it would only affect a handful of rich people in Manhattan. But in the past 15 years, however, it has spread to much of the city. As rents skyrocketed in affluent neighborhoods like the Upper East Side, they pushed people into other Manhattan neighborhoods, including the Lower East Side, driving up rents there. That in turn pushed people out to Upper Manhattan and the outer boroughs, repeating the process. Today, apartments in Bushwick and Bedford-Stuyvesant can rent for more than $2,000, and even in Brownsville and East New York, two of Brooklyn’s poorest and most isolated neighborhoods, two- and three-bedroom units are passing the $1,500 mark.

“We need rent stabilization,” Lower East Side City Councilmember Rosie Mendez told some 100 people who rallied outside the buildings on May 7 to support the tenants. Otherwise, she said, “there’s very little in the law that protects tenants.”

New York tenants have been trying to get the deregulation law repealed for years, but have been blocked in the state Senate by a coalition of real estate-funded Republicans and Democrats who are now convicted felons. Last year, they won a small victory when the state raised the deregulation threshold to $2,500. Some in the tenant movement advocate expanding protections to cover all renters.

However, says Mendez, “we can’t do anything on a city level.” A 1971 state law prohibits the city from enacting stronger rent controls on its own.

With virtually no legal rights, the Third Street tenants are using other tactics. They are trying to get elected officials to contact the Federal National Mortgage Association, which acquired the mortgage on the buildings last year for $9.8 million from a Maryland company called Beech Street Capital. At the May 7 rally, Steve Herrick, head of the Cooper Square Committee, called this “outrageous,” noting that Fannie Mae’s mission includes trying to “help struggling families” and “to make sure that people can buy or rent housing.”

They’re also looking into the building’s rent history to see if any apartments were illegally deregulated, says Wasim Lone, head of housing services at GOLES (Good Old Lower East Side). “There are some very questionable deregulation activities documented,” Palchek says. His apartment was deregulated in 2002; the landlord, he says, claimed the tenants occupying the apartment then were making more than $175,000 a year, over the limit for rent-stabilized tenants — except that those tenants were paying $1,300 a month, and “high-income decontrol” was only legal if the rent was more than $2,000.

“Of course we have no way of refuting this, [with the] statute of limitations and proof of fraud both limiting our options,” he says. The state generally has a four-year statute of limitations on complaints about illegal overcharges. That limit, Lone says, is “very hard to challenge” without strong evidence that the owner submitted fraudulent claims about renovations in order to deregulate the apartment.

One tenant in the buildings has won an overcharge case. In 2009, the state Appellate Division ordered Abart co-owner Abe Haruvi to pay $74,000 to Roger Jazilek, a tenant in 50 East Third, after it found that Abart had filed a false rent registration with the state. Abart had tried to evict Jazilek in 2002, claiming he had been illegally subletting from a woman who’d lived there since 1981. They settled out of court, with Jazilek getting a two-year lease that raised the rent from $812 to $1,800 — with the $1,800 a discounted “preferential rent” and the official rent listed at $2,200.

In 2005, Jazilek challenged the deal, saying that it had illegally deregulated his apartment. The court found that the legal rent was $975.

Abe Haruvi and his brother, Arthur, who have owned the buildings since 1988, also have a record of dubious eviction attempts. In 2000, the Village Voice reported that Haruvi had several times tried to take tenants’ apartments for personal use. In two cases, he claimed that he was a widowed single father. The courts rejected one of those cases, but in the other, at 114 East 71st Street, the tenant agreed to leave. Haruvi, however, did not move in. He rented the apartment to a new tenant, raising the rent from $900 to an estimated $5,000.

In 2005, he tried to claim another apartment in the 71st Street building, but the courts threw it out.

Perhaps not so ironically, the three buildings are across the street from 47 East Third Street, where landlords Alistair and Catherine Economakis forced out all the tenants by claiming that they wanted to use the entire 15-apartment building for their own home. Those tenants settled out of court in late 2008, after the state’s highest court ruled that there was no legal limit on the number of apartments an owner could claim for personal use at one time.

Tenants in the buildings describe a “mysterious” atmosphere. Lisa, a rent-stabilized tenant who has lived there 18 years, says people who won’t say who they are have come into apartments to take measurements.

Lone calls it “very nasty.” Abart’s agents, he says, have been calling tenants to ask them when they’re moving out.

“It’s not even so much that we won’t leave, but that we can’t leave,” Palchek-Essenpreis says. “We don’t have what it takes.” The two were already spending more than 30 percent of their income on to cover their monthly rent of approximately $2,500. She estimates it would cost them $8,000 to move. The landlord’s office’s response to this, Palchek says, was “why don’t you call your parents?”

The couple has lived in the neighborhood for 15 years, he says. “We should have the right to stay. I don’t think the landlord should kick us out just to make more money.”

The law doesn’t give them that protection. One goal of rent controls was to stabilize neighborhoods in the face of a chronic housing shortage. Deregulation subjugated that to the rule of the market.

“Without rent regulations, the protections that keep tenants in place, we’re going to see a lot more of this. It’ll be a revolving door,” says Mendez. “If we don’t change the rent laws, this will be a city for the rich.”

Is Your Rent Too High? What You Need to Know — And Can Do

Thousands of apartments in New York City have illegally high rents. Two things make it easy for landlords to get away with fraud: Most tenants don’t know their rights, and enforcement is weak, slow and dependent on tenant complaints.

If you live in one of the city’s roughly 1 million rent-regulated apartments (generally, apartments built before 1974 in buildings of six or more units), your rent can, with a few exceptions, be increased only by the amount permitted each year by the city Rent Guidelines Board. If you live in a deregulated apartment, there are no limits to rent increases.

The vast majority of rent fraud occurs in vacant apartments. If the rent on a vacant apartment is more than $2,500 a month, it’s deregulated. In apartments that rent for less, landlords still cheat to get more money and push prices closer to the $2,500 threshold.

The most common method is by inflating the cost of renovations. State law lets landlords raise the monthly rent by 1/40th of what they spend (1/60th in buildings of more than 35 units). If they spend $6,000, they can raise the rent by $100 or $150 — but if they claim that they spent $60,000, they can raise it by $1,000 or $1,500. Landlords also sometimes claim that an apartment renting for less than $2,000 is deregulated, but the rent is “preferential.”

To find out what your apartment used to rent for, get a rent history from the New York State Division of Homes and Community Renewal Office of Rent Administration. If you suspect your rent is too high, you can file an overcharge complaint. If you win, you get your rent reduced and triple damages. Unfortunately, the process takes at least a year, and usually much longer. If your apartment is no longer rent-regulated, your lease might expire before the complaint is resolved.

For more information, see nyshcr.org/rent/about.htm or call the Office of Rent Administration at 718-739-6400. You can also call the Metropolitan Council on Housing Tenants’ Rights Hotline at 212-979-0611 on Monday, Wednesday or Fridays from 1:30 to 5 p.m.