MANAGING RESIDENTIAL HOUSING:

Transcription

1 NYCLA CLE I NSTITUTE MANAGING RESIDENTIAL HOUSING: E FFECTIVE TECHNIQUES TO S USTAIN RENT I NCREASES FOR I MPROVEMENTS Prepared in connection with a Continuing Legal Education course presented at New York County Lawyers Association, 14 Vesey Street, New York, NY scheduled for December 11, 2013 Program Co-sponsor: Faculty: David Cabrera, Borah, Goldstein, Borah, Goldstein, Altschuler, Nahins & Goidel; Randi Beth Gilbert, Horing Welikson & Rosen; Karen Schwartz Sidrane, Esq.; Chris Athineos, Athineos Enterprises, Inc.; Michael Vinocur, Building Equity Management; Paul Fuller, Property Management Bureau/ Enforcement Compliance Mediation Moderstors: Mitchell Posilkin and Robin Bernstein, RSA This course has been approved in accordance with the requirements of the New York State Continuing Legal Education Board for a maximum of 3 Transitional and Non-Transitional credit hours; 1.5 Skills; 1.5 Professional Practice. This program has been approved by the Board of Continuing Legal education of the Supreme Court of New Jersey for 3 hours of total CLE credits. Of these 0 qualify as hours of credit for ethics/professionalism, and 0 qualify as hours of credit toward certification in civil trial law, criminal law, workers compensation law and/or matrimonial law. ACCREDITED PROVIDER STATUS: NYCLA s CLE Institute is currently certified as an Accredited Provider of continuing legal education in the States of New York and New Jersey.

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3 New York County Lawyers Association Continuing Legal Education Institute 14 Vesey Street, New York, N.Y (212) Managing Residential Housing: Effective Techniques to Sustain Rent Increases for Improvements December 11, 2013 Panelists: Chris Athineos, Athineos Enterprises; David Cabrera, Borah, Goldstein, Altschuler, Nahins & Goidel; Paul Fuller, Bureau Chief, Property Management Bureau/ Enforcement Compliance Mediation; Randi Beth Gilbert, Horing Welikson & Rosen; Karen Schwartz-Sidrane, Sidrane & Schwartz-Sidrane; Michael Vinocur, Building Equity Management Program Moderators: Mitchell Posilkin, General Counsel, RSA Robin A. Bernstein, Deputy Counsel, RSA 8:30 A.M. - 9:00 A.M. Coffee and On-Site Registration 9:00 A.M. - 9:15 A.M. Welcome and Announcements Bari Chase 9:15 A.M. - 9:30 A.M. Introduction Mitchell Posilkin Rent Increases For Improvements 9:30 A.M - 9:55 A.M. Procedures and Standards for Paul Fuller Reviewing Improvements 9:55 A.M. - 10:20 A.M. Individual Apartment Improvements Karen Schwartz-Sidrane 10:20 A.M. - 10:45 A.M. Major Capital Improvements David Cabrera The New J-51 Regulations 10:45 A.M. - 11:10 A.M An Owner s Perspective Chris Athineos 11:10 A.M. - 11:15 A.M. Break

4 The Tenant Protection Unit 11:15 A.M. - 11:25 A.M. What is the Tenant Protection Unit? Mitchell Posilkin 11:25 A.M. - 11:50 A.M. Responding to the Tenant Protection Unit Randi Beth Gilbert 11:50 A.M. - 12:05 P.M. An Owner s Perspective Michael Vinocur 12:05 P.M. - 12:30 P.M Questions & Answers

5 New York County Lawyers Association Continuing Legal Education Institute 14 Vesey Street, New York, N.Y (212) Managing Residential Housing: Effective Techniques to Sustain Rent Increases for Improvements December 11, 2013 Panelists: Chris Athineos, Athineos Enterprises; David Cabrera, Borah, Goldstein, Altschuler, Nahins & Goidel; Paul Fuller, Bureau Chief, Property Management Bureau/ Enforcement Compliance Mediation; Randi Beth Gilbert, Horing Welikson & Rosen; Karen Schwartz-Sidrane, Sidrane & Schwartz-Sidrane; Michael Vinocur, Building Equity Management Moderators: Mitchell Posilkin, General Counsel, RSA and Robin A. Bernstein, Deputy Counsel, RSA Table of Contents MCI Materials, Paul Fuller, Bureau Chief, Property Management Bureau/ Enforcement Compliance Mediation Rent Increases for Individual Apartment Improvements Materials, Karen Schwartz-Sidrane, Sidrane & Schwartz-Sidrane J51 Regulations and Materials, David Cabrera, Borah, Goldstein, Altschuler, Nahins & Goidel An Owner s Perspective: Top 10 Best Practices: MCIs and IAIs, Chris Athineos, Athineos Enterprises Sample TPU Documents, Mitchell Posilkin, General Counsel, RSA Owner s Response to Tenant Protection Unit, Randi Beth Gilbert, Horing Welikson & Rosen An Owner s Perspective: Tenant Protection Unit, Michael Vinocur, Building Equity Management Relevant Articles Faculty Biographies

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31 Rent Increases for Individual Apartment Improvements Materials Karen Schwartz-Sidrane, Sidrane & Schwartz-Sidrane

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45 12/6/2013 Major Capital Improvements The New J-51 Regulations David B. Cabrera, Esq. 377 Broadway New York, New York Tel: Fax: J-51 Basics J-51 Tax benefits are administered by HPD and DOF. J-51 Tax benefits are available to owners who rehabilitate qualifying systems in existing buildings. 421a Tax benefits are only available for the construction of new buildings. Practical Point Receipt of the tax benefits places the building under rent regulation. Roberts v. Tishman Speyer Props, L.P. 13 NY3d 270(2009). 1

46 12/6/2013 Two Types of J-51 Buildings Most common Buildings built before 1974 that contain six or more units. Previously subject to rent regulation (rent control or rent stabilization). The buildings remain subject to rent regulation at the end of the tax benefit period. Two Types of J-51 Buildings (cont d) Less common Buildings that were built or gut renovated after 1974 or contain less than six units. Subject to rent regulation solely because building received J-51 tax benefits. Rule: Must include J-51 rider in each lease and lease renewal. Notice must: be in at least twelve point type; inform tenant that the unit shall become deregulated upon the expiration of the last lease after tax benefit expires; and, state the approximate date on which the tax benefit period is scheduled to expire. Failure to give notice - unit remains rent regulated until the tenant vacates the unit. 2

47 12/6/2013 J-51 & MCI Basics Rule: If an owner receives a J-51 tax abatement and DHCR issues an MCI rent increase order for that item, the rent increase is reduced by a portion of the value of the tax abatement. The rent increase is reduced in the MCI proceeding or in a Tax Abatement Modification Proceeding. See sample orders with materials. Proposed Changes to MCI Regulations There are 27 Amendments to The Rent Stabilization Code (2 relate to Major Capital Improvement Applications) 9 NYCRR (a)(3)(22) is amended to provide there will be no MCI rent increases for conversions from master electric metering to individual electric metering; however, new electrical risers and feeders remain eligible for an MCI rent increase. All other work is excluded. 9 NYCRR (a)(13) is amended to allow any tenant or tenant representative to submit information regarding, or the DHCR to investigate upon its own initiative, whether an owner is providing all required services if immediately hazardous conditions or violations exist prior to granting an MCI application. Also give the DHCR the option to dismiss an MCI application for service-related issues with leave for the owner to re-file within 60 days (and toll the two-year time limit to file applications during the 60-day period.) 3

48 12/6/2013 Changes to J-51 regulations Require an affidavit of a registered architect or licensed engineer for purposes of determining the start dates and completion dates for J-51 eligible work. Require a certified pubic accountant certification to verify the cost of J-51 eligible work. The CPA certification will replace the submission of paid bills, cancelled checks, and work contracts. Extend the date by which J-51 work must be completed from December 31, 2011 to June 30, Reduce the time in which J-51 eligible work must be completed from 36 to 30 months. Reduce the time by which J-51 applications must be filed for most projects from 48 to 36 months following the start of construction. Changes to J-51 regulations (cont d) Reduce application completion period from 24 to 12 months after initial filing date Eliminate benefits for cooperatives and condominiums with average assessed value of $30,000 or more per dwelling unit. Establish a fee equal to two times the actual cost of inspecting any conversions, alterations or improvements that are claimed in the J-51 application if such work is not completed at the time such inspections take place. Prohibit J-51 benefits for conversions from non-residential to residential buildings unless the work is carried out with substantial governmental assistance. Revise the schedule for certified Reasonable Costs for projects completed after December 31,

49 12/6/2013 Recent Decision In re 20 Fifth Avenue LLC v. DHCR, 109 A.D.3d 159 (App. Div., 2013). Denial of Major Capital Improvement for exterior renovation work for entire building when a small number of apartments had water damage was revoked as arbitrary and capricious. Reference Materials DHCR Fact Sheet # 41 Tax Abatements Roberts v. Tishman Speyer Props, LP decision Rent Stabilization Code Amendments (Major Capital Improvement Amendments page 3, items 7 and 8) Order granting Major Capital Increase rent increase Modification Order for Major Capital Improvements Notice of Adoption J-51 Regulations Fifth Avenue LLC v. DHCR decision 5

50 12/6/2013 David Cabrera (212) David B. Cabrera is a partner at Borah, Goldstein, Altschuler, Nahins & Goidel, P.C., in the Administrative Division. He has experience in all types of proceedings before the State Division of Housing & Community Renewal (DHCR), as well as matters before the Department of Housing, Preservation & Development (HPD), the Environmental Control Board (ECB), the Department of Buildings (DOB), and the Loft Board. Mr. Cabrera has over twenty years of real estate law experience, including eleven years with DHCR in various senior positions. At DHCR, he was Deputy Commissioner for Housing Operations where he oversaw the State s Section 8, Mitchell-Lama and Public Housing programs. He also served DHCR as General Counsel in the Office of Legal Affairs and Deputy Counsel and Assistant Commissioner in the Office of Rent Administration and specialized in rent stabilization and rent control matters. Prior to joining the DHCR, Mr. Cabrera was in private practice specializing in real estate litigation and transactions. 6

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107 12/5/2013 An Owner s Perspective Chris Athineos, Athineos Enterprises Top 10 Best Practices: MCIs and IAIs 1. Get Organized 2. Take Photographs 3. Written Estimates and Contracts 4. Paid Invoices 5. Contractor Relationship 6. Sign Offs/Permits 7. MCI/IAI Submission to HCR 8. Rent Registrations/Building Wide Rent Reductions 9. Engineer/Architect fees 10. Useful Life 1

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133 Owner s Response to Tenant Protection Unit, Randi Beth Gilbert, Horing Welikson & Rosen

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161 12/5/2013 Tenant Protection Unit An Owner s Perspective Who Is Building Equity Management? Owners and 3 rd party building managers Expertise in regulated multifamily buildings Buying and redeveloping buildings for past 13 years Management company launched in 2012 Highly leveraging off of available technology to streamline building management processes Very hands on and focused on extracting value from buildings with below market rents 1

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164 12/5/2013 After So, What Do They Ask For? All supporting documents justifying the cost of the IAI Including, but not limited to: Leases Bills Cancelled Checks Receipts Contracts Invoices from contractors Date of completion Calculation of the new legal rent Contractor s itemized breakdown of costs or a notarized Owner s Affidavit 4

165 12/5/2013 Owner s Affidavit Should Include: A detailed description/explanation of the work performed. The installation dates of the work Identity of contractors and subcontractors A breakdown of the costs of the work Please note that all costs claimed for the IAI need to be broken down and itemized. Many renovations include non allowable costs which our staff will be unable to segregate if a complete breakdown is not submitted. If the TPU cannot determine which items are allowable, it could result in the entire IAI being found unacceptable, which, in turn, may lead to a finding that the rent is too high and further administrative or legal remedies. What Did We Submit? All done via Cover letter outlining everything that was attached A two page notarized affidavit Full bank statements with all related cleared checks A complete account check ledger of all checks related to IAI with check number, GL account, payee, amount, date. Copies of all contracts, receipts, invoices Over 80 pages of documentation! 5

166 12/5/2013 My TPU Timeline TPU letter #1 dated 3/19/13 and 3/22/13 Our reply ed 3/26/13 TPU letter #2 dated 6/14/13 Reply #2 sent on 6/27/13 TPU letter #3 dated 7/12/30 Reply #3 sent on 7/15/13 On November 11/22/13 I finally got a Determination No receipt of was ever acknowledged by TPU The Determination Disallowed $3000 in architect s fees Disallowed permitting and filing fees Disallowed other small items for maybe $200 Disallowed all payments to hourly workers due to lack of an invoice (Approx $2500) Disallowed $ with no tieback to anything we filed In total, disallowed approx. $8K out of $52K filing, reducing my legal rent by $201, which was still above my preferential rent to first tenant. Expected to correct registrations, send new lease to tenant, and sign a TPU affidavit. 6

167 12/5/2013 Post Mortem Worked with RSA to get to TPU Bureau Chief Greg Fewer. to Fewer resulted in phone call from TPU attorney. He reviewed file and couldn t make sense out of his auditing group. Case has been brought back to Sr. Auditor to revisit whole case. In Summary If using a general contractor, proposal needs to offer reasonable specificity with costs broken out. Try to have contract, invoice, and/or receipt for every dollar spent. Credit card bills seem to be acceptable, but keep an invoice or receipt to substantiate what was purchased Be careful about line iteming things that might be viewed as repairs and disallowed. Answer any correspondence promptly. 7

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191 SeminarBios BIOGRAPHIES

192 Mitchell L. Posilkin, Esq. General Counsel Rent Stabilization Association Mitchell Posilkin is the General Counsel of the Rent Stabilization Association, a trade association that represents approximately 25,000 owners and managers of over one million apartments in the City. In that capacity, Mr. Posilkin addresses a myriad of issues that affect property owners which arise in the courts, in government agencies and in the State Legislature and City Council. Prior to the commencement of his tenure at RSA in January 1996, Mr. Posilkin served as Deputy General Counsel of the Department of Housing Preservation and Development for eleven years, including two and one-half years as the Acting Director of the Department's Housing Litigation Bureau. Mr. Posilkin began his career as an Assistant Corporation Counsel in the Division of Legal Counsel at the New York City Law Department from 1979 to Mr. Posilkin graduated from the State University of New York at Binghamton in 1976 and from New York Law School, where he served as an editor of the Law Review, in Mr. Posilkin is a current owner s representative on Housing Court Advisory Council. He has previously served as the City s representative and as a representative of property owners, and has also served on the Housing Court Committee of the Association of the Bar of the City of New York. Mr. Posilkin has presented at many seminars held by RSA, the New York State Office of Court Administration, the New York City Bar Association, the New York State Bar Association and the Kings County Housing Court Bar Association, including programs pertaining to the significant changes in the State s rent regulatory laws and regulations, the City s lead paint laws, Section 8, bedbugs and numerous other issues and court decisions of concern to property owners. Website:

193 Robin A. Bernstein, Esq. Deputy Counsel Rent Stabilization Association Robin A. Bernstein is the Deputy General Counsel to the Rent Stabilization Association, a trade association that represents approximately 25,000 owners and managers of over one million apartments in the City. Prior to her current position, Ms. Bernstein served as in-house General Counsel to a major New York City property owner, and was in private practice in the areas of landlord/tenant and real estate litigation and transactions. Ms. Bernstein has coordinated and co-authored materials for numerous RSA seminars including: Property Insurance for Apartment Building Owners Learning from Sandy, Managing Rent Regulated Property in New York City series, and The City s New Energy laws series. Ms. Bernstein is a member of the New York City Bar Association, The New York State Bar Association, the New York County Lawyers Association and the Association of Corporate Counsel. She has served on the Housing Court and Housing Court Public Projects Committees of the New York Bar Association. She has also served on the New York Bar Association Judiciary Committee for several terms. Ms. Bernstein is a member of Civil Court Practice Section of the New York County Lawyers' Association. Prior to the implementation of the Housing Court Resource Centers, Ms. Bernstein supervised RSA staff located in the court houses that assisted unrepresented small property owners. The written owners materials now distributed in the Resource Centers were modeled on documents drafted by RSA. She is a certified member of the Volunteer Lawyers Program of the Housing Part of the Civil Court of the City of New York. She served on the New York City Hoarding Task Force, and the City DRIE Board. She has worked with City officials, NYSERDA, private consultants, lenders, Con- Edison and National Grid to educate RSA members on how to comply with the City s new energy laws. Website:

194 David B. Cabrera, Esq. Borah, Goldstein, Altschuler, Nahins & Goidel, PC David B. Cabrera is a partner of the firm in the Administrative Division. He has experience in all types of proceedings before the State Division of Housing & Community Renewal (DHCR), as well as matters before the Department of Housing Preservation & Development (HPD), the Environmental Control Board ECB), the Department of Buildings (DOB), and the Loft Board. Mr. Cabrera has over fifteen years of real estate law experience, including eleven years with DHCR in various senior positions. Most recently, he was DHCR s Deputy Commissioner for Housing Operations where he oversaw the State s Section 8, Mitchell-Lama and Public Housing programs. He also served DHCR as General Counsel in the Office of Rent Administration where he specialized in rent stabilization and rent control matters. Prior to joining the DHCR, Mr. Cabrera was in private practice specializing in real estate litigation and transactions. Over the last decade, Mr. Cabrera has been a lecturer or participant in panel discussions before practicing attorneys, judges, real estate professionals, and trade organizations on numerous topics related to rent regulations and affordable housing. He was also a member of the Housing Advisory Council. Website:

195 Randi Beth Gilbert, Esq. Horing Welikson & Rosen, PC Randi Beth Gilbert is a member of Horing Welikson & Rosen. Randi is currently the attorney in charge of the firm s Westchester Landlord-Tenant practice and the firm s bankruptcy practice, as well as a member of the firm s Administrative Law Department. Randi has substantial experience and expertise in civil litigation, concentrating in commercial and real estate matters. Before joining the firm, Randi was an Assistant General Counsel of the Jack Parker Organization. She has represented parties in diverse real estate related matters in New York State Courts (including Article 81 guardianship proceedings) and Federal district and Bankruptcy Courts. Randi has represented parties (primarily landlords) in administrative proceedings before the New York State Division of Housing and Community Renewal (DHCR) involving, among other things, non-primary residence and succession rights, illegal subletting, rent overcharge complaints, illegal occupancy. In addition, Randi has assisted owners seeking Major Capital Improvement rent increases (often for multimillion dollar renovations) in weaving their way through the procedures and administrative pitfalls of DHCR. Randi has also represented owners in administrative proceedings before the New York City Commission on Human Rights and New York State Division of Human rights defending alleged discrimination claims. On the transactional side, Randi represents owners in connection with commercial and residential leasing matters and seller and purchasers of commercial and residential properties. Randi also assists in the firm s Cooperative and Condominium Department by preparing amendments to offering plans for the firm s clients. Education: J.D. 1988, St. John s University School of Law B.S. 1985, Political Science with a minor in Business, SUNY at Stony Brook Website:

196 Karen Schwartz-Sidrane, Esq. Sidrane & Schwartz-Sidrane, LLP Karen Schwartz-Sidrane is a partner in the firm of Sidrane & Schwartz-Sidrane, LLP. Ms. Schwartz-Sidrane has represented parties in countless proceedings and hearings before the New York State Division of Housing and Community Renewal. She has broad experience with the TPU, rent overcharges, fair market rent appeals, major capital improvements, luxury deregulation and service issues before the DHCR. She has successfully challenged many adverse orders, litigated in Supreme Court and has argued numerous appeals in the Appellate Division of State Supreme Court. Ms. Schwartz-Sidrane is a frequent contributor to the RSA Reporter and Landlord v. Tenant. Ms. Schwartz-Sidrane has lectured for CHIP, the Rent Stabilization Association ( RSA ), as well as the New York City Rent Guidelines Board. Education: Cornell University, B.S., Benjamin Cardozo School of Law

197 Chris Athineos President Athineos Enterprises Inc. Chris Athineos is the president of Athineos Enterprises Inc. business owned by his family since Athineos Enterprises Inc. owns and manages 150 apartment units in Brooklyn, New York. Mr. Athineos has been a licensed real estate broker since Mr. Athineos has served on the RSA board of directors since He is also the vicepresident of SPONY. Michael Vinocur President Building Equity Management Michael Vinocur, President of Building Equity Management, entered the world of real estate investment/management in 2000, after having sold a successful conference management business focused on digital imaging technology. Vinocur s entry into NYC real estate started with the purchase and redevelopment of several Harlem townhouses into fully rehabbed rentals. When the inventory of prospective shells started to diminish, he set his sights on the multifamily market making a number of purchases in Washington Heights. His focus was on buying undermanaged buildings that could benefit from a heavy reinvestment in both Major Capital Improvements and Individual Apartment Improvements. Additionally, Vinocur is a principal in a related company, Building Equity LLC, a design/build firm focused on higher end rental, condo, and coop renovations. Vinocur holds a BA in Natural Sciences from John Hopkins University and a MBA from Yale University. Website:

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