S%#@ Happens (Part II)

I had the great pleasure and privilege of living in New York City for 9 years, from 2001 to 2010. And over those 9 years, I lived in four different apartments in three different neighborhoods of Manhattan—Hell’s Kitchen, the Upper East Side, and, finally, the Financial District. (Manhattanites are a nomadic tribe—like Bedouin Arabs, or the cast of Jersey Shore.) But my favourite apartment of all was my third apartment, a one-bedroom in an historic building situated just south of Wall Street.


A picture of my actual apartment building. (It did have a ground floor with a door--trust me.)

I loved that apartment for so many reasons. It had an actual bedroom, with a real wall and everything. (For a single person in New York, that is HUGE!) It also had very high ceilings, which made it feel even more spacious. And best of all, it was literally across the street from my job, so my daily commute was about 30 seconds long. (Mind you, that was each way, and assuming no traffic.)

I was so happy living there. I had found my home. And I remember thinking at the time, “This apartment is almost too good to be true!”

Sadly, it was.

As it turns out, just weeks before I had found my bliss in that “FiDi” apartment during the late summer of 2005, the building had been purchased by none other than the evil corporation known as S%#@ Equities LLC.

At that time, Brent S%#@ was the darling of the New York City real estate world. He was rich, blond (he still had his hair back then), and on a real estate acquisition frenzy. He had even recently won the highest award available in the world of New York real estate--kind of like an Oscar for billionaire real estate moguls. (Donald Trump was robbed that year.) In short, Brent seemed to have it all.

Of course not being a billionaire real estate developer myself, I was perfectly unaware of Brent S%#@ and his illustrious activities. But all that would soon change because Brent S%#@ was about to become the Gordon Gekko of my very own real-life Wall Street (Part I) drama.


"Greed IS good.  It got me this office, didn't it?"

I now know that during the summer of 2005, Brent was in the process of buying up rental buildings all over Manhattan with the goal of converting them into luxury condos that he could sell for billions of dollars, thus generating hundreds of millions in profits for himself. There was only one problem: these buildings had pesky humans (known as “tenants”) living in them, and these “tenants” had signed legal documents (known as “leases”) which entitled them to live in those apartments. (I know, all this legal jargon is complex, but bear with me.)

Being mere non-billionaires, we tenants were no match for Brent S%#@, who had a whole slew of evil-genius lawyers working for him. And they were about to unleash the greatest , most diabolical real estate development plan that New York City had ever seen—one that would ensure that those pesky tenants would be banished forever!  (Eat your heart out, Joker!) 

So how did Brent and his lawyers do it? Well, in order to understand their brilliant scheme, a little landlord/tenant legal history is in order.

In the 1960’s and 70’s, New York City experienced a cooperative (a.k.a. “co-op”) conversion craze—basically, landlords realized they could make huge short-term profits by converting their rental buildings into cooperative ownership and selling off the units to the highest bidder. If that buyer happened to be the existing tenant, great; if not, then the tenant had to go.

But back then, unlike today, most New Yorkers didn’t use hundred-dollar bills as toilet tissue. As a result, many of the tenants living in those apartments couldn’t afford to buy them; so suddenly, tens of thousands of tenants were facing eviction. And this was happening at the very moment when the rental housing stock was decreasing—and rental rates were increasing—precisely because landlords were converting so many rental buildings into co-ops in the first place.

Legislators realized that the only way to stop this vicious circle and prevent a potentially crippling housing crisis was to require, as a precondition to approval of a conversion project, that the owner of the building renew the leases of any tenants in good standing who expressly requested it. This was a compromise that would ensure that every tenant who wanted to could stay in their rental apartment indefinitely, as long as they continued to pay rent and otherwise honour their lease; and, as an alternative, a tenant could instead accept a buy-out, in exchange for which they would relinquish their right to a lease renewal and vacate their apartment. In short, it was a carefully crafted, thoughtfully-calibrated legislative balancing of rights—those of the landlord-developer on the one hand, and those of their existing tenants on the other. Given the recent political circus that surrounded the raising of the U.S. debt ceiling, it’s hard to believe that, a mere four decades ago, Americans tended to elect politicians who were actually able to agree on reasonable laws that benefited a majority of people. (But then again, they also thought these outfits looked attractive. So they weren’t perfect either.)


"Howdy, partner.  You a real cowboy?  'Cuz you sure look like one."

Now despite the landlord/tenant nirvana that was 1970’s New York, there was a potential glitch: a landlord who wanted to get rid of his tenant in anticipation of a co-op or condo conversion could simply offer to renew the tenant’s lease, but subject to some exorbitant rent increase, effectively forcing the tenant to leave.


“Good morning, Mrs. Weinstein—how’s the arthritis? Oh, I’m sorry to hear that. Well, hopefully, it’ll get better once the weather warms up. Oh, and the by way, starting in June, the rent on your 500 square foot one-bedroom is increasing to $736,000 a month. But don’t worry, heat and hot water are still included.”

Obviously, such a glaring loophole would defeat the whole purpose of the co-op and condo conversion laws. But this loophole wasn’t a problem because of what was known as “rent stabilization”—regulations that limited rent increases to some small percentage closely matching the overall rate of inflation. When combined with the co-op and condo conversion laws, rent stabilization meant that any tenant who wanted to stay in her apartment could do so, and do so indefinitely, at a rent that could only increase a few percent a year. (Which is why, to this day, every so often you’ll come across one of those eccentric 90-year-old ladies living in a $600-a-month rent-stabilized s%#@hole in what is otherwise a very posh Manhattan co-op—a human reminder that, even in glamourous New York City, once you turn 80, you become Sophia from the Golden Girls and begin to hoard newspapers and empty cans.) 


"Now, where DID I put those empty cans?..."

But just as a precaution, the Legislature threw in an extra rule--it said that if an apartment was "market rate" (in other words, not subject to rent stablization), then during a coop or condo conversion, the landlord was prohibited from imposing an "unconsicionable" rent increase.  (Whatever that means.)  The bottom line is, tenants were not going to be forced out of their apartments just because the owner of their building wanted to make a quick profit by selling the apartments as coop units or condos.

Thanks to New York’s condo conversion and rent stabilization laws, things continued along relatively smoothly for billionaire landlords and non-billionaire tenants, who lived in relative harmony and peace all through the 1980’s and early 90’s.  Like wizards and muggles. But then, along came Rudy Giuliani.  (Who looks like a muggle, but is actually a wizard.)

(TO BE CONTINUED...)