Tag Archives: rent stabilization

Owning the New Yorker

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Mickey Barreto, in New York. — Photo: Reproduction/Fantastic

Mickey Barreto, in New York. — Photo: Reproduction/Fantastic

I was interviewed by TV Globo, the largest broadcaster in Latin America, about Mickey Barreto who claimed to own the New Yorker hotel in Manhattan. The video is in Portuguese, but there is a rough English translation of the transcript. The transcript opens,

After Living for Free in a NY Hotel for 5 years, a Brazilian Puts the Entire Building in His Name and the Case Ends up in Court

A Brazilian is in the middle of a controversy involving New York ‘s housing legislation . After staying in a hotel room for 5 years, Mickey Barreto believes he owns the entire building.

The confusion ended up in court . He was even arrested on fraud charges. While free awaiting trial, Mickey spoke to Fantástico. New York hotels are among the most expensive in the world and living on Manhattan Island is not for everyone, but Brazilian Mickey Barreto paid nothing.

Barreto lived for free, for 5 years, at the New Yorker hotel. And there’s more: he managed to put the entire building in his name. A negotiation made based on New York City rent law. The hotel says there was fraud.

The Brazilian, who is actually called Marcos Aurélio Canuto Muniz Barreto, managed to understand a complex law — and benefit from it.

The New Yorker Hotel opened in 1930, with more than a thousand rooms and 43 floors . At the time, it was one of the largest in the world. It hosted politicians and celebrities, such as inventor Nikola Tesla, baseball player Joe DiMaggio and boxer Muhammad Ali. In 1972, it faced a crisis and closed its doors. It ended up becoming one of the cheapest hotels in the city.

When Mickey Barreto arrived from California in 2018, he said he had no plans to stay at the hotel for long. Until he learned of an old law in New York that allowed someone to stay with all room service included and pay very cheaply.

Under the law, still in effect, New York hotels built before 1969 that charged less than US$88 per week that year — a cheap rate at the time — would have to give guests a rental contract for 6 months or more. The guest would then have the right to become a permanent resident. “The legislation limits the amount that each owner can charge for rent in New York in certain apartments. It is a 1969 law that applies to different places. And through a legal loophole, hotels considered cheap entered this regulation. Mickey Barreto discovered that this hotel is technically included in the rules defined by law”, explains David Reiss, a jurist at the Brooklyn School of Law.

The hotel resisted, but Barreto won the case in court and that was how he started living at the New Yorker. But, in addition to refusing to pay, Mickey Barreto wrote a deed and managed to register the hotel in his name, claiming that a judge gave him ownership of the hotel.

“According to the law, having possession is not the same thing as being an owner . Every tenant has possession of the apartment where he lives, but that does not mean that he is the owner. There is no legal basis for this correlation. I think he only gained in Justice because the hotel didn’t send any lawyers. And here in the United States, if you don’t send your lawyers, you’re going to lose”, says the jurist.

Already calling himself the owner of the New Yorker, Barreto went to the hotel’s restaurant and demanded that the concessionaire pay him for renting the place. He was ignored, but continued to bother employees and even demanded a complete reform of the entrance.

How to Fake-Own the New Yorker Hotel

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Reinhold Möller, CC BY-SA 4.0

New York magazine’s Curbed interviewed me for their explainer, How to Fake-Own the New Yorker Hotel. It reads:

The story of how a guy named Mickey Barreto came to own, at least on paper, the New Yorker hotel is a weird one. It started in June 2018, when Barreto first booked a night at the Art Deco landmark for $149. He had plans to stay a while: Using an obscure clause in the city’s rent-stabilization law, Barreto requested a six-month lease to live at the hotel. The gambit worked. Even as the owner of the hotel, which happens to be the Unification Church despite the fact that it operates as a Wyndham, tried to boot him, the judge ordered them to let him back in.

Around the same time he requested the lease, and despite the fact that he did not own the New Yorker, Barreto filed a deed transferring ownership of the hotel from himself to something called Mickey Barreto Missions. Why did Barreto believe he owned the building? As he told a judge in 2019, the “building was never subdivided. It’s all one lot. It’s all one parcel.” Which meant, at least to him, that because he had a legal claim to room 2565, he had a legal claim to the whole thing: “What affects that part of the building called 2565, whatever happens in there, happens to the whole lot, the whole parcel.” He then went around presenting himself as the owner, attempting to collect rent from the building’s street-level businesses and at one point calling the Fire Department to have the building evacuated and, per court documents, identifying “himself as the owner of the subject property.” In the end, the judge found Barreto’s deed, which was extremely fraudulent, to be extremely fraudulent.

But Barreto wasn’t done! The Commercial Observer reports that Barreto made another play at ownership this month, with a 2021 deed transfer from Mickey Barreto Missions to … Mickey Barreto Missions. (Barreto only signed the document earlier this month, and the Department of Finance made it public shortly after.) All of which raises some important questions: Why is it so easy to fake-own a building in New York City? And what is this rent-stabilization law Barreto took advantage of? To help make sense of everything, and potentially try it myself, I reached out to David Reiss, a professor at Brooklyn Law School, who explained everything.

This interview has been edited and condensed for clarity.

Can we start with fake-owning a hotel? Barreto managed to file documents transferring ownership of the hotel to himself. Can someone just … do that?
The government looks at deeds and says: Do they meet our technical requirements for a deed? Is it on the right kind of paper, is it the right size? Does it have a notary stamp on it? If it meets all those technical requirements, then it is recordable. The way you sell a property is based on the fact that most people are doing the right thing and they’re not doing shenanigans. But if you record something that is fraudulent, that doesn’t make it real. A fraudulent deed conveys nothing, and really nobody’s going to be misled by this. It just needs cleaning up. The true owner has to go to court and get this deed declared fraudulent so that it could be removed from the recording documents.

You may not remember this famous headline some 20 years ago when the New York Daily News transferred ownership of the Empire State Building to itself. The notary was Willie Sutton, the famous bank robber, and one of the witnesses of the deed was Fay Wray from King Kong. They got a big headline, but it’s less interesting than the headline suggests.

They were trying to prove a point. 
I believe what they were trying to demonstrate is that regular people can have their properties swept away from them through deeded theft, which is another name for this. And this can be a serious problem for people living in relatively modest homes, typically in the outer boroughs. And typically the victims are elderly people, and it’s a way to steal people’s property. This is a horrific fraud.

Barreto’s fraud was more like the Empire State Building fraud. Barreto told the restaurant to pay rent to him and all these things, but no sophisticated person is going to fall for this. They’re going to call the property manager and say, “What’s going on?” It’s not going to change anything.

So it’s mostly a hassle. 
If this happened to you, you’d be miserable and you’d probably have to hire a lawyer. It would be a pain in the butt. But it doesn’t happen that often. And when you think about all of the transactions that happen whenever you design a government system like the recording system, you want to balance ease of use versus potential for fraud. Maybe it’s a cost we accept as a government because it doesn’t happen very much.

It was also funny to me that he transferred the deed from Mickey Barreto Missions to Mickey Barreto Missions. 
I mean, his deed was really weird because the deed was from himself to himself. So that’s even more fraudulent on its face. If David Reiss transfers to David Reiss, that doesn’t really even do anything. This is just nonsense, right?

Right. 
I mean maybe he was magically thinking that this would give him ownership of the building or just wanted to gunk up the works for them or is just a little wacky. Whatever his reasoning, trying to interpret it as a legal matter doesn’t get you anywhere because he had no rights and he kind of made it up. It’s like if your kid was writing a deed.

Okay, so he was not using magical thinking when it came to claiming a lease at the New Yorker Hotel. Can you tell me about that clause? 
So, this is part of the rent-stabilization law that allows guests at single-room occupancy (SRO) hotels to become tenants, usually by living there continuously for six months or by staying there for one night and requesting a lease. They’re a very specialized, small part of the New York City housing stock that are very complex. Most of them are in very bad condition. They’re kind of a holdover from an earlier era — after World War II a lot of them filled up with single men who would come to New York City to make their way in the world. They fell on very hard times in the ’70s and ’80s and kind of phased out. Then the government came up with a supportive SRO model where it had a similar type of housing space with services on-site. But we’re not talking about very many units.

But the New Yorker Hotel is kind of nice. Is it an anomaly?
The New Yorker Hotel is owned by the Unification Church, the Moonies church. I’m guessing it’s a complicated story. It’s not your typical hotel owner.

And Barreto knew about this odd little provision on rent-stabilized hotels. 
He clearly knew what he was doing. He was either advised by somebody or had done his own research and realized that he was able to request a lease. Some not-for-profit legal entities will even provide form letters to tenants so that they can do this, because for some people this is a very attractive housing option. It’s very reliable compared to being in a men’s shelter or a women’s shelter or something like that. So it’s obscure, but it’s doable. There have been other cases about this, and owners will often fight with a tenant about it because they would rather use it as a hotel unit where they can rent it out at a higher nightly rate. But that’s not complying with the law. So what he did in regards to rent stabilization and getting the lease is not extraordinary, although it’s rare.

And he paid $149 for one night at the hotel, but I assume once the court said he could stay, he would have paid a much lower rent?
That’s right. It can’t be higher than the legal rent. And the legal rent is set by a combination of what the initial rent was back in the day, and then whatever increases had been allowed over time under the rent-stabilization law.

So if someone gets a six-month lease, can they stay indefinitely because it’s a rent-stabilized lease?
Effectively, yes.

Are there similarly obscure laws tenants or people can use to try to get leases from properties like this?
If you become a family member of a rent-stabilized tenant, you can succeed tenancy upon their death, but that’s really well known. You can’t be evicted without a court process if you’re a resident for more than 30 days in an apartment, and you sometimes hear horror stories of a roommate who doesn’t leave and gets tenancy rights. But I don’t know if I’m familiar with a thing that’s so similar to this.

Rent Regulation from NY to NZ

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Indira Stewart (left) and the rest of the TVNZ Breakfast Team

I was interviewed by Indira Stewart on the TVNZ Breakfast show, the biggest morning news show in New Zealand, about New York City’s system of rent regulation (I serve as the Chair of the NYC Rent Guidelines Board).  You can find the interview here.

Addressing NYC’s Affordable Housing Crisis

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photo by Hromoslav

The NYC Rent Guidelines Board (of which I am a member) held a public hearing as part of its final vote on rent adjustments for the approximately one million dwelling units subject to the Rent Stabilization Law in New York City. My fellow board member, Hilary Botein, and I submitted the following joint statement at the hearing (also available on SSRN and BePress):

The Rent Guidelines Board determines rent increases for New York City’s 1 million rent-stabilized apartments. We must weigh the economic conditions of the residential real estate industry; current and projected cost of living; and other data made available to us. To make our decision, we reviewed reams of data and multiple analyses of those data. We also held five public hearings at which we heard hundreds of tenants speak, sing, chant, cry, and demonstrate. These hearings are among the only opportunities that tenants have to speak publicly about their housing situations, and they made clear the extremity of the housing crisis in the City, and that it will get worse without significant intervention.

Tenants who came to the RGB hearings are not a representative sample of rent-stabilized tenants in New York City. But they told us a lot about the state of housing in the City.  We felt that it was incumbent on us to respond to what we heard, even where it did not relate directly to the jurisdiction of the Board.

New York City cannot expect any meaningful housing assistance from the federal government in the near term. Our observations therefore focus on state and municipal actions that could address some of the issues that regularly cropped up at our hearings.

There is a desperate need for affordable housing that is pegged to residents’ incomes. Housing is deemed “affordable” when housing costs are 30 percent of a household’s income. There is no guarantee that rent stabilized housing remain affordable to a particular household, and there is no income eligibility for rent stabilized housing.  This aspect of rent regulation explains its durable political appeal, but makes it an imperfect vehicle for meeting the needs of low-income tenants.

Mayor de Blasio is protecting and developing hundreds of thousands of units of affordable housing through the Housing New York plan announced at the beginning of his term. More recently, his Administration announced a program to create 10,000 deeply affordable apartments and a new Elder Rent Assistance program.  But more can be done to help low-income tenants.

The Senior Citizen Rent Increase Exemption (SCRIE) and Disability Rent Increase Exemption (DRIE) programs have proven their effectiveness in “freezing” the rents of more than 60,000 low and moderate income rent-stabilized households. The state should create and fund a similar program for low-income rent stabilized tenants who pay more than 30 percent of their incomes towards housing costs.

State laws governing rent stabilization must be amended. Three elements of the law particularly penalize low-income tenants in gentrifying neighborhoods, and were behind the most distressing tenant testimonies that we heard. They are not within the RGB’s purview, but change is critical if the law is to operate as it was intended to do. The state legislature has considered bills that would make the necessary changes. First, owners can charge tenants a “preferential” rent, which is lower than the legal registered rent for the apartment. Preferential rents are granted most often in neighborhoods where the rent that the market can bear is less than the legal rent. This sounds like a good option for both tenants and owners, and perhaps that was its original intention. But now, as neighborhoods gentrify and market rates increase, the prospect of increasing a preferential rent with little notice has become a threat to tenants’ abilities to stay in their apartments. Preferential rents should be restricted to the tenancy of a particular tenant, as was the law before a 2003 amendment. Owners would then be able to increase rents for those tenants no more than the percentages approved by the Board.

Second, owners can tack on a 20 percent “vacancy increase” every time an apartment turns over. This increase incentivizes harassment, and should be limited to situations of very long tenancies, to keep owners from actively seeking to keep tenancies short.

Third, owners making what is termed a Major Capital Improvement (MCI) – a new roof, windows, or a boiler, for example – can pass this expense on to tenants via a rent increase that continues in perpetuity, after the owner has recouped her or his expenses. We also heard allegations of sketchy capital improvement applications that were intended to increase rents without improving the conditions in the building. The state legislature should review how MCIs work in order to ensure that they are properly incentivizing landlords to invest in their buildings to the benefit of both owners and tenants.

New York City needs a repair program for broken gas lines. We heard from tenants who had not had gas in their apartments for more than a year. We understand that fixing gas lines is particularly complicated and expensive, and that gas leaks raise serious safety concerns, but it is unacceptable for families to go for more than a year without gas, and we are concerned about fire safety issues resulting from people using hot plates. The city needs to step in and make the repairs.

We have a housing crisis. Low income tenants, who live disproportionately in communities of color, experience this crisis most acutely. We will not find systemic solutions within the housing market. All solutions require a lot of money, and we cannot count on anything from the federal government. But it is imperative that our state and local governments act, or New York City’s already burgeoning shelter system will be forced to take in even more people. Since the 1970s, New York City has been a leader in committing public resources to housing its low income residents, and that legacy must continue.  The Rent Guidelines Board cannot solve the housing crisis, but other arms of the New York State and City government can work together to reduce its impacts on low-income households.

Rental Potholes

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photo by Eric Haddox

Realtor.com quoted me in Rental Potholes—and How to Avoid Falling Into Them. It opens,

Until you have the money to buy your own home, renting is eventually a part of just about every person’s life. And typically this transaction tends to work out just fine. Until it doesn’t. Because there is indeed plenty that can go wrong, leaving renters learning some difficult lessons through trial and error. To make sure you aren’t one of them, check out these rental roadblocks—and what you can do to keep from getting stuck.

Somebody’s watching you

“My work took our family to Florida and in our haste to find somewhere to live with our two kids, we found a gorgeous townhouse seaside rental. The ocean views were incredible, just what we’d dreamed of. So incredible, in fact, that we didn’t realize the unit lacked window coverings of any kind! And as much as I loved looking at the ocean, there were times when some level of privacy was desired; people could see into the whole house if they were walking along the beach. When we shared this ‘oversight’ with the landlord, his offer was to split the costs of full-house window coverings! We decided not to help the property owner increase the value of his home. We continued to enjoy ocean views on a 24/7 basis but moved out after a year.” – Rhonda Moret, Del Mar, CA

Lesson learned: Don’t let your enthusiasm keep you from doing your due diligence before thoroughly vetting a place and signing on the dotted line.

“This responsibility falls squarely on the tenant; you can’t expect someone else to look out for your interests. That’s your job,” says David Reiss, academic program director for Brooklyn Law School’s Center for Urban Business Entrepreneurship. But by the same turn, don’t fall for a landlord’s request to “split the cost”—any renovations should be his responsibility all the way.

Bye-bye, security deposit

“When I handed our landlord a $1,000 security deposit, I assumed I’d get it back whenever we left, and didn’t bother to do a walk-through of the apartment to make sure it was in decent shape. Big mistake! Once we moved out, the landlord sent us a letter stating he was keeping the security deposit because we had broken a window in the garage. Only we hadn’t—that must have been done by a previous tenant. We got charged for someone else’s damage.” – Mindy Jensen, Wheaton, IL

Lesson learned: “Doing a walk-through inspection is important if you want your security deposit back,” says Reiss. “It’s important to add details like time stamps to everything and get documentation that your landlord received the report.”

Also consider recording a video with your smartphone while you walk through the place. The more backup material you have, the better the odds that you’ll get back what you deserve.

Your pet or your pad

“A few years ago, my family and I rented a townhouse. There was a pet shop on the corner selling the cutest puppies, and we fell in love with a French bulldog and bought him. That’s when things started to get ugly. We hadn’t checked the rental agreement to see if we could own a pet. When our landlord found out, she became hysterical and asked us to leave—or get rid of the dog. We ended up homeless, but with a very cute puppy. Fortunately, we stayed at a friend’s place until we found a dog-friendly home.” – Derek McLane, Sydney, Australia

Lesson learned: “Read the fine print before you sign. This is pretty fundamental, even if it is not fun to do,” says Reiss.

At the very least, ask your landlord what the rules are and to specify where the pertinent parts can be found in the lease. Be aware that many leases don’t allow pets, or will make pet owners pay an extra fee known as pet rent.

You’ve got mail … a mile away

“I was living in an amazing apartment when the mailboxes in the foyer were vandalized to the point where the USPS deemed them ‘unsafe for delivery of mail.’ We were ‘temporarily’ redirected to pick up mail six blocks up and four very long avenue blocks over until the landlords had an opportunity to repair our mailboxes. A year and a half later, they still hadn’t been fixed—and to make matters worse, a stairwell skylight had collapsed. I was forced to take on the practically full-time job of challenging my landlord to make repairs. I finally was able to make something happen by researching the building and finding out that my landlord had illegally jacked up the rent more than was legally allowed by rent-stabilization laws. Eventually, my efforts resulted in a rent reduction, reinstated mail delivery, and a very bad tenant/landlord relationship.” – Tim Tucker, Las Vegas, NV

Lesson learned: “Know your rights. Tenants have a lot of them, particularly in rent-regulated apartments,” says Reiss.

The Challenge of Rising Rents

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Nyu_law_vanderbilt

NYU’s Furman Center has issued a research brief, The Challenge of Rising Rents: Exploring Whether a New Tax Benefit Could Help Keep Unsubsidized Rental Units Affordable. The brief considers whether the creation of “a new property tax subsidy program aimed at maintaining affordability in buildings that currently provide affordable rents could be attractive to owners.” (1)

The brief concludes that

The bulk of New York City’s housing stock that is affordable to low-income households is in buildings that currently receive no government subsidy to maintain low rents. In a city where the real estate market is booming and the supply of housing is constrained, the upward pressure on these rents is likely to continue. However, our analysis here suggests that there are some markets in the city where an owner of an unsubsidized building would agree to restrict future rent increases in exchange for a tax benefit.

If owners think their building is in a neighborhood likely to experience rapid rent increases, they are not likely to participate in a program like the one we have outlined. But, owners who are less optimistic about rent growth in their neighborhood may be willing to sign up in exchange for the certainty of a 30-year tax break. Owners might be more likely to participate in this program than our modeling suggests if it were bundled with another benefit or if the regulatory requirements were less onerous. (11)

This is obviously a good exercise to undertake, but I wonder if most landlords believe that their buildings are like Lake Wobegon children — above average, one and all. So, if the success of this proposal rests on reaching pessimistic landlords, it may be relying on a very small pool of landlords indeed.

Facts and Myths About Rent Regulation

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Polonius

Few topics are more fraught in NYC than rent regulation and stances about it are typically set by where people are financially and ideologically. It is always useful when someone tries to add some good old-fashioned facts to the debate in order to help craft good policies. That is particularly true now, given that NYC’s rent laws are supposed to expire on June 15th.

The Citizens Budget Commission has issued a report, 5 Myths About Rent Regulation in New York City. The CBC is hoping that that this report will inform the New York State legislature’s debates over the renewal of New York City’s rent laws (for those who don’t follow this carefully, NYS has jurisdiction over NYC’s rent regulation). Unfortunately, the report is ideologically skewed, which limits its usefulness for those trying to get their hands around this topic.

Here are the CBC’s five “Myths” and “Facts:”

Myth 1: A majority of tenant households in New York City are rent burdened.

Fact 1: 38 percent of tenant households in New York City are rent burdened.

Myth 2: Market-rate units in New York City are not affordable to most tenants.

Fact 2: In market-rate units, 54 percent of tenants have affordable rent.

Myth 3: A rent-regulated housing unit is an affordable unit.

Fact 3: Among tenants in rent-regulated units, 44 percent are rent-burdened.

Myth 4: Middle-income households cannot find affordable housing in New York City.

Fact 4: Outside of Manhattan, 96 percent of middle-income tenant households are not rent burdened.

Myth 5: The number of rent-regulated units is rapidly declining.

Fact 5: The number of rent-regulations is stabilizing.

The CBC claims that public officials and housing advocates are using “problematic” figures and characterizations. That is most certainly true in many cases, and par for the course for advocates. But the CBC does much the same, which should not be par for the course for a nonpartisan civic organization.

The second “Fact” is particularly laughable because CBC is doing exactly what it accuses advocates of doing — some form of rhetorical bait and switch. The second “Myth” is about tenants overall, while the second “Fact” is just about tenants who are currently in market-rate apartments. This is an apples to oranges comparison. Once you see the bait and switch, you see that CBC’s figures actually support the truth of this supposed second “Myth.” There are more problems contained in this document, but I leave it to you to find them for yourself.

I have no problem with CBC trying to make the debate over rent regulation more fact-based. But CBC should follow the wise advice of Polonius: “This above all: to thine own self be true.”

Picture: "Polonius" by https://www.oregonlink.com/elsinore/poveyglass/polonius.html.