Will New York's Poorest Tenants Be Pawns in a Rent Law Compromise?

by J. A. Lobbia, May 6, 1997 Legislators returned to Albany Monday after a two-week break that was, as far as the battle over rent laws is concerned, unproductive. Although Al D'Amato and George Pataki are making noise about a compromise within the GOP's ranks, the Democratic assembly and Republican senate remain far apart. Assembly Speaker Shelly Silver has not budged from his house's bill to make rent laws permanent, and Senate Majority Leader Joe Bruno has offered nothing to counter the assembly's starry-eyed plan. Capital observers say progress between the two parties is so nonexistent, the question is no longer what's on the table, but whether there even is a table.

Behind the apparent stalemate, however, lurks a sleeper. Three bills are pending that would require tenants who are sued by their landlords for overdue rent to post the money in a housing court account almost immediately after a landlord makes the claim--even if tenants dispute it. Tenants who don't post the rent face eviction.

While not directly related to controversial rent regulation laws, the measures--called mandatory rent deposit bills--are expected to be used by landlords as bargaining chips to loosen rent regulation. ''There's no question that this will be on the table,'' says Michael McKee, who runs New York State Tenants & Neighbors, one of the most active groups battling Bruno's assault on rent regulation. ''The landlords want mandatory deposit of rent badly.'' Perhaps not as badly as they want to scrap rent laws entirely, but short of such a sweeping victory, McKee reasons, a mandatory rent deposit bill would be a coup, too. And since tenants want to keep rent regulation just as much as landlords want to lose it, a mandatory deposit bill could become the fulcrum of a compromise.

Spokesmen for two of the city's largest landlord lobbies--Joe Strasburg of the Rent Stabilization Association (RSA) and Dan Margulies of the Community Housing Improvement Program (CHIP)--say they would never bargain away a once-in-a-lifetime chance to decontrol New York City's rental market in order to gain rent deposits. But the origin of the most viable of the three bills begs the question: it is sponsored by Vincent Leibell, who took over Pataki's senate seat. Despite the fact that Leibell's upstate district centers on Putnam and Westchester counties and stops a full 35 miles from the city's northernmost border, his measure--Senate Bill 3115--applies exclusively to New York City.

Leibell's aide, Bob Farley, says his boss's interest stems from his job as chair of the senate's housing committee. ''This is a problem only in New York City, and it's our obligation to address it,'' Farley said. The fact that New York City landlords and their lobbyists have given Leibell's campaign committee more than $33,250 since January 1996 might also solidify the senator's feelings of duty.

The key provision of Leibell's bill forces tenants to post the amount a landlord says they owe in a court-administered escrow account upon the second adjournment of a case. The clock starts ticking immediately, even if the first adjournment is used by a tenant to get a lawyer, or requested by a judge trying to manage a crowded calendar. Those who post the sum initially but fail to keep up payments as the case winds its way through court will face eviction, as will those who fail to post the first amount demanded.

Landlords argue that the bill is necessary to counter protracted rent battles waged by tenants who are ''evading'' rent--a tactic they say deprives them of millions of dollars each year. Tenants say mandatory rent deposit would rob them of due process and force them to pay before having much chance to defend themselves. And judges and housing court administrators say it would steal the bench's options and turn the court into a mere collection agency.

''It takes away a judge's discretion completely,'' says Fern Fisher-Brandveen, chief administrative judge of Manhattan's civil court. ''And we believe that it will be a nightmare for us simply in terms of administration. It will require tremendous additional resources with clerks and bookkeeping.''

Besides Leibell's bill, there is a measure by Brooklyn assemblyman Nick Perry and one by Assemblyman Ed Griffith, also of Brooklyn. Griffith's bill most closely parallels Leibell's senate measure; Perry's applies only to six-family units that are owner occupied, and was undergoing revision at press time. Sources say Silver is unlikely to let either assembly bill make progress.

In the senate, however, Bruno will be more than happy to set Leibell's bill sailing. Although Bruno refused to take a call from the Voice, Real Estate Weekly reported that the majority leader ''considers the deposit of rent...to be among the items that will be negotiated during the rent regulation discussions.'' Bruno told the trade paper that he thinks the lack of mandatory rent deposits is ''an absolute disgrace.''

Bruno himself is a big Leibell supporter; his campaign committee has given Leibell's committee $7000 since 1996. And Leibell is perhaps showing his gratitude via flattery, aping the majority leader. Like his boss, who came down to New York City from his Rensselaer estate in December to begin a war to dismantle the laws that protect 2.6 million New York renters, Leibell, too, is turning his eye miles from his upstate district to the distant metropolis of New York City.

The issue of mandatory rent deposit goes straight to the heart of one of the housing system's most hellish features: housing court, an institution where impossibly complicated procedures dictate profoundly personal matters, like whether a tenant will be evicted, or a landlord paid. Daily, the corridors of the courts swell with the city's poorest tenants seeking what is likely their last recourse before eviction.

Each year, about 320,000 cases are filed, mostly because tenants aren't paying rent. Consequences are dire: about 25,000 families are evicted annually; in fact, 44 per cent of families who show up at the city's shelters came there because of an eviction. Many include children.

Tenant advocates argue that renters are at a disadvantage: 88 per cent have no attorney, and many are persuaded by landlords or their lawyers to sign unfavorable settlements. Nearly all landlords have lawyers, since state law requires that of corporations.

Similarly, landlords insist that the entire system is rigged against them. When the court was established in 1973, it was intended to allow ''summary'' proceedings that grant relatively quick resolution, since a tenant's housing and a landlord's cash flow are at stake. But landlords say the process has become anything but quick. A 1995 study commissioned by the RSA from Dr. Charles de Seve calculated that while most tenants pay shortly after being sued, some cases drag on for six to nine months, and a few for years. The study, called ''The Need for Mandatory Rent Deposits,'' calculated that 40,000 tenants each year failed to pay $145 million in rent, and that landlords spend another $100 million pursuing it. (The RSA recently hired de Seve to study the possible effects of rent deregulation.)

In 1989, the RSA sued the court's chief judge, arguing that the court favored tenants by, among other things, allowing delays and failing to investigate complaints against judges. A 1991 settlement called for more than a dozen changes that would in effect speed up evictions. But in 1992, the RSA reopened the suit, charging the changes were not implemented and asking a federal judge to intervene. This January, U.S. Southern District Judge Shirley Wohl Kram refused to do that, saying she did not want the federal court to be used as part of the ''landlords' attempt to...further its political objective.''

The mistrust landlords feel for the court is profound. ''There is a bias and ideological viewpoint that both the housing court judges have,'' says Strasburg of the RSA. ''There's a mindset that says owners, especially those who come to housing court, are basically wrong or evil. You can't expect a fair or impartial determination.''

To landlords, a mandatory rent deposit bill is an antidote, if not a cure. Central to the 1989 litigation was the fact that, although current state law gives a housing court judge the choice of ordering tenants to deposit rents, judges rarely use it. Leibell's bill aims to give them no such choice.

''We need this to be mandatory partly because the judges never exercise their option'' to require a deposit, says Margulies of CHIP. ''There's massive judicial abuse and refusal to follow the law.''

In January 1996, landlords in Manhattan's housing court orchestrated a protest, called Justice Week. From January 22 to 26, landlords asked judges to require a deposit in every case. The move was a bust, with few deposits required and many judges put off by the landlords' attempt. Strasburg says he doubts ''you'll find one penny deposited, at least in Manhattan,'' where landlords find judges outlandishly liberal.

In fact, there are typically 175 deposits a year in the Manhattan system, according to First Deputy Chief Clerk Ernesto Belzaguy. (The number swelled to 685 in 1994 because of litigation over the Ansonia, which was being converted to condominiums.) Even so, 175 is paltry compared to the number of nonpayment cases filed in Manhattan each year.

Tenant attorneys doubt the very legality of Leibell's bill. ''I think it's constitutionally questionable,'' says Sam Himmelstein, a private attorney who represents tenants who can afford to hire him. ''Whenever you condition someone's right to a trial on prepayment of an amount that's claimed due, you're running into constitutional trouble.''

Leibell's bill does not deny a tenant a trial, but it does make one virtually impossible unless the money is posted. ''There are a couple of problems that are so obvious,'' says April Newbauer, a tenant attorney at the Harlem Legal Aid office. ''What if the tenant has a valid defense? Why should he have to deposit the rent before they make it? Many landlord claims are inaccurate. What if it's not the right amount? What if it's not the legal rent? What if there's an overcharge? And what about if it's a question of withholding rent for lack of services or conditions?''

Such glitches are not unheard of. Even de Seve's analysis for the RSA found that in about 20 per cent of the cases citywide, tenants argued that their apartments were loaded with housing code violations, or that the amount of rent claimed due was wrong, or that rent had been offered but was refused by a landlord. ''One of the most egregious parts of this bill is that you can't even interpose any counterclaims without putting money on the table,'' says Angelita Anderson, who heads the Citywide Task Force on Housing Court.

Under Leibell's bill, a judge could forgo requiring a deposit in only a few circumstances: If a tenant can prove that the person suing is not the rightful landlord; if the amount has already been paid; if conditions are so bad, the tenant can no longer live in the apartment; or if they have already been evicted and left the premises.

Leibell would not require tenants whose rent is paid in full or part by government subsidies to post that money--a provision that sources say was added to quell concerns about the 30 per cent of tenants in housing court who rely on public assistance. Such payments could be held up in the mail or bureaucratically snagged. But tenant advocates find little practical help in the bill's language.

''How does a tenant prove that it's government money that's due?'' asks Newbauer. ''That's forcing tenants to rely for documentation on the very agency that screwed up payment in the first place. It basically leaves them with no remedy, having to rely on an agency that is notorious for being inefficient and delaying everything.''

Last November, for instance, the city's Human Resources Administration, which issues most government rent checks, accidentally cut off more than 6000 welfare recipients in a computer error. ''We continue today to see that rippling through the courts,'' says Anderson.

Administrative problems are not inconsequential. Clerk Belzaguy calculates that at a minimum, the Manhattan court would probably have 200,000 deposit accounts a year. Collecting and maintaining them would require 40 to 50 new clerks, who make about $39,000 a year. ''That's more than $1.5 million, at least,'' says Belzaguy. ''Where we going to get that?''

Farley of Leibell's office won't say the state is committed to paying for the bill's costs. ''Maybe it's an issue we can look at,'' he said. ''We subsidize the housing courts already. I don't think that impediment is terribly justified. It's that nobody wants to do more work.''

This isn't the first time the idea of mandatory rent deposits has been floated. In 1995, Manhattan city councilman and landlord ally Antonio Pagan pushed for a council resolution urging the state to adopt such a measure. It failed, but Albany apparently did not need the lower body's suggestion to pursue a bill. Several versions were introduced, though none ever passed into law.

Last year, virtually the entire Bronx Democratic delegation in the assembly put forth a deposit bill sponsored by Assemblywoman Gloria Davis, who represents parts of the South Bronx. The bill's steam came from the RSA, which helped draft the language. The RSA has been a generous donor to Bronx Democratic party boss and assemblyman Roberto Ramirez, who reportedly summoned the delegation to his office last spring to urge their support for mandatory rent deposits, and to Bronx borough president Fernando Ferrer, who's running for mayor. Ferrer supports mandatory rent deposits after two adjournments, as Leibell's bill requires. In 1995, Ferrer told Real Estate Weekly, ''If someone is trying to skip out, rent should be deposited so no one loses.''

Davis's bill was on its way through the assembly when she pulled it suddenly in early December. According to Davis's press release announcing the bill's demise, the assemblywoman was ''troubled by mounting evidence which suggests the Rent Stabilization Association and others are employing a strategy which seeks to totally abolish rent regulation'' and that her bill would be used as part of a compromise on that issue. ''It would be extremely shortsighted to advocate for anything which might help someone else buttress their case for the dismantling of rent regulation.''

Anderson of the housing court task force says it would be disastrous for tenants to yield on rent deposits in order to spare some rent regulation protections, since the results of the two proposals are not so far apart.

''Losing rent regulation would diminish eviction protection for tenants, and requiring rent deposits could make it almost impossible for [tenants] to protect themselves against eviction,'' says Anderson. ''In the realm of laws that would make it easy for landlords to evict, these two are really one and the same.''

Brokering a compromise on rent regulations, which cover a broad economic class of tenants, with a bill that falls hardest on the poor, would be equally treacherous.

Who's in Housing Court?

Race
African American57.5 per cent
Asian1
Hispanic29.1
White10.8
Other1.6
Source of Income
Employment56.95 per cent
Public Assistance30.48
Other12.57
Median Income: $11,082
Who Has a Lawyer?
Tenants11.9 per cent
Landlords97.6

Source: based on 1990 data compiled by the Community Training and Resource Center and the City-wide Task Force on Housing Court