Mitchell-Lama Tenants Win Three
By Steven Wishnia

Tenants in three Manhattan Mitchell-Lama apartment complexes have killed one landlord buyout and won court rulings delaying two others. The buyouts would have deregulated rents and led to massive displacement and evictions. Owners of Mitchell-Lama housing, moderate-income complexes built mainly in the ’60s and ’70s, are allowed to buy out of the rent restrictions after 20 years. This is critical for buildings occupied after 1974, because they are not covered by rent stabilization, so landlords completing a buyout could raise rents to market rates and refuse to renew leases at will. With rents skyrocketing throughout the city, several Mitchell-Lama owners—including some of the city’s biggest and best-known landlords—have applied to state and city housing agencies for buyouts.

“These are major victories,” says Lee Chong, director of housing for Manhattan Borough President Virginia Fields. “Good things come in threes.” All three developments were built in the 1970s, and at least two of them were occupied after the 1974 cutoff date for rent stabilization.

The biggest win came in the Cooper-Gramercy Apartments at Second Avenue and East 23rd Street, where the landlord, the Seavey Organization, announced the buyout plan in the fall of 1998. They offered to delay the buyout for five years if the tenants would accept rent increases of up to 16% a year and agree not to challenge the buyout in court.

The building’s tenant association voted to take that deal after the lawyer they hired made the situation “look very bleak,” says Dan Petrucelli of Concerned Tenants of Cooper-Gramercy, which split off from the main tenant association after the vote.

Taking advice from longtime Mitchell-Lama activist Bob Woolis, the Concerned Tenants examined the 1973 lease for the site. The land had been rented to the developers by the New York City Educational Construction Fund, which used income from the building to finance construction of an adjacent school for the deaf. The lease said the site had to be used for low- and moderate-income housing for 75 years.

Tenants in the building lobbied both the ECF and the federal Department of Housing and Urban Development, which were both reluctant to challenge the buyout, says Petrucelli. HUD gave preliminary approval to the proposed settlement last August.

That changed after a lawyer from Assemblymember Steven Sanders’ office urged the ECF to re-examine the lease. “The terms of the lease are clear and unequivocal,” the ECF told the landlords in a Sept. 21 letter. “This is when the house of cards came tumbling down,” says Petrucelli. “I immediately took that letter and faxed it to HUD.”

A week later, HUD rescinded its approval of the rent increases. Petrucelli believes the landlords offered the settlement because given the terms of the lease, “they knew they could never win in a court of law.”

Tenants in two other Mitchell-Lama developments won court rulings barring a buyout until their claims against the landlords have been settled.

In Waterside Plaza, at 23rd Street and the East River in Manhattan, federal Judge Paula Omansky on Sept. 24 granted tenants’ request for a preliminary injunction barring the state Division of Housing and Community Renewal from processing the landlord’s buyout application until the court can determine whether or not the buildings are subject to rent stabilization. The landlord insists that they are not, because they were not fully occupied until 1976, after the 1974 cutoff date; tenants argue that they should be covered, because some tenants moved in before then.

The tenants charge that developer Richard Ravitch—who heads the companies that built and own Waterside—has used the threat of decontrol to scare tenants into leaving their homes, so they can be rented out at higher rates. At the Ruppert-Yorkville Towers on the Upper East Side, the DeMatteis family, which owns the 1,250-apartment complex, announced a planned buyout in June 1998. They told tenants that one-bedroom apartments which now rent for from $600 to $900 a month, would go up to $1,590 and more. Tenants in the two buildings filed suit last February, and won a similar ruling holding off the buyout until it is settled.

“It was a beginning kind of victory,” says tenant leader Lila Dias. “At least we weren’t thrown out of court.” Most important, she says, is that the court allows the tenants’ lawyers to gain information from the owners. In the lawsuit, tenants charge that the buyout would violate a clause in the complex’s lease that requires the land—site of the old Knickerbocker brewery—to be used for low and moderate-income housing for 40 years. They also allege that the owners failed to repair leaky windows and broken elevators, despite a $22 million reserve fund; and that there was massive fraud in the way apartments were rented.

“There are people who moved in in June 1998 who were not told by management that there was going to be a buyout,” says Dias. “There was nothing on the lease that said this was Mitchell-Lama.” Mitchell-Lama housing is supposed to be rented to New York State residents who pass income tests, but according to Dias, there was often no income certification, and apartments were rented to corporations, diplomats, and Marymount College.

The landlords filed a countersuit, alleging that the tenants’ suit was frivolous, and asking for $1.25 million a month in damages to compensate for money supposedly lost because the buyout was delayed.

Ironically, the Ruppert-Yorkville owners’ lawyer, Al Walsh, was commissioner of the city Department of Housing Preservation and Development during the 1970s—and signed the lease reserving the site for low-income housing. Walsh is also representing the Cooper-Gramercy and Waterside landlords.