Bedford & Bowery, Nicole Disser, November 25, 2015

original: http://bedfordandbowery.com/2015/11/east-village-tenants-say-enough-is-enough-to-alleged-predatory-landlord/

Karen Platt has been channeling her frustrations through the satisfying scrape of chalk across concrete. After years of living with dust, noise, and health hazards caused by construction, repeated and seemingly relentless service cut-offs, and what she says are intentional moves by her landlord to clear her (and other rent-regulated tenants like her) out of her longtime home at 522 East 5th Street in the East Village, Platt’s sidewalk messages reveal she has reached a breaking point: “Lack of services is harassment” and “Enough is Enough.”

As Platt explained to B+B, since Icon Realty Management bought her building, things took a turn for the miserable. “I’ve lived in New York my whole life and I’ve never, ever been treated like this,” she said.

By now, we’re all familiar with the horror stories of gas cutoffs, days without heat and hot water, and buildings that turn into hazardous construction sites while people are still living inside. When landlords want certain low-rent tenants out of their buildings (rent-regulated residents seem to be the major targets) construction as harassment is a tried and true method of making people’s lives miserable enough that they’ll take a buyout or in the worst cases, fearing for their safety, flee altogether. But lately, city leaders have acknowledged that this problem has crossed the line, from exceptional cases to the modus operandi for some owners. Tenants say that Icon Realty, a company that’s been buying up property in the East Village (and lately, selling it for a killing) qualifies as a member of the latter group.

While rents have doubled and tripled in a matter of months in some “up-and-coming” neighborhoods (and residents’ disgust grows exponentially as well), in 2011 close to half of the city’s apartments were still rent-regulated. As the housing crisis shows no chance of letting up, maintaining existing rent-regulated units is more important that ever, particularly since the process of constructing new affordable units is slow and expensive. Nevertheless, landlords hoping to cash in find ways to systematically deregulate these units. Organizations like the Cooper Square Committee, a non-profit tenants advocacy group working to protect the rights of rent-regulated renters and preserve affordable housing in the East Village, call the practice “predatory equity.”

This week, the Public Advocate released the annual Landlord Watchlist of landlords with the most building violations. Earlier this year, Stabilizing NYC (a coalition of which Cooper Square Committee is a member) named seven “target landlords” who are among the worst predatory equity offenders. Icon Realty made the list for what Brandon Kielbasa, Director of Organizing at the Cooper Square Committee, explained as “what we believe is a widespread pattern of harassment.”

City Council Member Rosie Mendez testified at a City Planning Commission hearing about the risk to rent-regulated units in her district. “Every day in my office we get a call from a rent-regulated tenant who is being forced out of his or her home either lawfully or unlawfully to make way for development,” she said. That was in 2008, in the midst of the financial criss. Today, landlords have picked up the pace.

B+B has covered these same local residents’ issues with Icon in the past. At the end of the summer, Stage Restaurant, the old-school Ukrainian diner located at 128 2nd Avenue for 35 years, was served eviction notices by the realty management company because Icon claims the restaurant was illegally siphoning gas. Stage’s owner called Icon’s claims “absurd.”

Residents living in the units above Stage at 128 2nd Avenue filed a lawsuit against Icon for poor building conditions that led to 114 complaints with the Housing Preservation & Development (HPD) including multiple instances of loss of heat and hot water. The dispute was settled in September when tenants agreed to a settlement in which Icon would pay $10,000 in civil penalties and make repairs to a laundry list of problems including “faulty fire escapes, inconsistent heat and hot water and lack of cooking gas.”

Mendez, during a conversation with B+B this morning, recalled that at 128 2nd Avenue tenants also faced other issues including problems with unsafe fire escapes. She described a bizarre scenario in which Icon had placed armed guards inside the building. City agencies allow owners to place “fire safety monitors” in buildings with these issues. “Icon failed to explain to the tenants” why these guards were armed, Mendez explained. “This created a very intimidating and hostile environment for tenants. They would ask the guards, ‘Why are you here?’ and their response was, ‘We’re here to ensure you don’t use the gas and fire escapes.'” Mendez said she didn’t know if hiring scary guards was “intentional or not.”

Meanwhile, as the case played out in court, Icon failed to make the necessary repairs so that gas service could be restored. “Icon refused to fix anything,” she said. “They could have made the repairs.” Mendez said her office attempted to contact Icon. For a while, the company ignored the requests for communication. “They were not responsive,” Mendez said. When Icon finally returned the council member’s calls, it was too late– they were already in the midst of the legal battle.

I asked Mendez is she thought that Icon was engaging in predatory equity as a means of ridding their buildings of rent-regulated tenants. “Seeing the m.o. that’s been followed by predatory equity landlords in my district, yes, it does seem that’s what Icon is doing,” she said.

B+B spoke to a handful of rent-regulated tenants in the last month living in the East Village who say they are the victims of construction harassment since their buildings came under new ownership by Icon Realty.

Neighborhoods like the East Village and the Lower East Side have been in the midst of gentrification for decades. But residents like Adam and Leslie Alexander, who have lived at 57 2nd Avenue for 45 and 30 years respectively, say that despite the proliferation of chain franchises and the influx of what Leslie says are “fratty” elements, the neighborhood has remnants of its essential character. “[Our building] is full of interesting creatives– there are writers, poets, actors. Everyone here has a fascinating story, even if it’s comparatively mundane in terms of their day job,” Leslie said. “They are just the kind of New York characters people are bemoaning the loss of, and here we are hanging on tooth and nail.”

But some investors and realty companies see these not-fancy apartments for their potential as luxury and market rate units. If they succeed in flipping them, many of the last scraps of affordability in the neighborhood will disappear.

When developers buy up existing buildings in the East Village, they are often old tenements that are, to varying degrees, well lived-in. Since market prices demand at least some facade of luxury, often they have to update these apartments in order to keep rent pricing apace with the brand new units nearby.

While carrying out renovations are undeniably the right of a property owner, as the Stand for Tenant Safety Coalition‘s very existence makes clear, some landlords have used construction as an opportunity to harass longtime and rent-regulated tenants into leaving by creating conditions that range from nuisances to disturbances all the way up to health hazards. To address this increasingly widespread problem, the coalition of city leaders and tenants advocacy groups proposed a 10-point plan to city hall back in September.

According to the realty company’s website, Icon owns and manages “1,800 apartment units located throughout the city,” many of them “gut renovated” with the “highest quality finishes.” The management company with claim to a boutique hotel in Chelsea, and plans for luxury developments galore, attracted local notoriety for their Craigslist ads that baited bros with promises of a six-bed, “brand spanking new” duplex apartment at 205 Avenue A complete with “amazing roof deck,” “condo like bathrooms,” and “a kitchen that will evoke wonderful meals”– all under the title of “Frat House !!!!!!”

But in speaking with tenants living in other Icon buildings, it becomes clear these issues are not just isolated incidents.

B+B spoke over the phone with a longtime resident of 57 2nd Avenue who wishes to remain anonymous, so we’ll call her Beth. She instructed me to hang on several times while she paused to speak with her exterminator. “Wonderful! So no more mice?” He spoke unintelligibly in the background. “Well that looks horrible, you can’t leave it like that.”

Things started to change in Beth’s building “from the moment” Icon started managing it after purchasing it back in January of this year. Since then, it’s been a push and pull with management to maintain livable quarters for the longtime residents. “The minute they came here they stopped the exterminator,” Beth recalled. “It became a surreal amount of mice. It was just amazing. Once they started doing the demos, the mice were out even more so. There were so many mice found on the garbage landing that at night it looked like the movie Willard. It was just a heaving mass of black mice. I had literal piles of mouse shit, something I’ve never seen before.”

B+B reached out to Icon Realty to hear their version of events. Terrence Lowenberg, who co-founded Icon along with Todd Cohen, responded promptly and connected me with Chris Coffey, the Managing Director at Tusk Strategies, a PR firm that executes “full-scale campaigns.” Coffey worked for Mayor Bloomberg for over a decade. “We want to have a respectable, productive relationship with all our tenants and we’re proud of the relationship we have,” Coffey explained, in a tone that was halfway between mournful and frustrated. “For whatever reason, I think there’s always going to be an exception to that.”

When I asked about the problems with vermin at 57 2nd Avenue, Coffey pointed out, “We’ve never had a violation for rats.” As for that “heaving mass” of mice, the Icon representative claimed they only had “one violation, I think, issued in 2015 for a mouse sighting, or a mouse,” emphasizing the singular mouse. However, city records indicate there were multiple warnings issued for vermin problems (see thumbnails below for records from Department of Health and Mental Hygiene). “I know we’re working hard to make sure that doesn’t happen again. We take these issues very seriously,” he said.

Adam and Leslie Alexander are also residents of 57 2nd Avenue, a 33-unit building building mostly made up of rent-regulated units. Their apartment is the rare rent-controlled unit. “People have been here an average of 20 years,” Adam explained. “There are a couple of kids here, but for the most part the tenants don’t move out, they leave in a bag or a box,” Leslie said. “They stay here their whole lives.”

But when Icon bought the building at the start of 2015, things started to seem less permanent. “Things are weird– there’s a lot of cause for anxiety […] they came in with profiteering guns blazing, so to speak,” Leslie explained.

By February, just a month after Icon purchased 57 2nd Avenue, the management company delivered vacate orders to the owners of Allied Hardware. The decades-old business closed up shop in October. Leslie said that Allied did small favors for their upstairs neighbors, such as collecting packages. “We don’t have a doorman and for decades they held on to our mail,” she said. “I know it may sound trivial, but it’s just one more thing on top of so many more things. There is a sense of urgency to all this. If we didn’t have Rosie Mendez’s office cracking the whip at these guys, it’d be like a boisterous construction party.”

The second retail tenant, Allied Hardware’s neighbor, Alex Shoe Repair, closed this summer after 28 years in business. The owner told The Lo-Down that his rent went from $4,000 to $14,000 a month as soon as Icon bought the building. One of the commercial units on the ground floor at 57 2nd Avenue is currently advertised as a “location perfect for restaurant, bar, clothing store, salon” and is still available for $14,000 a month.

Then the construction began. Adam and Leslie complained of work that sometimes went on for “16 hours a day” and continued on into the weekends. Beth also complained about the long work hours. “They got variances to work on nights and weekends and it was really noisy demo. This was the worst summer of my life because I was living on a construction site– the amount of dust and noise was unbelievable,” Beth recalled. “I was nervous about my health– they were using the elevator and everything was coated with dust.”

Months after the first permits were filed in June of this year, construction is still an issue at 57 2nd Avenue. “There is work going on on every floor,” Leslie said. “They’ve obtained permits for minor repair and alterations and then proceed to gut the building.” DOB records confirm that Icon applied for several permits to carry out “interior renovations” of various vacant units that included “minor partition changes and minor plumbing work” with “no change in use, occupancy, or egress.”

The realty company has bought up a number of buildings in the East Village and is behind an enormous number of construction projects throughout the city. Icon came in second place for most demolition permits filed (from the start of 2014 to September 2015, Icon has sought to topple nine buildings). Along the way, the realty company has racked up multiple violations with the Department of Building for code failures created by construction. The most recent one at 57 2nd Avenue was incurred on November 18th for a blocked fire escape and obstructed stairwell.

Leslie, who has a neurological disorder, has a difficult time getting down the stairs sometimes, and pointed out that the elevators, which are often used by the workers, have become extremely difficult for tenants to access. “There are people with wheelchairs, with walkers and it’s the one resource that, for everyone above the second or third floor, is most useful.”

The lack of essential services is another hallmark of predatory equity, and tenants at 57 2nd Avenue have been subjected to the temporary loss of services like heat and hot water for days on end as well as the persistent rodent problem. At the end of August, the Department of Health contacted Icon (operating under 57-59 Second Avenue Corp/ T&T Realty Management, LLC in the case of this particular building) and issued them a final warning of their responsibility as owners to maintain “such property free from rodents, insects and other pests.”

The city agency conducted another inspection in September and found the rats were still there. At this point, the owners were leveled a maximum penalty of just $600 for each of the three violations. But Leslie said the mice are still an issue. “There are just herds of mice out by the trash, it’s never been so bad,” she said. “[In the past] there have only been a few, now there are mice in the hallway.”

According to Cooper Square, tenants have also voiced concerns about the improper cleanup and disposal of materials containing lead-based paint. Coffey argued lead is another issue that Icon is committed to handling properly. “We’re working really closely with the Department of Health and Mental Hygiene,” he said. “The renovation work has been monitored by DOH contractors and [we’ve] abided by all procedures promulgated by the Department of Health and Mental Hygiene. We have a phone number that is posted for the contract site manager. The manager is in the building every day. Tenants have been asked to feel free to contact him if they have any concerns or comments and we are confident as well that we’re doing this in as healthy and safe a way as possible. ”

As for the tenants’ concerns regarding construction, Coffey insisted: “All the renovation work is done inside vacant apartments and any demolition work that was inside any of those apartments has been finished. Obviously we regret any inconveniences such as loud noises– that’s not something we want to have in any of our buildings and we appreciate people’s patience.”

Residents have lost access to some less essential building amenities too, but ones that are just as important to a sense of being at home. “We never thought we’d miss the old landlady as much as we have since the Icon era began,” Leslie complained. Tenants watched as contractors began to work on the roof, which was an informal hang-out for many of the residents. “They put up a notice saying ‘Tenants must follow the rules’ and that it was illegal to go on the roof,” Adam recalled. “We’re worried they will disturb the asbestos up there,” Leslie added.

Beth also voiced her concerns about the rooftop construction. “I call it the pent-shack– but they’re trying to turn it into a penthouse. That’s one of the big things with their buildings, it’s a roof-party deck,” Beth laughed. One of her neighbors started to look into permits, curious as to how management was able to get permission for such a project. According to city records, a permit application for a “redesign of existing roof deck” was approved by the DOB on June 11, 2015. The only problem is, Beth laughed darkly: “There never was a roof deck there.” But there were times, tenants said, that Icon didn’t even bother filing for permits.

All of this chaos began to take a toll on the tenants. “The vacancy de-control sets up a psychodynamic of Darwinian horror where you know you’re in the way as a tenant in our position,” Leslie said. “If we were gone, it’d be to their advantage. If we suddenly died, it would be to their advantage.”

“It is harassment,” Beth agreed. “To live in a construction zone like this is just… basically they were doing anything they wanted until they started getting caught.”

Tenants quickly decided it was best to bond together so they could have a chance of getting Icon caught. At first, the 311 process was slow. “A lot of times what would happen is that we’d call in complaints and it would take so long for DOB that by the time they got here, the work was already finished or they had already gotten a permit by that time,” Beth recalled. “So we formed a very strong tenants association and as a group we stepped up calling 311– it’s basically the only time stuff gets done. Without Cooper Square [Committee] and the tenants association, I think Icon would have gotten a lot more of us out of here.”

Beth conceded that, after tenants had organized, “Icon started communicating a little bit more. After we started really stepping up complaints as a group, more permits started to appear in the lobby. It went from six permits to 20 or 30. Now, [Icon] is responsive. But as far as complaining about anything for the first six months, forget about it.”

The contractors became responsive too. “Now they know the issues,” she said. “And they also know that we’ll call 311 immediately.” Her building remains under construction and no new tenants have moved into freshly renovated spaces just yet. “But it looks like they’re going to be getting the frat boys in here– all these apartments are being set up as lofts with three bedrooms, which is kind of funny.”

As of November 24, the building has two open DOB “work without a permit” violations, both for building multiple residential units in the basement.

***

While the tenants at 57 2nd Avenue have organized and formed a tenants association, Karen Platt of 522 East 5th Street has been largely on her own when it comes to mounting complaints against her landlord and has taken to scrawling messages on the sidewalk out front. “I am rent stabilized and I’m on disability, so they hate me extra,” Karen laughed. “They don’t like me because I’m probably not leaving on my own.”

Icon began gut renovating apartments in the building almost immediately after buying the property in February 2012. Construction quickly became a nuisance. “I was coughing up blood a few years ago when they were doing the apartments beneath me and I was diagnosed with asthma,” she recalled. “I wound up with a mold issue and my eyes swelled up like a football, I had to go to the hospital because the mold in the building had been shaken up and became airborne.”

Platt explained that communication from management was at a minimum. “A lot of this stuff is hard to prove,” she conceded. But she argued that it’s clear Icon’s intentions are to transform the entire building into multiple-bedroom units with high turnover rates. “They’ve been moving nuisance tenants into the building, which I think is part of their business plan: move these people in to help drive out their rent-stabilized tenants.”

Then, over the summer, the building lost hot water and Platt says tenants were not kept informed about what was going on and when they should expect service to be restored. “Everything takes forever. It’s ridiculous. I don’t think anybody in that office has ever been to the building,” Platt said. “And then I got so upset over not having hot water for eight days, that’s when I started to do the chalk stuff. No response from management, no returned calls. Even the high-paying tenants got no word from Icon. That was my first chalk protest. So now every time I get completely frustrated I just grab my chalk and go running out there.”

Finally, hot water was restored over the summer. Karen couldn’t help laughing as she explained that the very same day “we got our hot water back,” on July 30, “we lost cooking gas.” Cooper Square Committee informed us that cooking gas shutoffs are a “common theme across a lot of the Icon buildings.” (Since 2008 Con Edison has been in the process of suing Icon Realty Corporation for replevin, or the recovery of property.) Karen explained that despite her attempt to communicate with Icon, “there were no memos sent out for the first month of no cooking gas— nothing. Icon was hiding or missing in action. It was unbelievable.”

Recently, Platt has tried to have management fix her broken sink. But when “Wally the plumber,” an Icon employee, showed up to address the issue, she said he only made things worse. “Immediately when he came into my bathroom, he looks at this sink and he goes, ‘I have to go behind the wall,’ and I go, ‘Why do you have to go behind the wall?’ And he takes a pipe and he smacked it against the wall, and a chunk of my wall fell off.” At this point, Karen asked him to leave her apartment and has requested that Icon send someone else. “I’ve started demanding to see identification from anyone who wants to come into my apartment,” she said.

Karen is honest about the aggressive stance she’s taken towards Icon. “That’s the only way to deal with Icon, is to demand what you’re entitled to,” she said. “They’ve already lawyered up with me.” While her neighbors are still communicating with management, Karen now relays her concerns via Icon’s attorney. “Icon doesn’t know what to do with me,” she laughed.

But “difficult tenants” are not the only reason lawyers have intervened. “The moment they came in, they did what seems to be a classic maneuver of lawyers in these types of buildings, they say, ‘Oh, we have to speak to everybody and we’ll need the personal information of you and your roommates and anybody else who has access to the apartment,’” recalled Beth of 57 2nd Avenue. “When really, the only personal information they need is from the person whose name is on the lease.”

She said that her immigrant neighbors became the “target”– “everyone with a foreign accent, basically.” Beth said it was “obvious” Icon had made use of detectives to dig up information on the tenants, in hopes of finding them in violation of their lease terms. “If someone from the family had moved to Jersey or whatever, they were aware of that and just things like that,” Beth explained.

The Alexanders corroborated Beth’s recollection. “[Their lawyers] were bothering one of our neighbors because one of the Tibetan family members owns a house in Jersey,” Leslie remembered. “There are people who have lived their for decades, and maybe their name isn’t the name on the lease, but they’re looking for any angle to get people out.”

Tenants say attorneys working at the law firm Kossoff PLLC represented Icon. Interestingly, looking at records of the law firm’s website from around 2010 through summer of 2015 show the firm advertised itself as one that helps clients in “maximizing existing rent rolls” and to “recognize and recover valuable residential and commercial units” through a wide variety of means. These include “sophisticated surveillance technology” which “in many cases” has “provided definitive proof that tenants are not in compliance with their lease obligations, proof that has saved our clients substantial sums in fees and other litigation costs, and assured favorable results in court.”

***

The Association for Neighborhood Housing and Development (ANHD), which brings together over 100 non-profit housing groups across the city in order to “ensure flourishing neighborhood and decent, affordable housing,” calls these kinds of practices “predatory equity.”

Jaime Weisberg, a Senior Campaign Associate at ANHD, told us the problems at Icon buildings were an inheritance of the subprime mortgage lending crisis. “With the subprime crisis, it was a flood of irresponsible lending targeting families of color, that was with the single-family market,” she explained. “And what we saw with the multi-family market where banks and a lot of non-bank lenders, secured hedges and what-not, were putting massive amounts of debt on rent-regulated buildings with more affordable rent and they just weren’t sustainable.”

When lawmakers became aware of this, action was taken to provide even greater protections for rent-regulated tenants. But, recently ANHD has seen the same kind of predatory practices making a comeback. “What we’re concerned about is that it’s coming back,” Weisberg explained.

The Cooper Square Committee is also concerned about the return of these predatory equity practices, and has seen “construction as harassment” in the East Village as a hallmark of this tactic. Harassment via construction is notoriously hard to prove, but in simply following the money, it becomes clear Icon plans to at least make back what they paid for their buildings.

According to property records, Icon bought the 9-story, 33-unit building at 57 2nd Avenue for $24.8 million in January of this year. The same records show Icon took out about $17 million in mortgage loans on the building as well. “But the building only makes about a $1 million on the rent rolls,” Yonatan Tadele of Cooper Square explained over the phone.

Weisberg said this qualifies the mortgage as an “over-leveraged loan.” According to a report released by ANHD in 2009, a solid indicator of default danger is “the debt service coverage ratio,” or “the ratio of building income available to pay the debt owed to the building.” Weisberg explained that a “realistic ratio” is around 1.2.

Weisberg explained why 57 Second Avenue’s ratio set off alarm bells at ANHD. “When you see a loan for 15 times the rent rolls, when many of the tenants are rent-regulated, it’s concerning,” she explained. “That’s an alarmingly high amount of debt given the rent they’re taking in.”

Though there are no laws regulating how much debt an owner can take out, “what we say over and over again is we want loans based off of actual rent and maintenance costs,” Weisberg said. “There’s not a law around how much debt an owner can take out, and that’s part of the concern as well— but the question is what do you do with that debt?”

B+B attempted to obtain comment from Bank United regarding the loan, but the bank declined to answer our questions. Icon’s PR rep, Chris Coffey, responded to my email about the loan, but listed 522 East 5th Street as the address in question (it was for the 57 Second Avenue property that Icon received the mortgage). “The loan is and always has been current and plays no role whatsoever in how Icon approaches the operation of the building,” he said in a follow-up interview. “Icon has made significant investment in the building and additionally in renovation of the building.” I asked him to clarify which address he was speaking about. “Yeah, for 57 Second Avenue,” he said.

Most recently, Icon has flipped buildings in the East Village, selling them at huge profits just a few years after buying. Just last week, Icon sold 82 Second Avenue and 326 East 4th street (buildings the management company bought for $3.2 million and $3.4 million, respectively within the last five years) for a total of $30.9 million to an investor from South Carolina.

***

Some tenants have become so desperate that they’ve sought legal recourse. Residents of 222 East 12th Street have filed a lawsuit against Icon Realty, which bought their building for just over $2.5 million at the beginning of 2013. Coffey confirmed Icon is in the midst of “ongoing litigation” in regards to their tenants at 222 East 12th Street, but he declined to go into specifics.

But tenants like the ones B+B spoke with are determined to stay in their homes, no matter how bad the construction gets. I asked the couple living at 57 Second Avenue, Adam and Leslie, what they would do if they were forced out of their rent-controlled apartment. “Because I’ve lived in Manhattan my entire life, I don’t think I’d would want to move,” Adam said. “I would be the last hold out.”

Leslie agreed. “I wonder where we would go, I really do. It’s not as though we don’t love other cities, but we haven’t had the means to travel to them much recently. I could imagine Adam enjoying a visit to LA, but I don’t know that I’d want him to have to live there. He doesn’t drive, among other things. And no place is inexpensive now, that’s the thing. And it’s not as though we’d want to live in a van down by the river, so it’s a very good question.”