Grace Ashford

Many of the residents have been artists, teachers and filmmakers whose apartments were rent-controlled before they pooled resources and bought the building in 1998.

Now a city clerical error threatens to take it away.

The error — which classified the building as having 11 or more units instead of the eight it actually has — vaulted 39 Pearl St. into a different tax category, causing taxes to increase by more than $100,000 over the past five years. Some residents of the building have taken on roommates or are thinking of dropping health insurance in order to afford the bigger bill.

In addition to this building in Dumbo, the city could be overtaxing hundreds of other small buildings, a New York Times analysis found, while making it difficult for their owners to fix the problem. These taxpayers must navigate a confusing and opaque appeals process. When the cases land in court, the city fights to keep the taxes it has collected — even when they have been collected because of a mistake.

“We had a place that we could live, we had a place that we could make our art,” said Julia Loktev, a filmmaker who lives at 39 Pearl St. “It’s the reason the city thrives.”

A spokeswoman for the Department of Finance, Sonia Alleyne, said the city was deeply concerned about overtaxation, noting that the de Blasio administration had instituted new rules to correct errors and had refunded more than $4 million to property owners in the past two fiscal years.

Even so, the city has continued to oppose taxpayers in court.

“It’s bewildering to us,” said YuhTyng Patka, a lawyer who has handled several claims of overtaxation, including those by residents of 39 Pearl St. “We just don’t understand why they are fighting so hard against small property owners.”

The problem hinges on assessments, a value the city provides properties each year that can help determine how much they pay in taxes. In New York City, building exteriors must be inspected every three years to help determine the assessment. But these external inspections don’t always correctly identify how many units are in a building, a crucial factor in determining property taxes.

Under state law, the assessments of small buildings — those that have between four and 10 apartments — cannot rise more than 8 percent a year, or 30 percent over five years. The savings can be great, particularly in rapidly gentrifying neighborhoods where a building’s value can double or even triple over a short period. There is no similar cap on the assessments of larger buildings.

But the number of buildings that are entitled to these protections is up for debate. The city says that when it counts the number of units in a building, it includes commercial space, such as a street-level storefront. State law, however, says nothing about commercial space. Confounding the problem is that the city’s decision making has been uneven: In 2017, it agreed in court that a property with 10 residential units and one commercial space qualified for the cap, throwing into question the status of many other properties.

Even for those buildings whose total count falls below the threshold, fixing the mistake — and recouping the money — can be challenging.

In 2016, the city instituted an appeal process which it said fixed misclassifications and reduced assessments by more than $150 million. But when that process fails, some buildings have sued the city. While the city has admitted in court that properties have been misclassified, it has generally refused to return property taxes to where they would be if the errors had not happened, tax attorneys said, locking the buildings permanently into the higher assessment.

Manhattan and Brooklyn each has one judge hearing these cases, and they both have accepted the city’s argument that taxpayers, not the city, are responsible for making sure they are properly billed. Only one judge has sided with owners in recent years, but she was transferred out of that court, in Manhattan, in 2014.

When Loktev moved into her loft apartment on the Brooklyn waterfront in 1996, the neighborhood was desolate. There were no stores or cafes, and wild dogs were known to roam the streets at night.

Two years later, Loktev and her neighbors bought the industrial building from their landlady when she retired. Since then, they have worked to bring it into compliance with the building code and to transform the lofts into living spaces.

Early last year, 39 Pearl St. requested that the city recount the units in the building. An inspector came out to survey the building. But when the tax roll was released by the city in May 2018, it showed no change.

Marcia Hillis, a teacher and painter, raised her two sons in the building. Over the years she volunteered on neighborhood associations and sat on her local community board. One of her biggest victories was securing the building’s right to have municipal trash pickup.

“For those of us who endured all those challenges, we really shouldn’t be kicked out by the city at this point,” she said.

A floor above, Anna Harper, a jewelry maker, lives with her husband, an artist. She’s been in the building since 1992. “The new roof was my retirement fund,” she says. “If we end up losing the building because of the taxes, we will have nothing.”

This year, 39 Pearl Street paid $133,000 in property taxes — instead of the $32,000 the building would have paid without the error.

In January, a full year after the building filed its request to correct the error, the city moved 39 Pearl Street into the correct category. But instead of lowering the assessment to where it would have been without the mistake, the city raised it by 8 percent — leaving the building in an even worse position than before.

“We’re not saying, please lower our property values, or give us special treatment,” Loktev said. “We are asking for the city not to profiteer off a mistake they have admitted.”

In response to questions from The Times, the city said that 39 Pearl St. is “under review.” Residents, who had up until that point heard nothing of any review, are hoping a determination could be made before next year’s tax bill, which they expect to be $220,000. Loktev calculated that by next year the building will have overpaid the city more than $400,000.

The Dumbo of today is not the frontier it was. Multimillion-dollar condominiums fill the skyline and tech startups occupy loft spaces where artists once lived.

The building at 39 Pearl St. is worth considerably more than its 1998 purchase price, but because it is still not up to code, the options for resale are limited. The owners do not want to sell; they see themselves as part of the neighborhood’s history. But they say they can hold on for only so long.

“If we lose this space, we’ll have to leave New York,” said Harper, the jeweler, “because of a clerical error.”

This article originally appeared in <a id="3626b651-58e1-43d4-bd1b-b95d2808db95" href="https://www.nytimes.com/2019/04/02/nyregion/nyc-property-tax-assessments.html">The New York Times</a>.

Nightmare at 39 Pearl St.: A Clerical Error Quadruples Taxes

NEW YORK — For years, 39 Pearl St. in Dumbo was the embodiment of Brooklyn’s bohemian renaissance. The rock band Sonic Youth got its start on the fifth floor, while the band Blue Öyster Cult used to rehearse downstairs.

Nightmare at 39 Pearl St.: A clerical error quadruples taxes

His neighbor had it even worse; his pet parrots were eaten by rats.

The city is aware of the issues in the West Harlem building. Over the course of a decade, it has sued the landlord over hazardous conditions 21 times and could have imposed as much as $900,000 in fines. But each time, officials accepted a low settlement and the landlord’s promise to make repairs.

Often, the repairs were quick-fix solutions — like a fresh coat of paint on a moldy bathroom ceiling — that did not solve the underlying problem.

“They would come and patch it up every year,” said Polanco, 68, a retired maintenance worker who pays $1,500 a month in rent. “It was the same leak every time.”

The Department of Housing Preservation and Development is supposed to ensure that the city’s 2.2 million rental apartments are habitable. But the agency takes a gentle hand with landlords who deprive tenants of basic services, declining to enforce the maximum penalties for even the worst offenders, a review of city records shows.

To examine how the city handled these cases, The New York Times analyzed city housing data, interviewed tenants and advocates and reviewed hundreds of housing court cases, taking as a sample the 126 cases filed for serious buildingwide issues in Manhattan last year.

In more than two-thirds of the cases, the city settled for less than 15 percent of penalties available under the law. Most were closer to 10 percent. The median settlement was $4,000.

Landlords who lie about making repairs also face minimal repercussions. One landlord who filed 40 certifications with the city over two years that falsely claimed violations had been fixed paid less than $3,000 in fines, The Times found.

The problem is particularly acute for people living in the roughly 1 million rent-regulated apartments that make up the largest source of affordable housing in the city.

Over time, neglected repairs can amount to a form of harassment that forces tenants to leave their homes, advocates for affordable housing said. Once they do, landlords can renovate, raise the rent and, ultimately, move the apartment into the free market, exacerbating the city’s housing crisis.

A similar pattern has been playing out in other cities with rent regulations, like San Francisco and Los Angeles. “This is a huge issue nationwide. We’re relying on residents and tenants themselves to enforce housing conditions,” said Deborah Thorpe, supervising attorney with the National Housing Law Project. “The structure is flawed.”

At Polanco’s building at 520 W. 136th St., a quarter of the apartments — nine rent-stabilized units — have been moved into the free market since the current landlord took ownership 15 years ago. Meanwhile, the building around them has deteriorated.

The city is aware of these problems: Mayor Bill de Blasio has staked his legacy on increasing the city’s affordable housing stock. A city-state task force has tried to fight tenant harassment for years; the City Council passed a package of bills aimed at curbing landlord abuses last year. In June, one month after articles in The Times highlighted tenant harassment and the loss of rent-regulated apartments, the city established a tenant anti-harassment unit.

Even so, the city’s housing department says its goal is to correct violations, not to punish landlords.

Pushing for higher penalties could prolong cases, the agency says, leaving tenants to wait longer for repairs. There is also a concern that issuing hefty fines could make it more difficult for landlords to make necessary fixes.

“Our primary mission has been and will continue to be ensuring New Yorkers live in safe and secure homes, which is why we concentrate our efforts on correcting conditions for tenants,” said Matthew Creegan, a spokesman for the housing department, known as HPD, adding that the agency continues to “develop new tools to aggressively combat tenant harassment.”

When a tenant calls the city, the system creaks to life: Inspectors evaluate the building for hazards and issue violations if they find them. If landlords fail to respond, the city can send out emergency repair crews, but generally does so only for problems deemed imminently hazardous. If the landlord refuses to let crews in to address the conditions, which may range from toxic lead to defective window guards, the city can sue in housing court.

This work is billed to the owner, but city housing officials acknowledge these cases rarely result in fines. Even landlords who lie escape tough punishment.

Take the case of Jason Green, a lawyer who first made a name for himself in housing court by representing mega-landlords repeatedly accused of harassing tenants with spurious lawsuits and poor services. Now a landlord in his own right, Green has been sued by the city 34 times in the past decade — cited for withholding heat and hot water, denying city emergency crews access and falsely certifying that violations had been corrected.

In 2016 and 2017, the city sued Green seven times, saying he had filed 40 different certifications falsely claiming that violations had been fixed in regulated buildings. The total fines came to just $2,750 — a small amount for the owner of property worth millions.

Seven of those violations were in Diana Tise’s apartment on West 138th Street. For months, Tise, 24, had been struggling to fix up the apartment she shared with her blind grandmother, who has lived in the building more than 40 years. Pregnant with her first child, Tise worried about the loose and uneven floorboards, crumbling plaster walls and collapsing ceilings. She called the city over and over.

“I did not want to bring a new baby into this,” she said.

But city inspectors did not come for weeks, and the repairs lagged for months, she said. What Tise did not know was that Green had told the city that the repairs were complete, even though he had not even started them. The city found out and sued Green, but then settled at the first court date for $600.

Work started only after Tise gave birth. The floors and subfloors were replaced in the hallway. Inspectors found lead paint on several walls, and Green chose to cover those walls with drywall, an inexpensive strategy for mitigating the problem. Everything else got another coat of Spackle. That work is already falling apart, Tise said.

“You can see the walls, literally cracks everywhere, like an old manicure,” Tise said. “They did a patch job.”

Green denied requests for interviews. In an email, he said that The Times’ information was “inaccurate” but would not elaborate.

In extreme cases, the city can file a lawsuit against the landlord for a raft of violations found at a single building. The Times reviewed all 126 of these “comprehensive” cases filed in Manhattan last year. Most were settled for relatively little. In one, the city accepted $1,500 for $28,800 worth of fines. In another, the city accepted $4,000 out of a possible $100,000.

In all, the city left $4.7 million in civil penalties on the table in those cases — nearly five times the amount it actually levied.

And just because a fine is levied does not mean it will be paid: In 2016, the city admitted that its collection rate for unpaid judgments was just 13 percent over a year-and-a-half period. A comptroller’s report from the same year said that by allowing so many judgments to go uncollected for so long, “HPD might actually be creating the unintended impression that building owners face little immediate risk of penalty for such violations.”

Of the $10.1 million in judgments owed last year, the city says it has collected just $766,000, a little less than 8 percent.

Hamid Khan, a landlord and property manager, is no stranger to these comprehensive cases, having been charged in nine of them in the past 10 years. Khan, 73, is No. 27 on a list of worst landlords compiled by the New York City public advocate. In 2008, he served nine days in jail for code violations at one of his Bronx buildings. Since then, he has been sued almost 50 times over conditions at buildings he manages, all of which contain rent-regulated apartments.

One such building is 235 W. 103rd St., which has been the target of two comprehensive lawsuits since May 2017. Both were settled, and out of the possible $120,000 in penalties, the owners paid just $11,000.

“You’re basically patting them on the head and saying don’t do that again,” said Anthony Thornton, 59, the leader of the tenants’ association.

This peculiar system of incentives means that landlords often let regulated apartments with longtime tenants fall apart while they renovate market-rate units right next door. A renovated apartment with stainless steel appliances and granite countertops in Khan’s building on West 103rd Street was recently advertised for $2,800 a month. Neighboring regulated apartments, meanwhile, lacked cooking gas for more than two years.

In 2003, Khan and his partners purchased the building at 520 W. 136th St. in Harlem where Polanco, the maintenance man, lives with his family. Five years later, the city filed a comprehensive suit against the building for issues including mice, roaches and lead. That case would be reopened three times before the building’s 303 violations were closed.

Felix Salazar, who lived in another apartment in the building, sued Khan and his partners in 2013 after he tripped on an uneven floor. In a deposition, he described the deplorable conditions. “I had two parrots in the house and the rats ate them up,” Salazar said. “They ate their beaks and their eyes out.”

In June 2014, the city again sued, to compel the building’s owners to correct its 236 open violations. The next month, the city settled for $2,500, out of a potential $31,000 in fines. When an inspector found that 75 violations had not been corrected, the city reopened the case.

This time it settled for $5,000 — out of a possible $200,000.

By 2016, Polanco’s building had landed in the Alternative Enforcement Program, which is the city’s harshest punishment for neglectful landlords. Once in the program, landlords have four months to correct the most serious issues and face fines each year that they fail to do so.

Last year, 2 out of every 5 buildings in the program failed to make the necessary repairs, city records show. It was the program’s best year yet.

In the end, Khan’s partners became alarmed by the mountain of fines and replaced him as a property manager at the two West Side buildings.

A co-owner of several buildings Khan managed, Ruth Shomron, said that he had hidden the lawsuits and violations from his partners, adding that the program and its steep fines alerted them to the decay of the property. “He betrayed us as people, as a partner,” she said.

When reached by phone, Khan said he managed the building as instructed but could not remember any details.

After 2-1/2 years in the program, Polanco’s building is finally being improved. The roof and elevator have been replaced. Many apartments have been upgraded. Polanco’s bathroom and kitchen were renovated, after a fashion. The faucet knobs in the kitchen were installed backward. The countertops were never secured to the cabinets below, leaving a half-inch gap that Polanco tried to fill with wood chips.

Following The Times’ inquiries into 520 W. 136th St., the building was selected for a new pilot program to combat tenant harassment.

But improvements came too late for Salazar, the man whose parrots were eaten. He moved out, and a new family lives there now, paying nearly $3,000 a month.

They like the renovations — new floors, new kitchen, new bathroom. They have only one complaint. They are starting to think they might have rats.

This article originally appeared in <a href="https://www.nytimes.com/2018/12/26/nyregion/nyc-housing-violations-landlords-tenants.html" id="58416225-490b-3926-a16f-57bb82a710fe">The New York Times</a>.

City's Housing Watchdog Spares the Worst Landlords Its Full Bite

NEW YORK — Jose Polanco lives in one of the worst buildings in New York City. In his 18 years there, the apartment has had leaks, mold, roaches and rodents — sometimes all at once. Last winter, Polanco was stepping out of the shower when the bathroom ceiling collapsed.

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Grace Ashford

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Nightmare at 39 Pearl St.: A clerical error quadruples taxes

City's Housing Watchdog Spares the Worst Landlords Its Full Bite