Cornell has just formally announced the creation of its first NYC law clinic, a branch of the law school’s Entrepreneurship Law Clinic, to be located on the Cornell Tech campus. You can read more here.
Tag Archives: New York City
NYC Rent Guidelines Board Final Vote Interview
I was interviewed on WCBS AM’s Drive Time about the vote of the New York City Rent Guidelines Board. Click here to hear it.
How to Fake-Own the New Yorker Hotel
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.
Housing Supply and The Housing Crisis
Opportunity Now interviewed me about how limited housing construction impacts the housing crisis:
Dynamic metropolitan areas like the Bay Area, LA, and New York City suffer from longstanding mismatches between the supply of housing and demand for it. Local communities control the zoning, and local voters (typically existing homeowners) have little incentive to increase the supply of housing. After all, more supply will likely increase the tax burden as new residents increase the demand for services (more schools, more infrastructure, more public safety). Homeowners are already in the market and generally like the way things are, notwithstanding their political views about the high cost of living for others and the epidemic of desperate homelessness that plagues all of these areas. The result of all of these local land use decisions is that very few units of housing are built in these communities, given the size and growth of the population.
Many coastal cities are high-opportunity areas, offering jobs to immigrants, young adults, and strivers of all stripes. They drive up the demand for housing even hours from urban centers, living in overcrowded units in many cases.
When demand outpaces supply, prices rise. Government can try to limit the effect of this pressure through a variety of means: rent controls, housing subsidies, right-to-shelter legislation. All of these interventions can assist certain segments of the housing burdened — current renters, new renters, homeless people — but to a large extent, they just reallocate scarce housing from one burdened group to another. That is not necessarily bad public policy given the current political realities, but it does not address the fundamental problem these communities face: There is not enough housing for all of the people who live in them. A broad coalition of decision-makers needs to face this reality and develop long-term strategies to build a lot more housing where all of these people want to live — for access to economic opportunity, for proximity to family, for all of the reasons that people want to relocate and build a life for themselves and their loved ones.
Rent Regulation from NY to NZ
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.
Does Historic Preservation Limit Affordable Housing?
I answer that it can in CQ Researcher’s Historic Preservation: Can The Past Escape The Wrecking Ball?
Many people fail to realize that land use policies like historic preservation involve big trade-offs. The most important one is that if you want to protect existing structures from demolition and modification, you can’t replace them with bigger ones that could house more people. Consider:
- Historic preservation equals height and density restrictions. New building technologies (think steel girders and elevators) allow buildings to be built higher as time goes by. If a city landmarks a large percentage of its inner core, it restricts the ability of that core to go higher. This can lead to sprawl, as a growing population is pushed farther and farther from the city center.
- Historic preservation favors the wealthy. Limited supply drives up housing prices and apartment rents, benefiting owners. And low-income and younger households are likely to suffer, as they are least able to bear the cost of the increases compared to other households. Future residents — think Midwesterners, Southerners and immigrants seeking to relocate to a city like New York for job opportunities — will also suffer.
- It isn’t easy for historic preservation to be green. It feels environmentally responsible to protect older, low-density buildings in city centers because you have no dusty demolition, no noisy construction. But it actually comes at a big environmental cost. Denser construction reduces reliance on cars and thereby lowers carbon emissions. People living in a dense city have a much smaller carbon footprint than those in a car-oriented suburb.
Just because preservation comes at a cost does not mean it is bad. Much of our past is worth protecting. Some places benefit from maintaining their identities — think of the European cities that draw the most tourists year in and year out. But it is bad to deploy historic preservation indiscriminately, without evaluating the costs it imposes on current residents and potential future ones.
Cities that want to encourage entrepreneurship and affordable housing should deploy historic preservation and other restrictive land use tools thoughtfully. Otherwise, those cities will be inhabited by comparatively rich folks who complain about the sterility of their current lives and who are nostalgic for “the good old days” when cities were diverse and hotbeds of creativity.
If they fail to understand the trade-offs inherent in historic preservation, they won’t even understand that a part of the problem is the very policy they support to “protect” their vision of their community.
Skyscraper’s Future up in The Air
The New York Law Journal quoted me in Upper West Side Skyscraper’s Future Uncertain After NY State Court Ruling. The story opens,
The development at 200 Amsterdam Ave. in Manhattan is slated to be the tallest building on the Upper West Side, with its 51 stories rivaling the skyscrapers located further downtown.
But whether this will ever happen has now become questionable, after a state court ruling that found city officials were wrong to follow an interpretation of city zoning law used by the developer to achieve the project’s awesome height.
Supreme Court Justice Franc Perry of Manhattan sided with local community groups looking to halt the building underway at the site. The plaintiffs—the Committee for Environmentally Sound Development and the Municipal Arts Society of New York—were joined by numerous local state and city elected officials in opposing what they say is not only an out-of-character monster development in the Manhattan neighborhood, but one that relied on a faulty zoning law interpretation to move forward.
“It is finally a declaration that zoning law means something and developers can’t make it up as they go along,” said Emery Celli Brinckerhoff & Abady name attorney Richard Emery, who represented the plaintiffs.
Since 1978, developers and city buildings officials have relied on the so-called Minkin Memo, named after the former head of the city’s Department of Buildings’ Irving Minkin, for guidance on what experts call an ambiguity in the city’s zoning law towards so-called tax lots. These are additional subdivisions of city real estate, which can overlap with or be included inside a zoning lot.
Under the Minkin memo, developers have been able to pull together extra vertical building rights that nearby property owners aren’t using, offering the opportunity to boost the size of a project such as 200 Amsterdam beyond what would normally be allowed.
“The zoning resolution is ambiguous about when a zoning lot can be formed from partial tax lot; it never deals with that problem,” said Stewart Sterk, the Mack Professor of Real Estate Law and director of the Center for Real Estate Law & Policy at the Cardozo School of Law.
Initially, city officials had no problem with the move. DOB issued a permit to the developers for a residential and community facility building at the site of the Lincoln Towers condos on the Upper West Side. The developers relied on the Minkin memo as the basis for the acquisition tax lots that combined partial and whole lots to provide the developers with the vertical building rights needed for their skyscraper.
Shortly after DOB green lighted the project, the Committee for Environmentally Sound Development challenged the DOB’s decision. The challenge snowballed, and soon seemingly every local elected official, from state Assemblyman Richard Gottfried to borough president Gale Brewer, were opposed to the plan. The project’s permit was appealed by both CESD and the Municipal Arts Society to the city’s Board of Standards and Appeals.
In March 208, DOB made an official about-face on the project. In a letter from assistant general counsel to the BSA, the department said the Minkin memo provided an incorrect interpretation and that zoning regulations did not in fact intend for zoning lots to consist of partial tax lots.
The BSA was not persuaded by the arguments and in July 2018 voted 3-1 not to grant the appeal, with one board member abstaining. The plaintiffs soon after pursued a review of the BSA’s decision in state Supreme Court.
In subjecting the developers’ permit to further review, Perry pointedly took issue with BSA view of the process.
“BSA found that the Subject Zoning lot is ‘unsubdivided,’ within the meaning of the [New York City Zoning Resolution], simply because Developer has declared it to be so,” the judge wrote.
Noting that the referenced law states that a zoning lot is defined by being “unsubdivided” within a single block, Perry said BSA’s interpretation would render the term “superfluous,” and run “afoul of elementary rules of statutory construction.”
Since DOB saw the light on the Minkin memo during the appeal process, the court said the department’s statutory basis for the issuance of the permit to begin with was undermined. BSA’s decision was nullified and vacated, and the board was directed to review the project’s permit application “in accordance with the plain language” of the zoning regulation and Perry’s order.
As Cordozo’s Sterk noted, the development at 200 Amsterdam was far from the first to use the Milkin memo to justify partial tax lot usage in a building plan. Perry’s decision has the ability to throw uncertainty around zoning and building issues into a business sector highly adverse to such things, Sterk said.
But just as important for Sterk is the question now of when a government agency becomes estopped from changing its mind after it’s already induced people to rely on its existing interpretation.
“That’s a big problem in this case, because clearly developers have put millions of dollars into this project in reliance on an existing interpretation,” he said.
Brooklyn Law School professor David Reiss, who is the research director of the school’s Center for Urban Business Entrepreneurship, said he saw the case as less of a “good guy vs. bad guy” dynamic as much as one of whether the assurances of government officials can be binding.
“There’s a reliance on government statements and government permissions,” Reiss said, while noting the project has already commenced.
Should the case stand, he predicted it would serve to rattle developers’ confidence in their dealings with the city going forward.
“It’s more uncertainty in a process that’s already pretty uncertain,” he said.
