W Post: Landlords Who Empty Buildings of Tenants Reap Extra Benefit Under Law
Papadillos
Landlords Who Empty Buildings of Tenants Reap Extra Benefit Under Law
By Debbie Cenziper and Sarah Cohen
Washington Post Staff Writers
Sunday, March 9, 2008; A01
PHOTO GALLERY: http://tinyurl.com/yrd77x
Landlords determined to cash in on a lucrative real estate market pushed
thousands of tenants out of apartments across the District in recent years
and then reaped more than $328 million by converting the buildings into
condominiums.
Dozens of landlords refused to make repairs, forcing families to live in
filth -- at times without heat, hot water or electricity. Other landlords
delivered urgent letters or mass notices demanding that tenants leave.
In the past four years, landlords emptied more than 200 buildings from
Columbia Heights to Southeast, most of them rent-controlled, thwarting the
intent of one of the nation's toughest tenant rights laws with the approval
of the city government, a Washington Post investigation found.
It was the hidden toll of a frenzied condominium boom that turned aging
neighborhoods into coveted urban communities.
At 3872 Ninth St. SE, three floors of misery in the heart of Southeast
Washington, tenants lived for years with leaking pipes, crumbling ceilings
and kitchens that reeked of rat urine. When Sherita Evans returned home from
work with her young son, she'd shield his eyes and step over addicts who
broke into vacant, unsecured apartments to get high or get warm.
After new owners took over in 2005, tenants pleaded for months for repairs.
Most eventually moved out, allowing the owners to turn the rent-controlled
apartments into a $9 million condominium complex.
"It was clear. They wanted us out," said Evans, among a handful of tenants
who struck a deal with the owners to stay on as renters. "It got so bad, all
I wanted to do was leave."
Nearly three decades ago, city leaders created a law that gave tenants
extraordinary power: the right to vote on whether property owners could
convert rental buildings into condominiums. The law also requires owners to
pay the city a fee on the sale of new condominiums, which would help
displaced renters with relocation costs.
But as the District's real estate market thrived, landlords found a way out:
The law doesn't apply to vacant buildings.
By emptying buildings and taking advantage of a provision known as a
"vacancy exemption," landlords can avoid the tenant vote and the tax and
turn rental apartments into condominiums. City officials have granted the
exemptions even when government records chronicled widespread evictions and
buildings riddled with code violations.
In the past four years, nearly three-quarters of the landlords who received
permission to begin converting apartment buildings into condominiums did so
through a vacancy exemption, not a vote by tenants -- saving $16 million in
condominium conversion fees while families across the city lost their homes.
"The exemption is providing every incentive for a landlord to be aggressive,
in some instances bordering on actually being criminal," said Joel Cohn,
legislative director with the District's Office of the Tenant Advocate. "You
have a real concerted effort to get rid of tenants."
More than half of the buildings that received exemptions had code violations
recorded in city records, while most buildings in the city had none. City
housing inspectors found more than 3,000 infractions in the three years
before tenants moved out, including leaks, busted stoves and toilets,
splintered floors, broken windows and cracked walls.
In nearly 40 cases, buildings were cited for problems with heat,
electricity, hot water or air conditioning. Inspectors found more than 400
damaged ceilings and walls, 40 leaking pipes and 212 broken windows,
according to city records. In three cases, tenants had no place to bathe.
At the same time, some landlords have delivered a flurry of eviction notices
or claimed that the properties would be renovated or no longer used for
housing -- then moved to convert to condominiums once tenants were gone.
Clashes between tenants and landlords continue to erupt, even as District
leaders promise to crack down on property owners who allow their buildings
to fall apart.
A property manager for a building on Longfellow Street NW wrote three times
to tenants in 2005 urging them to move out. One letter said: "Next year, it
will be a miracle if you all have heat and water."
On Vernon Street NW, families twice reported strangers banging on doors in
2006, in one case yelling: "You have to move out. You have 48 hours." Both
buildings have since become vacant, and in one case the new owner has
applied for an exemption.
Some of the owners have prominent ties in the region, but tenant advocates
say identities are often difficult to determine because the buildings are
owned by limited liability companies or the owners hire property managers to
represent them. The owners include Ellis Parker, son-in-law of the
co-founder of Chevy Chase Bank; Providence Hospital doctor Pamela Coleman;
and developers Aubrey Carter Nowell and Patrick Strauss, who offered a
redevelopment proposal to the city last year with an official from the
Clinton administration.
Property owners say District law is skewed in favor of tenants and places
unfair restrictions on private enterprise.
"I think tenants need to be protected, but the laws are much too
tenant-oriented," said Arnold Litman, whose company owns Evans's building on
Ninth Street SE.
Landlords say they negotiate move-out deals with tenants and offer them
money to leave. But, they say, tenants often exploit the law by reporting
frivolous housing code violations for leverage in the negotiations.
Landlords also describe the dilemma of owning aging buildings -- how to make
major repairs that would cost millions of dollars without drastically
raising rents or converting to condominiums.
Landlords, Litman said, "don't make an investment without expecting a
return."
Tenant lawyers and advocates say landlords can make a profit within the law,
which was meant to preserve affordable rental housing in a city filled with
government employees, young families and low-wage workers. They argue that
the city should do more to prevent abuses of the exemption, though city
officials say the law is vague and their authority limited. Mayor Adrian M.
Fenty (D) late last year took steps to tighten the law, submitting to the
D.C. Council a proposal to keep landlords from converting buildings to
condominiums if they have outstanding code violations.
"Tenants have amazing rights," said Natalie LeBeau, an advocate with the
nonprofit Housing Counseling Services. "But some landlords are aggressively
using building conditions to get rid of tenants. Their water is shut off.
Their heat is shut off. And the next thing you know, they're gone."
* * *
In 1980, city leaders created a law that empowered tenants in two
fundamental ways: giving them the right to decide whether apartments should
convert to condominiums and the right to buy their buildings before they are
sold to outside bidders. In recent years, the council has toughened controls
on rent and evictions and twice closed loopholes that had helped landlords
sidestep tenant rights.
But the flow of vacancy exemptions continued, with 2,500 rent-controlled
units lost in the past four years. In some cases, entire sections of city
blocks began converting to condominiums with approval from the District's
watchdog agency, the Department of Consumer and Regulatory Affairs, or DCRA.
For property owners, vacancy exemptions have paid off: They have sold more
than 1,200 condominiums, with a median price of $250,000 and reaching up to
$1.1 million. Because the owners were exempted from the conversion fee, they
saved an average of $180,000 per building. One owner saved more than $1
million.
Exemptions were originally given only to long-vacant properties, but in 1995
the D.C. Council dropped that requirement, saying in a report that "there do
not appear to be the same incentives or ability for owners to illegally
vacate their rental housing accommodations in order to establish
condominiums."
Since 2004, more than 200 apartment buildings have received exemptions even
though city records show that they had been occupied in recent years. Not
all of the owners had code violations or disputes with tenants. In some
cases, tenants accepted money to move out or struck a deal to buy a condo at
below-market prices. Some building owners who received vacancy exemptions
said their buildings were empty when they bought them.
Lawyers and housing advocates, however, have been pointing to evidence for
years that tenants have been unlawfully forced out, but the government has
seldom intervened. One landlord even stated on vacancy exemption
applications for two properties that tenants had left because building
conditions were so bad.
By law, landlords can ask the city for permission to raise rents to cover
the cost of repairs, as well as when their return on investment dips below
12 percent. But only six of the owners with vacancy exemptions did so, city
records show.
At Sherita Evans's complex, the owners were cited for more than 75
violations, including leaking sinks, uncollected garbage and damp floors and
walls, in the months before they were granted a vacancy exemption.
Evans had moved into the building in 2001, enrolled her son in preschool and
took the nearby subway every day to her job as a human resources
representative in Arlington County. She decorated her son's bedroom with
train posters and became friendly with the elderly neighbors who waved hello
from their porches across the street.
She thought she had finally found a home.
By 2005, however, the 81-unit complex was run-down and dangerous, with just
18 families left. Evans started wedging steel wool into holes in the floors
to keep the mice out. She made up stories when her son asked about the
prostitutes and drug dealers who roamed the buildings, gaining access
through unlocked doors.
In September 2005, the owner sold the property, giving the remaining tenants
fresh hope that a new landlord would finally fix up the complex and rent
vacant apartments.
They were wrong.
* * *
The new owner was a company controlled by Litman and Steven Madeoy, who were
among more than 30 people convicted in the late 1980s of fraudulent property
deals that cost taxpayers hundreds of millions of dollars. Madeoy served 2
1/2 years in a federal correctional institution in Virginia; Litman served
seven months in a halfway house.
Soon after buying the property for $4.8 million, Madeoy, Litman and a third
partner began advertising the complex in fliers as condominiums, with two
bedrooms selling for $185,000. Evans, a single mother, didn't see how she
could afford the mortgage on a $34,000 annual salary.
The owners offered tenants condominiums at reduced prices, the option to
remain as renters or a move-out payment. But tenants worried that they
couldn't afford even the lowered prices and that the offers were vague and
wouldn't begin to cover the cost of giving up a rent-controlled apartment.
In the meantime, they tried to fix up the buildings themselves. Tangela
Garnett, a Department of Labor secretary, used bleach to scrub hallways in
her unsecured building after vagrants left condoms, feces and syringes on
the floor.
By late 2005, just seven families were left.
"People just get tired of living in a place where conditions are so bad,"
said the tenants' attorney, Julie Becker of the Legal Aid Society of the
District of Columbia.
In November of that year, the owners submitted through their attorney an
application to DCRA claiming that the buildings were "entirely vacant" and
that "none of the original tenants was requested, ordered or coerced to
vacate and surrender his or her unit."
But the complex was not vacant; the landlords were still negotiating with
the remaining tenants. Two days after submitting the application, Litman
e-mailed Becker and others about an upcoming tenants' meeting, saying, "I
would also like to add to the agenda a conversation about condo
conversions."
DCRA quickly granted the vacancy exemption even though the tenants'
association at the complex had registered with the agency just weeks before.
When Becker pointed out the discrepancy, the agency rescinded the exemption.
In the meantime, another family moved out. In March 2006, Litman sent a
letter to tenants, saying, "If you want to stop us from converting . . .
what do you gain? Sure, I'll patch and paint your apartment, move in Section
8 tenants and just rerent the complex. If that is the victory you seek, then
be careful, you might get it."
Two months later, the owners struck a deal with the remaining tenants,
including Evans, paying their moving costs or allowing them to stay as
renters in renovated condominiums.
DCRA reissued the vacancy exemption, paving the way for the owners to sell
46 condominiums so far, drawing almost $9 million in sales and saving
$450,000 on the conversion fee.
Litman and Madeoy said they did not know why their attorney told DCRA the
buildings were vacant while tenants were still living there. "Clearly, it
was an error," Litman said.
He said tenants had been treated fairly, with move-out offers that included
$1,000 and a month's rent at a new apartment complex. Litman said he had
good reason to pay the money: The partners saved hundreds of thousands of
dollars on the condominium conversion fee.
"Thirty thousand [on move-out offers] or $400,000 [in fees]? Let's see,"
Litman said. "I didn't go to business school for that one."
Records show that Madeoy has an interest in companies that own at least
eight other apartment buildings in the city, several with a history of
building code violations.
At 7436 Georgia Ave. NW., LaTreaviette Prailow and her husband lived for
months without heat, huddling under blankets to stay warm. The heating unit
caught fire in December 2006. It wasn't fixed until more than nine months
later. Still, Prailow wants to stay because she fears that she won't find
another affordable apartment close to public transportation, which her
husband uses to get to his housekeeping job at George Washington University.
Tenants have resisted taking an offer of three months of free rent if they
move to a neighboring building.
"I'm leaving it in God's hands," said Prailow, who is working with housing
advocates from the nonprofit Latino Economic Development Corp. "I'm praying
He puts me somewhere safe."
At two other properties, Madeoy claimed the buildings would be "completely
renovated and then sold as a private home," telling the city he planned to
vacate the buildings. At one of the buildings, he is now developing 14
condominiums at $299,000 apiece. He sold the other building once tenants
were gone for $1.4 million, about $1 million more than he had paid in 2003.
The new owner received a vacancy exemption and told DCRA she plans to sell
condominiums.
Madeoy said he had planned to sell that building to a private owner but the
deal fell through. At the other building, he said, he ended up giving
tenants money to leave or deals to return as renters or buyers.
"We followed the law to the letter," Madeoy said, adding: "I'm trying to
provide as much affordable housing as I can."
* * *
Records show that other landlords have delivered a flurry of eviction
notices, often to tenants who had never received notices before. Housing
advocates and lawyers say the notices can be a baseless form of harassment,
but tenants must go to court and defend themselves. Some simply give up and
move out.
On Brandywine Street SE, David Tolson's company paid $6.1 million in 2005
for a series of apartment buildings that had been cited for hundreds of code
violations. Only about 18 families were left in a complex of more than 100
units.
A manager for Tolson sent a letter to tenants saying the company "wants to
vacate apartments" and offering buy-out payments. Once again, tenants
resisted, saying the offers were sketchy. They also complained that repairs
weren't being made, with rats still running through their apartments. Within
months of Tolson's buying the complex, tenants began receiving eviction
notices for nonpayment of rent. Records show that in several cases, Tolson
settled with tenants, paying them to leave.
By 2006, most tenants had left, with one striking a deal to stay on as a
renter. When Tolson applied for vacancy exemptions, he said the property had
been vacant when he bought it.
Tolson sold $14.9 million in condominiums, saving nearly $750,000 on the
conversion fee.
"I thought, 'That man is sitting back there laughing at us,' " said tenant
Yvania Flakes, a data entry specialist, who negotiated a deal to remain as a
renter. She has since moved to Virginia. "I was hearing stories every day
from tenants about how if they didn't move out, they'd get evicted. [Tolson]
managed to get everybody to run."
Tolson, who had received a vacancy exemption on an earlier property as well,
countered that the Brandywine project has been a success, with the buildings
cleaned up and turned into affordable housing. He acknowledged that telling
the government the buildings were vacant when he bought them was "a
mistake," but he said that the eviction notices were legitimate and that he
made repairs.
"Some of the tenants knew that we were emptying the project and just quit
paying the rent," he said. Tolson said he didn't ask tenants to vote on a
condominium conversion and opted instead to empty the buildings because
"then the conversion tax doesn't apply." He said he gave tenants the chance
to stay on as renters, but most took money to leave. "It's a low-income
neighborhood, and they were happy to have that money," he said. "It was no
big deal to get them vacant."
At 1417 N St. NW, tenants also resisted a condominium conversion. A company
hired by the owner had approached them in 2006 about converting, also
offering money to move out or the chance to stay as renters in the new
condominium complex. Tenants instead called on the owner to make building
repairs.
After the elevator in the building broke down last summer, tenants protested
in the lobby, where they served lemonade. Shortly after, an attorney for the
owner sent a letter to two tenants who had organized the protest, saying
that they had breached the terms of their tenancy for "loitering in the
common areas," among other things.
"For a minute, your heart stops," said tenant Silvia Salazar, who had worked
with the tenants who received the letter. "You think, 'They're coming after
me now.' "
Erik Bolog, managing partner with Tenacity Group, the asset manager for the
owner, said that the company respects the right of tenants to meet but that
the protest in the lobby wasn't properly scheduled and raised safety
concerns.
"If by chance there was a fire in that building and people could not get out
because a table was in the way, then people would be critical of the
ownership for allowing that to be going on," Bolog said. " . . . If lemonade
spills on the floor and people slip, it becomes a safety issue."
Bolog said the owner is repairing the elevator, a lengthy process because
its age makes it difficult to get replacement parts.
* * *
Across the city, tenants are still locked in battles with landlords pushing
to empty buildings. A vacant building not only qualifies for a vacancy
exemption but is also often worth more on the market because a new owner can
easily convert to condominiums or bring in tenants at higher rents.
At 1352 Longfellow St. NW, owner Pamela Coleman, a Providence Hospital
doctor, hired a property manager who in April 2005 warned tenants in a
letter that there may not be heat and water the following year: "It is going
to become a health hazard and the city will shut [the building] down if that
happens."
Two months later, the manager sent another letter to tenants: "We cannot
keep the hot water heater going and the heat for next winter will be
non-existent." On the same day, she wrote: "Your landlady will pay you
$5,000 to vacate if you leave ASAP."
The manager told tenants that Coleman couldn't afford to make the repairs.
Records show that Coleman never applied to raise rents to cover the costs.
Tenants said the apartments had no heat or hot water for much of 2004, 2005
and 2006. They directed a steady series of complaints to DCRA, which
confirmed the problems. By February 2007, the pipes had deteriorated so
badly that the water stopped working altogether.
When that happened, DCRA determined conditions were unsafe and forced the
two remaining tenants to move, emptying the building. Coleman, who has not
applied for a vacancy exemption, did not respond to calls and letters
seeking comment.
"It was terrible, terrible," said tenant Asrat Ferede, who lived in the
building for 12 years, including two years without a working refrigerator.
In 2006, records show, Ferede received an eviction notice for nonpayment of
rent, even though he had copies of his cashed checks showing that the rent
had been paid.
"She was the coldest landlady I have ever seen," Ferede said.
He sued for wrongful eviction and this year received a $153,000 settlement,
which his attorney said will likely help Ferede buy a place to live.
In Southeast, Angelia Chatman-Moat, a data analyst at Howard University, is
one of fewer than 30 tenants left in a 108-unit complex at the Oak Hill
Apartments on Wheeler Road SE, where boarded-up windows bear the
spray-painted message: "Keep out."
In late 2006, a company owned by developers Aubrey Carter Nowell and Patrick
Strauss bought the complex for $6 million. In mid-2007, records show, they
started offering money to tenants to move out.
About the same time, they proposed to the city a redevelopment plan for the
area, which would include the school property next door. They submitted the
proposal with Meridian Hill Advisors LLC, a real estate investment firm
whose managing director is Adam Kreisel, who served as assistant to
President Bill Clinton's longtime chief of staff, Leon Panetta.
Dozens of tenants left. But Moat, who pays $769 a month in rent, feared she
could not afford a more expensive apartment on a $28,000-a-year salary.
In February 2007, DCRA documented several dozen code violations at the
complex, but inspectors never returned to inspect the whole complex, even
after tenants sent a 25-page report last summer describing the lingering
problems. DCRA officials said the property manager and tenants reported that
repairs had been made.
Strauss said he and his partner responded to repair requests. He said the
plan to redevelop the school site with Meridian Hill has been dropped but
the partners are offering buyouts to tenants so the Oak Hill site can be
renovated.
"After decades of neglect by previous owners, the Oak Hill Apartments are in
need of a major renovation," Strauss said.
Moat said tenants are worried: The complex still needs repairs, and last
fall, more than a dozen tenants received eviction notices for nonpayment of
rent. Nine cases were dismissed in court after a lawyer with the nonprofit
Bread for the City stepped in and the tenants showed that they had paid.
Moat fears that without more help from the city, she might be the last
tenant left in an abandoned apartment complex that once bustled with life.
Still, she refuses to go.
"I'm holding out because this is where I can afford," she said. "This is my
home."
Staff researcher Meg Smith contributed to this report.
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