By KIMBERLY ACEVEDO
The suit, which originally sought $20 million, was filed by landlords seeking to end the rent controls which they say resulted in lost rental income and a drop in the value of their buildings.
The State Supreme Court of Nassau County determined the City of Long Beach was indeed responsible for the loss of rental income and awarded Executive Towers' owner Samuel Walton $4 million and David Paulsen of Paulsen Real Estate Corp., which owns the Crystal House on Shore Road, $2 million, on Wednesday, July 3.
City officials said they intend to appeal.
According to Emergency Tenant Protection Act, if the local vacancy rate is more than five percent, the municipal body should declare that rent stabilization is at an end, said attorney Jeffrey Stark of Meyer Suozzi English & Klein, which represented the city. And, he added, the statute provides that if the rate then dips back below five percent, the municipal body may re-impose stabilization.
Filing suit against the city were the Executive Towers owners, Paulsen Real Estate Corp., Angelo Paladino, Maureen Paladino, Robert Botwinick and Beach House Owners Corp Et. Al.
Walton was unavailable for comment and Paulsen declined to speak.
Attorney for the landlords, Martin Shlufman, said that in January 1996 he sent a letter to then city manager Edwin Eaton notifying him that his client's vacancy rate was above five percent. A survey of the apartment buildings should have been done, Shlufman said. But, he added, when it was brought to the attention of the city council they refused.
Instead, the council offered to have vacancy
decontrol, he said, which meant that when a tenant moved out of a rent stabilized apartment, the apartment would then become de-stabilized. But during a public hearing in April 1996, the council tabled the resolution, Shlufman said.
That decision to squash the resolution stunned one resident, who only wanted to be identified as John. He charged that the city was being watched by at least three major television news crews and may have been influenced by others to vote against the resolution. And, John added, a meeting was held the night before the public hearing with several city and non-city officials. At that time, it was believed that the city council would in fact vote for vacancy decontrol, he said.
According to council president Joel Crystal, during the 1996 public hearing several tenants alleged the owners were warehousing apartments meaning they were withholding the apartments on purpose to boost the vacancy rate. But, Shlufman said, that obviously wasn't true because the judge ruled in our favor.
His clients, he added, listed the apartments with a broker and continued to keep them on the market. The judge, Shlufman added, found our testimony to be credible and found the defendants' argument that we were warehousing was not credible.
But one local broker who declined to give her name said, I don't think they ever listed with any brokers.
After several tenants testified at the 1996 hearing about the warehousing allegation, Crystal said he was struck by the importance of the decision and that it might do away with rent stabilization regarding the State of New York.
Also during the hearing, there was some controversy about how the vacancy rate was determined. When the apartments were tallied for the vacancy rate, John said, that some of the apartments were being renovated.
How can you count an apartment that is under construction, he said. Naturally it's going to be vacant. That was a big discrepancy.
Despite resident's allegations of warehousing, one month later, the landlords delivered the lawsuit to the city on the grounds of an excess vacancy rate and said they wanted the apartments de-stabilized.
Crystal said, Since 1996, the Long Beach city
council has been committed to the protection of
residents who rent homes and apartments in our city and those individuals who have rent stabilized apartments in our city.
Throughout my tenure on the city council, I have been proud to be a leader in that effort. Our city council stands united with our residents in this mission.
Though the case was dismissed from Federal court in 1998, it was handed to the State Supreme Court of Nassau County. During the case, both the city and landlords decided to allow former Supreme Court Justice Eli Wager to act as a special referee.
He wasn't imposed on us, Shlufman said. We decided for him to hear the case.
According to Shlufman, in January of 2001, Wager determined that for several months in 1996 the vacancy rate did exceed five percent but only in buildings including Executive Towers and the Crystal House of 100 units or more. In buildings with 60-99 units, Wager did not find that the vacancy rate exceeded five percent.
A trial of damages was scheduled in May of 2001, Shlufman said. It was during that trial that Wager determined that the city was responsible for the loss of rental income during a four month period in 1996. The $6 million figure is based, Shlufman added, on the difference in the highest comparable rent versus the rent stabilization of the apartment in that time period.
Executive Towers, located at 854 E. Broadway, which has 276 units, it was awarded $4 million. The Crystal House, located at 630 Shore Rd, has 178 units and was awarded $2 million.
According to Stark, the city does plan to appeal the decision.
Naturally, news of the decision didn't sit well with many residents. One resident, who declined to give his name, wondered how the landlords' argument could stand. If there was a vacancy rate exceeding five percent, he said, then how can they claim there was a need for apartments at a higher rent?
Michael Rosingrave, an aide to Assemblyman Harvey Weisenberg, said that affordable housing in Long Beach is difficult to find, especially since the market is very high.
If you remove rent stabilization, where do you go? Rosingrave asked.
Rosingrave said that Long Beach has over 1,000 rent stabilized apartments.
Therefore, Weisenberg supports rent stabilization and believes that there is a great need for it. Especially for the older residents, he said.
It's a necessity to maintain a quality of life for people who need it the most, he added.
And some city council members agree. City councilman Denis Kelly said the city will pursue this until we are victorious.
I don't think that we should let the decision stand as it is but that we should pursue it in court.
In a place where affordable housing is scarce, Kelly feels rent stabilization is a necessity.
Though the city was disappointed in the ruling, Crystal said the decision by Judge Wager does not deter us from our dedication to this cause and our residents. We intend to appeal the ruling and are confident the city will be vindicated based upon the law.
Meanwhile Shlufman said he considers the case is closed and will be entering the judgment within the next two weeks.
