Given the uncertain direction of the state of our economy, almost everyone is under pressure these days to save money in any way they can. Even the most financially solvent and healthy establishments are trying to root out unnecessary expenditures in efforts to contribute to their fiscal strength. As this month’s headlines signify, NYC property owners continue to be under added duress to maintain the value of their assets as new rounds of regulations and property management issues emerge challenging their endeavors.

PROCEDURAL CHANGES IN CORRECTING ECB VIOLATIONS – Until recently, in order to clear an ECB Class 1 (immediately hazardous) violation, you were required to pay a civil penalty, correct the condition cited in the violation, and submit a Certificate of Correction. Although that is still the basic procedure, as of this month, a newly imposed 60-day deadline went into effect, along with a $1,500 civil penalty for non-compliance with that deadline. In essence, as of now, if you receive an ECB Class 1 violation, in addition to correcting the violating condition, the Certificate of Correction must be submitted and approved within 60 days of the violation’s issuance, or it will automatically generate a $1,500 fine. Furthermore, any efforts to clear the violation after surpassing this deadline will be out of contention for a review without the respondent’s initial presentation of proof of payment of the $1,500 fine.

In our opinion, this new procedure is glaringly flawed, since correcting the violating condition may require securing a DOB permit prior to the commencement of work, a process which in and of itself may take more than 60 days thus forcing the burdensome $1,500 penalty on to the owner. Putting time limitations on the entire process will likely result in the performance of shoddy work as owners will be motivated to make quick and poor repairs just to comply with the rigorous time constraints. As with many other issues, Jack Jaffa and Associates has been advocating reconsideration of these changes with the agency’s top brass. As this issue will undoubtedly affect many of our clients, we urge you to voice your opinion on this subject by contacting DOB Commissioner Robert LiMandri at robertl@buildings.nyc.gov. Of course if you’re ever in a quandary about how to handle any violation related issues, please call Jack Jaffa & Associates for immediate assistance or email us at info@jackjaffa.com.

PROPERTY TAX HEARING FEES – The City’s Tax Commission, the agency that is responsible for reviewing applications for correction of property tax assessments, will be charging a $175 fee for hearings which until now were free. According to the new rules, the fees will only apply to properties assessed for at least $2 million, and for single condominium units for which their entire building’s total tax assessment is over $2 million. Owners will still be able to file free applications to maintain their rights for a tax protest. Those who waive, or don’t even get a chance to appear at a hearing altogether, will not be charged. In 2009, the agency reviewed 19,122 of the 46,239 applications that were submitted. Currently the agency is tremendously understaffed to handle all of the incoming tax protest applications, which results in most of them not even getting to the hearing stage. The Commission is indicating that the fees collected from this initiative will be used to cover the costs of the hearings, to modernize the agency’s technology, and to enhance its modus operandi.

BEDBUG EPIDEMIC – The City is experiencing an explosion of bedbug infestation cases.  Last year, one out of every fifteen New Yorkers battled bedbugs. This statistic is likely to increase this year, as in addition to residential properties, enterprises such as high-end retailers and hospitals are also suddenly forced to deal with this nuisance. In July, state officials composed a bill that included requiring landlords to disclose to incoming tenants whether the apartment under consideration has been infested with bedbugs within the last twelve months. The bill also included a provision to give bedbug victims a 15% credit on their state personal income tax, up to $750, to compensate for replacing furniture infested by these pests. To many landlords’ relief, despite sailing through both houses of the State Legislature, Governor Paterson vetoed the bill due to the seemingly high financial support that was required to uphold it. It should be noted though, that bedbugs continue to be a landlord’s legal issue. Under the Warranty of Habitability, it is the landlord’s responsibility to maintain their premises in a habitable condition and to ensure that tenants are not subject to any conditions that are dangerous, hazardous or detrimental to the tenants’ health or safety. Currently the NYC Housing Court is reviewing thousands of cases relating to this subject, many of which are expected to result in costly rent reductions. The NYC Department of Health and Mental Hygiene has issued a helpful publication on how to deal with bedbugs. It can be viewed by clicking here.

NEW ACRIS ALERT PROGRAM – The Department of Finance has implemented a new opt-in program to provide notice to property owners when deeds, mortgages and related documents affecting an ownership interest in real estate assets are recorded against any property located within the City’s five boroughs. There are no fees to register or to receive a notification, which can be sent via e-mail or regular mail. The program is designed to alert registered owners when documents are recorded without their knowledge and will allow them to take steps to limit the harm caused by unauthorized submissions of important documents. The program was introduced in order to combat a significant rise in various Ponzi schemes, identity theft and fraudulent activity cases that often go undetected for many years. Additional information on the alert can be obtained by clicking here.

Confusion reigns for property owners and managers as new regulations and administrative guidelines affecting their real estate assets are introduced. With so many issues and concerns that have to be dealt with on a constant basis, many owners are challenged when it comes to meeting new directives. Often these challenges arise due to lack of general knowledge which can be effectively utilized in avoiding common procedural missteps. In this issue of our newsletter we will briefly address a few topics that should give our clients an advantage in matters impacting them in the foreseeable future.

NEW RENT GUIDELINES BOARD INCREASES – On June 24, 2010, the NYC Rent Guidelines Board (RGB) adopted the latest set of renewal lease guidelines (a.k.a. RGB Order #42) for rent-stabilized apartments and lofts. In a 7-2 vote, the Board that establishes rent adjustments for the approximately one million dwelling units subject to NYC Rent Stabilization Laws, approved rent increases of 2.25% for one-year leases and 4.5% for two-year leases. These increases will apply to leases in effect between October 1, 2010 and September 30, 2011. It should be noted that this time around, the newly adopted rent increases noticeably omitted provisions for the controversial supplemental increases entitling owners of rent-stabilized apartments to dollar-based renewal increases as opposed to the customary percentage-based renewal increases, the legality of which is currently under review by the courts.

In a decision issued on January 20, 2010, the Supreme Court of New York County issued a determination in Casado vs. Markus invalidating the minimum rent increases as approved by RGB in the two previous orders. These minimum increases affected rent-stabilized tenants who renewed leases with effective dates between October 1, 2008 and September 30, 2010, had been living in their apartments for at least 6 years and had legal rents of less than $1,000 per month. On June 22, 2010 a mid-level appellate court affirmed the lower court’s decision to invalidate the minimum increases. The Board is currently in the process of asking the Court of Appeals (the State’s highest court) to review the case. Unless the Court of Appeals reverses the lower court’s decision, the minimum increases referenced in Orders #40 and #41 are not in effect. (Click here to view Order #40, Order #41, and Order #42.)

Consequently, more than 300,000 rent-regulated tenants may be entitled to receive an estimated $100 million in refunds. Uncertainty emerging as a result of these court decisions may encourage many tenants to file rent overcharge complaints with DHCR. Due to such indecisive circumstances, should any of our multi-family clients have rent overcharge cases pending, we strongly recommend that a request for a final consideration of the rent overcharge proceeding be extended until a concluding determination in Casado vs. Markus is issued. Needless to say, we will monitor the case’s path through the court’s system and keep our clients apprised of any new developments.

FIRE CODE VIOLATION SUMMONSES – It’s now more important than ever to comply with the City’s Fire Code regulations. In a joint effort by the Department of Investigations and the Fire Department, city investigators and fire marshals have arrested more than 218 people in a massive sweep targeting business and building owners who failed to appear in court on repeated fire code infractions. Although by apprehending violators the city is resorting to highly unusual steps, these arrests are meant to remind the general public of the seriousness of consequences resulting from lapses in public safety. Among violations cited are failing to maintain a standpipe or a sprinkler system, blocked exits, illegal storage of flammable material and lack of fire extinguishers on premises. It should be noted that criminal summonses and arrests are usually preceded with warnings. Lack of correction of a violating condition and repeated non-compliance with such orders may in fact trigger a warrant for arrest of the responsible parties. To learn more information about the existing fire codes click here.

Regardless of what kind of a violation is issued, it is always beneficial to correct the violating condition immediately. However, should additional expertise or knowledgeable representation with regards to the issued violation be necessary, we advise our clients to contact Jack Jaffa & Associates Violations Division for professional assistance.

LOCAL LAW PENALTY WAIVER PROGRAM SUSPENDED – The NYC Department of Buildings (DOB) recently suspended the waiver program which allowed new property owners to request abatement or reduction of penalties initiated by violations issued due to failures in filing Local Law Boiler, Elevator and Facade inspection reports. Under the old rules, if a building was sold and the new owner could demonstrate that these violations were incurred by the previous owner before the transfer of ownership, a reduction of civil penalties associated with such violations was instigated. In addition to affording new owners an opportunity to remove a significant amount of the accrued fines, the granting of the waiver also dismissed the underlying violations. Regretfully, the elimination of this program now puts a bigger financial burden on the shoulders of new owners as they have no other choice but to absorb all such penalties that exist on DOB records. Jack Jaffa & Associates has been vigorously campaigning on behalf of our clients in order to have the program reinstated. Property owners who are detrimentally affected by these changes are urged to voice their opinions by contacting DOB Commissioner Robert LiMandri at robertl@buildings.nyc.gov.

RESTAURANT GRADING SYSTEM - The New York City Health Department announced the final rules for a new restaurant letter grading system which is scheduled to go into effect as of this month. The grades, which will run from “A” to “C”, will reflect sanitary conditions at restaurants and must be prominently displayed in the window-front, or on a door or wall that can be seen immediately as diners enter. The agency will begin inspections in July in order to ensure compliance. However, the agency also issued a statement indicating that it will take a full year before all of the city’s 24,000 restaurants receive a grade. Under the new rules, restaurants with “A” grades will be inspected annually. Those receiving lower grades will be inspected on a more frequent basis, but at the same time they will also have the ability to appeal “B” or “C” grades at hearings or subsequent inspections. The Health Department will offer free workshops for eating establishment owners and employees on the new rules. (Click here to view more information.) Clients in need of assistance with any Department of Health violations are urged to contact a Jack Jaffa and Associates representative.

Since our inception, our responsibilities have always included providing the general public with critical information that enabled them to make smarter and more educated property ownership and management decisions. In our previous newsletters we touched on different issues impacting this particular sector of the real estate industry. Recently a few important and noteworthy administrative developments and proposed changes have emerged which merit utmost attention.

CHANGES IMPLEMENTED IN DEPARTMENT OF BUILDINGS/ECB HEARING PROCEDURES: Up until recently, if an ECB hearing was scheduled for an issued violation, the respondent had to appear in ECB court at a designated time in order to address the infraction. If the respondent did not appear at the hearing, the violation remained open and an additional default penalty was imposed. Upon taking the necessary steps, the respondent always had the option of reopening the case within one year. As of April 5, 2010, the agency unexpectedly adopted significantly more stringent rules, reducing the period in which the case could be reopened. As a result, the respondent currently has only 45 days after the previously assigned hearing date in which to request another hearing in efforts to dismiss the case. The revised timetable will unquestionably have a harmful affect on thousands of property owners and managers throughout the city. If you need assistance with a defaulted violation, please contact a Jack Jaffa & Associates representative.

PROPOSED CHANGES IN RENT REGULATION LAWS: On May 26, 2010, Governor David Paterson proposed an amendment package to the existing rent laws which are set to expire next year.  In addition to the eight-year extension until 2019, the measures include raising the threshold for removing a vacant apartment from rent stabilization. Under current rules, the landlord of a rent-stabilized apartment can begin charging market rates once the apartment becomes vacant and the monthly rent hits $2,000. The governor suggested that this cap be raised to $3,000 a month. The changes also include proposals that would affect an estimated 40,000 tenants throughout the city whose rents could fall as a result of the State Court of Appeals decision regarding Stuyvesant Town and Peter Cooper Village. Last fall, the court found that these two housing complexes had improperly charged market rates on some apartments while receiving J-51 tax breaks for building-wide renovations. The governor’s proposal would establish a procedure by which tenants of apartments affected by the ruling could apply for rent decreases. Currently all of these amendments are subject to approval by State Legislature- at the moment it is unclear if they will be addressed this year. Details of the governor’s proposals are available by clicking here. In order to find out how these proposed amendments can affect your existing or future J-51 filings, please contact Jack Jaffa & Associates Tax Incentives Division.

NEW PAINTING REQUIREMENTS FOR STANDPIPE AND SPRINKLER SYSTEM COMPONENTS:  Beginning June 2, 2010, all existing buildings are required to comply with new sprinkler and standpipe painting requirements.  All exposed standpipes and sprinkler piping must be painted red according to the new rules. The law outlines specific exceptions, such as branch piping.  All buildings – regardless of size or occupancy -  must comply with these new requirements: dedicated standpipe valve handles must be painted red, combination standpipe valve handles must be painted yellow, and dedicated sprinkler valve handles must be painted green. Additionally, color-coding certifications must be obtained and be kept on the premises at all times for Buildings and Fire Department inspections.  For more specific information, please click on the following links: BUILDINGS BULLETIN 2010-014 NEW SPRINKLER AND STANDPIPE REQUIREMENTS

DOB BEGINS AN ENFORCEMENT BLITZ AGAINST ILLEGAL SIGNS AND BILLBOARDS: The federal appeals court has authorized the city to enforce regulations governing removal of illegal signs and billboards. These regulations have been contested for more than a decade. As a result of the court’s decision, the agency can now engage in an extremely aggressive campaign of enforcement pursuant to the parameters contained in the City’s Administrative Code and Zoning Laws. DOB defines an advertising sign as a mark that directs attention to goods and services at a location other than the premises where the sign is located. Although they are permitted in certain zoning districts, most of these signs are erected illegally as a means of generating income for the property owner. The agency has already begun deploying crews to physically remove illegal signs from buildings with multiple offenses. Under current laws, each violation based on illegal sign or billboard formation carries a $10,000 fine which, depending on justification presented, could be reduced during the hearing process.  Billboard companies and property owners who don’t show up for hearings face an even stiffer penalty of $25,000 per offense. According to officials, violators have already been slapped with nearly $2 million in fines - a figure which is expected to rise sharply as stricter enforcement continues.

All NYC agencies rely on various codes and legislative considerations in efforts to regulate the City’s daily administrative maintenance. Often there are times when agencies intensify enforcement of these codes as a result of emerging circumstances.

Providing Heat in Residential Buildings: 2010 got off to a frigid start with temperatures in the first two months of the year averaging 30 degrees Fahrenheit during the day. This situation prompted HPD Commissioner Rafael Cestero to announce that when temperatures drop below the freezing point for prolonged periods of time, HPD doubles the number of inspection and maintenance teams in efforts to ensure the building owner’s compliance with obligations relating to provision of heat as warranted by extreme outdoor temperatures [read more...].

Single Complaint Resulting in Multiple Violations: When a tenant reports a complaint and HPD sends an inspector to investigate the situation, the inspector has the right to look into other code infractions in the apartment and issue violations accordingly [read more...].

J-51 Tax Abatements: This incentive program is an as-of-right tax exemption and abatement for residential rehabilitation or conversion to multiple dwellings. Completed J-51 applications are only accepted by HPD during designated periods.  The first filing period of the calendar year already began on February 1, 2010 and will continue until March 15, 2010. The next filing period will last from May 1, 2010 through June 15, 2010 [read more...].

New Online Annual Rent Registration System: As of this week, DHCR’s new online Rent Registration System became available at www.nysdhcr.gov. The new system enables owners to complete and submit their rent registrations on the web, print tenant and owner forms, and certify the registrations online. Owners will no longer be required to send signed and notarized building summary and apartment registration forms to DHCR. Annual Rent Registrations must be filed by July 31 and must reflect the status of the apartment on April 1. The agency is already mailing out notices to residential property owners and managers advising them of the changes and additional information on navigating through the new system.

As the real estate industry continues to face a host of ever-changing legal, administrative and financial challenges, the arrival of a new calendar year already has the markings of another dramatic period for our clients. We at Jack Jaffa & Associates would like to take this opportunity to utilize our email newsletter as a medium for providing you with useful information and helpful advice relating to property ownership and management issues. The following matters are the latest in the industry to have surfaced and are worth noting:

Weather-related Violations: City agencies are continuing to enforce a blitz of various codes and regulations.  In the last few weeks, we’ve noticed a particular rise in the issuance of weather-related violations due to snow and ice formation.  Improper or untimely removal of snow or ice could set you back anywhere from $10 – $350 per violation, depending on the frequency of the recurring infraction [read more...].

Construction Site Safety: The Department of Buildings (DOB) has been very busy implementing newly-passed laws requiring construction site safety.  Under previously favorable economic conditions some of you may have taken out construction permits in hopes of building new structures or reconstructing old existing buildings.  If those projects have been suspended for more than 12 months, the permits pulled for these projects are no longer valid [read more...].

Building and Apartment Registration Forms Online: The New York State Division of Housing and Community Renewal (DHCR) has announced that in the second half of 2010, owners and managers of rent regulated housing will be able to file Building and Apartment Registration Forms online.  As this development is still at an embryonic stage, our future newsletters will address this issue at length as more details become available.

MCI Benefits: One of the most reliable methods for increasing a residential building’s rent roll is to make capital improvements that would qualify for MCI rent increase benefits. Although many of our clients throughout the five boroughs have successfully obtained benefits under this program, not too many of you are aware that buildings located in Nassau, Suffolk and Westchester counties are also eligible to receive MCI benefits for various capital improvements. Please give us a call to find out more.