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The High Cost of Leaving

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As this negotiation-and-settlement tango continues, rent regulation's long-predicted demise draws closer and closer. And the sound of political gunfire is curiously absent. "Most of Manhattan below 110th Street is experiencing deregulation upon vacancy," says tenant lawyer and former Rent Guidelines Board executive director Timothy Collins, whose own firm handles up to 50 buyouts a year. "Rent regulation will largely disappear in Manhattan in the next five to ten years."

The 823 Park Avenue battle, then, is a variation on a story that's playing out all over town: Excited by Manhattan rents that have leaped as much as 50 to 60 percent in the past five years, landlords are eyeing their regulated buildings more ravenously than ever. Every New York real-estate era has its tales of Bad Landlords who badger and harass rent-protected tenants into moving. But as this market becomes too hot to ignore, even legitimate landlords are looking to ease their regulated tenants out. More and more, filing for eviction is merely foreplay for a buyout. Over time, this is how rent regulation is likely to die in Manhattan -- not with landlords playing poor to an audience in Albany but with landlords writing checks to tenants; not with the bang of a controversial new law going into effect but with a cash-muffled whimper.

The groundwork for the revolution was laid back in 1997, when Albany's rent-law revision slapped a slow death sentence on rent-stabilized apartments. Stabilized tenants have always paid incremental increases every few years, but now the law allows rents to lurch up by 20 percent once the stabilized tenant leaves. And as soon as monthly rents nudge past $2,000, landlords can charge market rate -- whatever they want -- to the next tenants. As if that weren't incentive enough, the new law also relaxed the rules against demolitions, adding loopholes to ease the last one or two rent-controlled tenants out of apartment buildings facing the wrecking ball. "Landlords have been more aggressive about buyouts because the change in legislation has made it more difficult for some tenants to protect themselves," says Aby Rosen, president of RFR Holding, the company that, after a two-year legal battle, paid a total $5.7 million to clear out the Cottages.

Moguls like Manocherian dream of buying regulated buildings that aren't making a dime -- understanding that it's easier these days to empty and mow down a building. But tenant lawyers like Rozenholc also have some leverage here as they gum up developers' timetables with litigation. They know that in this market, the landlords might pay top dollar for them to go away.

In less sexy locations than the Cottages, RFR Holding typically forks over between $80,000 and $150,000 to buy out a rent-stabilized tenant and up to $200,000 to buy out a rent-controlled tenant. "Look, this is a booming community," Rosen says. "In a couple of years, will there be a market to build? Who knows? So you do what you can now. You've got to move fast. And in these buildings, for someone who's one of the last leftovers, it can be a really great deal."

Of course, these standoffs tend to drag on. Herbert Bronstein, a retired museum administrator who lived in a rent-controlled $150-a-month one-bedroom tenement in Murray Hill, was bought out by his landlord five years ago for $200,000. It took six years in court for his lawyer, Kent Karlsson, to drive up the landlord's buyout price from an initial offer of $50,000. Bronstein is still amazed by the wait. "I turned to Kent once and said, 'It's like Jarndyce v. Jarndyce in Bleak House, where both sides are fighting forever,' " he says. "Kent said, 'Exactly. Nothing's changed,' and then he joked, 'And thank God for it!' "


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