The Art of Persuading Tenants to Move
By PATRICK O'GILFOIL HEALY
Published: August 28, 2005
Illustration by Lou Beach
Ruby Washington/The New York Times, Robert Caplin/The New York Times, Chester Higgins Jr./The New York Times
AN UNUSUAL SPECIALTY Jan Reynolds, Sherwin Belkin and Michael Grabow are hired by landlords to figure out deals that will convince tenants that moving out of regulated apartments is in their best interest. Sometimes, the landlord just wants to raise the rent to market levels. Other times, a new development is planned and the owner hopes to sell to make way for a new building.
THE woman had brilliant blond hair, a decent job and a rent-stabilized apartment on West 88th Street, but she longed for grander things. She yearned to cast off Manhattan and her job teaching special education. She wanted to trek to India to live spiritually, alone.
She described this wish to Jan Reynolds, an independent broker and managing agent, and then laid out her cards. The woman knew her landlord wanted to clear out his rent-stabilized tenants, with help from Ms. Reynolds. The tenant also knew she had a right to live at West 88th Street until she dropped dead. So she made Ms. Reynolds an offer.
If the landlord gave her $20,000, the tenant said, she would give up her apartment. Ms. Reynolds told the landlord, and within a few months, the tenant had made peace with her family, stripped the blond from her graying hair and boarded a plane to an ashram in India, Ms. Reynolds said.
With that deal 10 years ago, Ms. Reynolds leaped into a corner of the real estate world that is uniquely New York. She began brokering agreements to buy tenants out of their rent-stabilized and rent-controlled apartments.
When landlords want to demolish a building, take over an occupied brownstone or pull a stabilized apartment off the regulated rent rolls, they call in people like Ms. Reynolds to perform the seemingly impossible feat of wooing the tenants out of their cheap apartments. They are the pied pipers of Manhattan's rental market, operating on the belief that every tenant, no matter how entrenched, will make a deal. Their job is calculating each person's price tag.
They speak softly and carry a big purse, offering tenants $30,000, $50,000, $100,000. They dangle new apartments, moving expenses, a week in a hotel, a new life replete with doormen, sunlight and city views. Anything to make a deal. A lone tenant holding up a major redevelopment project can get as much as $1 million.
"It's a strange world," said Michael Grabow, a managing agent with A. J. Clarke, who has been brokering buyouts for more than 20 years. "There are windfalls in the city of New York."
Only a few people engineer these deals. The whole species consists of five or six lawyers, brokers and managing agents who have a sideline business coordinating buyouts. They are barely an asterisk in the mad churn of Manhattan's real estate market. Employed exclusively by landlords and developers, each does perhaps 20 such deals a year in a borough where 10,000 apartments are bought and sold annually.
They have brokered big buyouts, including tenants living in the old Mayflower Hotel on Central Park West, the Grand Beekman on the East Side and the Seville condominium in the East 70's. They earn $1,000 or $3,000 for small buyouts, and up to $100,000 for clearing whole buildings.
These facilitators and dealmakers say they prefer to fly dark, relying on confidentiality agreements and lawyer-client privilege to ensure their work stays quiet and their clients anonymous.
But the word is out. Newcomers hoping to break into the business of coordinating buyouts are advertising for business in free weekly newspapers. This spring, Mr. Grabow was featured in a profile in The Washington Post. Ms. Reynolds said she is worried about new hordes of competitors.
"I don't advertise," said Ms. Reynolds, who has a gentle manner spiked with seen-it-all wit. "I don't go looking for business. People call me."
These deals are a runoff from New York's system of rent controls and regulations, which bestows rock-bottom rents and noneviction leases on thousands of lucky tenants, essentially giving them the right to live cheaply until they die. They may pay half, or even one-tenth, of market rents and can be evicted only if they stop paying the bills, use their homes as pieds-Ã -terre rather than primary residences, or illegally sublet them. Inheritance rules allow tenants to pass on their $600 two-bedrooms like heirlooms.
About half of the city's 2.08 million rental apartments are stabilized, and another 59,324 units are controlled, according to the New York City Rent Guidelines Board. Rent-controlled units can be found in prewar buildings where a renter has lived continuously since 1971. Stabilized apartments largely sit in buildings of six or more units built from 1947 to 1974, and their rents are usually regulated by the board.
In many cases, landlords want nothing more than to get rid of their protected tenants so a building can be converted to a co-op, reconfigured as a single-family home or spruced up enough to recalibrate the rents to market levels, beyond the reach of the Rent Guidelines Board. And some owners try to move tenants by harassing them, refusing to collect rent and denying crucial services.
But each voluntary buyout deal is a delicate tango in which personality, money, time and pressure dance contrapuntally, and for Mr. Grabow, they all begin with a letter.
"As you may know," his template letter reads, "I have been engaged by your landlord to contact you concerning your apartment. I would like to discuss a matter that may prove mutually beneficial. Please contact me at your convenience."
The tenants are wary, but 85 percent of the time, they do call to hear the offer, he said. Others ignore the letter, hang up when Mr. Grabow calls, refer him to a lawyer or tell him they wouldn't leave their apartment for $10 million.
That's just fine, Mr. Grabow tells them. Just think it over and hold onto my number.
Rule No. 1, the facilitators say, is Don't Scare the Tenant. Many of the tenants are old and ailing. They are emotionally attached to their apartments and dread the idea of moving.
So Mr. Grabow, a New Jersey native, comes across as somebody's next-door neighbor, just as eager to talk about lawn mowers as contractual details. Ms. Reynolds exudes motherly calm and tells tenants she wants to help fulfill their dreams.
Sherwin Belkin, a landlord lawyer who is 6 feet 4 inches tall, takes care never to raise his voice. "I come across nonthreatening," Mr. Belkin said. "If tenants feel intimidated, they can't engage in a meaningful conversation. All they want to do is get off the phone."
The hardest cases are those in which inept landlords have attempted to organize buyouts themselves, Mr. Grabow said, generating not solutions but anger. Sometimes, they offered insultingly low buyouts of $3,000 per apartment. Other landlords, frustrated by the negotiations, threatened to sue or evict their tenants or stopped maintaining the building. In those buildings, the tenants are angry, organized and eager to bleed their landlord.
"That can be a problem," Mr. Grabow said. "If a tenant's there legally, you can't do anything but negotiate."
Facilitators like Mr. Grabow and Ms. Reynolds got into the buyout business by clearing out illegal tenants. They would interview the building superintendent, monitor the postmarks on rent checks and check whether tenants had books on the shelves and cosmetics in the bathroom - typical signs of life.
But even when landlords have the law at their backs or have caught their tenants living in Phoenix or subletting to tourists, eviction is not cheap. Often, tenants stop paying rent and go to court to tie up the process for months. So facilitators began offering a free month's rent or moving expenses if tenants agreed to leave swiftly. Landlords saved on legal fees and quickly replaced tenants.
Dealmakers like Ms. Reynolds, Mr. Grabow and Mr. Belkin say that they come up with agreements leaving both the landlord and the tenant happy.
But these deals rankle many tenant lawyers. They say that each transaction chips away at the city's supply of affordable rentals, indirectly harming all tenants. And they argue that their clients often lose in the end. With Manhattan rents averaging $2,408 a month, even a $100,000 buyout dries up after three years and five months. And that's not counting the taxes that must be paid.
"People are often very unrealistic," said Michael McKee, the associate director of New York State Tenants and Neighbors, a tenant advocacy group. "How long is this money you're getting going to last? Unless you're planning to leave the city and move to Iowa, it's probably not worth it."
When buyouts disintegrate, greed and anger usually deserve the blame. Some tenants will demand $2 million when their landlord would never make back that kind of money, and is simply hoping to bump up the rent an additional $1,000 a month. Sometimes a tenant's adult children intervene and torpedo a deal.
Other tenants simply refuse to bargain and discover too late that their landlord has gone to court to seek an order to clear the building for demolition or owner occupancy. The deals can rot as tenants hold out and landlords get impatient, until owners throw up their hands and sell the building or build a high-rise around a recalcitrant tenant.
"The longer you wait, the less your apartment is worth," Mr. Grabow said. "You want to strike while the iron is hot? The iron's hot!"
One town house owner who recently used a facilitator to clear her property on the Upper West Side said the experience was still a nightmare. One of the tenants refused to deal with the facilitator. Some threatened lawsuits. They slammed doors, cursed and bargained hard, said the landlord, who refused to be named, saying she feared reprisal.
"Tenants see this as, they won the lottery," she said.
When tenants and facilitators bargain in good faith, they cobble together strange and wonderful deals. A tenant gets a new apartment with a fireplace, or a special mover for a harpsichord, or a college fund for a grandson.
Some tenants move from studio walk-ups to two-bedrooms in doorman buildings and pay the same rent. Others are given condominium apartments in exchange for moving out. Most just take the cash.
On the East Side, Mr. Belkin negotiated a deal in which a woman living in a stabilized co-op unit agreed to move out for a pittance, with the caveat that she would receive a percentage of the profit when the apartment was sold off.
In another, a blind tenant being relocated to an elevator building insisted her apartment be below the fourth floor, so she had to count only three "dings" as the elevator climbed floor to floor, Mr. Grabow said. Another tenant wanted to be on the second floor of the new building, in case ill health ever confined him to a wheelchair.
Two years ago, Mr. Grabow was working for a landlord who wanted to clear a building and use it as housing for his employees. Two of the tenants were a 70-year-old man and a 40-year-old woman who had become close over the years. They told Mr. Grabow they would not leave unless they could move to the same building and remain neighbors.
Another tenant pulled out midway through a buyout, saying that she couldn't bear to leave behind her new refrigerator. Mr. Grabow made a quick save, assuring the woman that he would pay to move her fridge to the new apartment.
"That did it," he said. "That was the deal maker. She loved this refrigerator."
The facilitators get to know their quarry. They spend hours talking to tenants on the phone or at their apartments. They hire limousines and brokers to take them apartment hunting. They put tenants up in hotels and remodel their new apartments. They hire moving companies. They buy furniture.
Ten years ago, Mr. Belkin helped orchestrate a deal that moved five families less than a block away. Robert Cohen, a landlord and building manager in Manhattan, wanted to combine and redevelop several parcels at 44th Street and Eighth Avenue, including a defunct convent where the occupants of five apartments paid $167 a month each for their railroad apartments.
Mr. Belkin told the tenants they could move anywhere in Manhattan or the rest of the country, but all they wanted was to stay in their neighborhood.
The tenants had been there for decades, said Reinaldo Campo, a Cuban immigrant who moved into the building in 1960 and raised his family there. Many were retired and reluctant to take a cash buyout. "We know everyone here," Mr. Campo said. "Our kids were born here."
So Mr. Cohen, Mr. Belkin and the tenants hit a deal. Mr. Cohen would gut a building he owned on Eighth Avenue and give Mr. Campo and the other tenants lifetime leases at the same price. And the tenants could design the apartments themselves.
"It was amazing," Mr. Cohen said. "They're picking out tiles. I put washers and dryers in. It was very surreal. It was a real New York story."
The hushed nature of buyouts makes it impossible to know whether the balance of tenants regret these deals or celebrate them. But at least one stabilized tenant, now ensconced in a one-bedroom on West End Avenue, said she could not be happier with the new life a buyout afforded.
The tenant, Linda Leigh, had spent 25 years in her cramped brownstone apartment on the Upper West Side before learning her landlords wanted to clear the building and operate it as a bed-and-breakfast. Ms. Leigh, a school secretary, knew she could not afford market rents in her neighborhood and worried that her landlords would sell the building to someone who would be hostile to the tenants.
So, working with Ms. Reynolds, Ms. Leigh negotiated a deal. She would move out of her cramped studio and into a roomy one-bedroom with Central Park views. The owners would get their building. Ms. Leigh would pay the same rent, with nominal increases, for the rest of her life.
"My whole life, I loved West End Avenue, and I always joked I could never afford to live here," Ms. Leigh said. "As far as I'm concerned, this is a gift.">
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