Brooklyn tenants fight management firm

When Latia Wade decided to move from her home in Orlando, Fla., to New York City, the 24-year-old knew to expect exorbitant prices for apartments. She searched for three months to find the safest, most affordable areas in Brooklyn. So when she finally settled on a $2,050 two-bedroom apartment at 266 Washington Ave. in Ft. Greene, she was confident she’d found a deal.

“My roommate and I were so excited to find a two-bedroom for around $2,000,” Wade said. “It really seemed like a steal in the New York City market.”

But just days after moving in, Wade was repeatedly approached by her new neighbors and encouraged to seek the rental history of her apartment. They believed she was being overcharged for her apartment.

Unbeknownst to Wade, the tenants of 266 Washington Avenue were fighting increasingly nasty battles against Dermot Management Company, the firm that managed her new building. They allege that through a practice known as “predatory equity,” management and investment companies such as Dermot are buying up rent-controlled properties at high prices that do not match up with the income potential based on profits from rent paid by tenants.

Companies do this by investing equity and securing bank loans for renovations, then aggressively raising rents to increase profit margins and earn back the money they’ve lost in the purchase, tenants say.

To earn the necessary income, the companies drive out existing rent-controlled tenants, renovate their newly vacated apartments and place them on the market with price tags rent-stabilized tenants say they cannot afford.

In addition to the financial turmoil the predatory equity is already generating, the tactics companies use to drive tenants from their homes has stirred controversy.  According to the Pratt Area Community Council, a Brooklyn community organizing group, the companies use harassment, denial of maintenance and services, exorbitant rent increases and outright evictions.

The suspicions of Wade’s neighbors were confirmed when she received the rental history for her new apartment. In a four-page document, the New York State Division of Housing and Community Renewal’s Office of Rent Administration detailed the rent paid by the previous tenant, Sandra Rubins, from 1987 until she moved out in October 2008.

Rubins moved in late 1987, at a stabilized rate of $319.50, and paid an additional $26 biennially at her lease renewal. By the time she moved out 22 years later, Rubins was still paying just $645.74. Wade, in contrast, was paying $2,050 for the same apartment, three-and-a-half times Rubins’ rent.  When Wade found out, she was crushed.

“Here I was thinking I’d found this amazing steal in an awesome area, and come to find out I’ve been seriously fooled,” she said.

Wade wasn’t the only one who had been duped. Among the tenants of its numerous properties, The Dermot Company has developed a reputation for using predatory tactics to displace long-standing tenants in rent-stabilized units.

Anthony Bergadro has lived at 266 Washington Ave. since 1977.  When Dermot took over management of the building two years ago, Bergadro, 61, received a letter from the company, offering him $8,000 and relocation assistance. Once he turned down their offer, Dermot’s positive tone changed.

“A few weeks later, I come home and there are notices all over my door saying they’re suing me for eviction,” Bergadro said.

Dermot, dead-set on getting Bergadro out of his apartment, began making questionable claims. Because Bergadro had a Connecticut driver’s license, Dermot accused him of maintaining another primary residence, he said. And because his daughter, a Long Island University student, was living with him in the apartment, they accused him of subleasing his apartment to her. They promptly took him to court.

“They’ve used three different lawyers so far as a stalling tactic, and they keep putting off the court date,” Bergadro said.  “They’ve kept this going for the past year and a half, and while they’ve been doing it, all those damn credit checks killed my credit score, just in the discovery process.”

Dermot released a statement in response to tenant complaints of harassment and unlawful eviction citing just cause.

“Dermot has only taken legal action against tenants that have failed to pay rent for at least two months or with evidence that the tenant of record does not live in the apartment,” the statement said.

Dermot did not respond to repeated requests for additional comments.

Wade and Bergadro are not alone in their struggle, and predatory equity is not a problem peculiar to New York City. Most recently, renters in Florida, Oregon, Texas, Illinois, and Connecticut have all begun to bring suit against predatory landlords, and legislation is rapidly following.

California cities have been fighting predatory equity practices for some time. In December 2007, the East Palo Alto City Council voted in favor of an urgency ordinance that placed a six-month moratorium on rent increases above 3.2 percent.

Despite the city ordinance, Page Mill, a California-based management company, bought up more than half of the rent-controlled housing in East Palo Alto and aggressively raised rental prices.  According to Tenant’s Together, a tenant’s rights organization, Page Mill has imposed rent increases of more than 50 percent on many of East Palo Alto’s low-income tenants in the past year.  The tenants recently filed a class action lawsuit against Page Mill for its practice of violating local rent control laws, the outcome of which remains to be seen.

In Oregon, an Eagle Point woman fought and beat an eviction suit that came when the rent on her mobile home space increased. She said the management company held her checks for August and October and then claimed she hadn’t paid — a move reminiscent of Dermot’s tactics.

Back in New York, many disgruntled Dermot tenants gathered at a strategy meeting, spearheaded by the Pratt Area Community Council on October 27, to determine a plan of action against Dermot.

“This is our home,” Kitty Solla, 69, stated emphatically. “I don’t care if you own the building, this is my home! Some of us in here have lived in these buildings 40, 50 years.” Solla has lived at 266 Washington Avenue for 36 years.

The impassioned tenants in attendance painstakingly detailed the tactics Dermot had used to harass and evict them.  Many had horror stories similar to those of Wade and Bergadro.

One frustrated woman had an Ohio driver’s license, so the Dermot team contended that Brooklyn was not her primary residence and sued for eviction.  Another woman repeatedly had her rent checks returned and was sued for unpaid rent, and yet another woman claimed that her rent bill was sent to her sister’s address in Michigan.

“How do we deal with this?” asked Linda Foster, 64, a resident of 266 Washington Ave. “How do we fight it when the agencies that have been created to help us aren’t helping?”

City Council member Letitia James has long been an outspoken opponent of predatory equity practices. She recounted the struggle of the residents of 99 Lafayette St., another Dermot property.

“During the summer of 2008, the entire building lost gas, and residents bombarded Dermot management with calls and complaints for weeks, but to no avail,” James said. “Eventually, residents held a press conference with all kinds of politicians in attendance.  And, wouldn’t you know it, before the end of the conference, the gas was back on.”

“The company gave in to the power of the residents’ collective voice,” James said. “Dermot doesn’t take kindly to negative media attention.”

Many in attendance expressed despair at their lack of options.

“They’re pushing people out of the projects. They want that area, too. Can you believe that?” asked Foster. “Where will we go when they push us out? We can’t afford all these new buildings they’re putting up — who can?”

Andrew Reicher, executive director of the Urban Homesteading Assistance Board, identifies predatory equity as the emerging housing issue following the subprime-lending crisis.  In a letter forwarded to the Securities and Exchange Commission by Congressman Jose Serrano (16th District, N.Y.), Reicher goes so far as to imply that predatory equity is the single most overlooked aspect of the crisis.

No matter how the issue is framed by experts and advocates, tenants are fighting an uphill battle to stay in their homes, just seeking relief — relief they’re not sure will ever come.

“I haven’t even thought about where I’ll go if I lose,” Bergadro said. “I have a brother — maybe I can do that.”