Sunday, March 09, 2008

Rectify your "mistake"

The WaPo started a series today, "Forced Out: The Cost of DC's Condo Boom", that depressingly retells the old story of how the well-financed and well-lawyered people in this world always win out over the poor and powerless. In a nutshell:

Landlords determined to cash in on a lucrative real estate market pushed thousands of tenants out of apartments across the District in recent years and then reaped more than $328 million by converting the buildings into condominiums.

While the story itself isn't new, what's infuriating is how the landlords use DC law to push people out of their homes without paying any statutorily required fees to the District.

Nearly three decades ago, city leaders created a law that gave tenants extraordinary power: the right to vote on whether property owners could convert rental buildings into condominiums. The law also requires owners to pay the city a fee on the sale of new condominiums, which would help displaced renters with relocation costs.

But as the District's real estate market thrived, landlords found a way out: The law doesn't apply to vacant buildings.

By emptying buildings and taking advantage of a provision known as a "vacancy exemption," landlords can avoid the tenant vote and the tax and turn rental apartments into condominiums. City officials have granted the exemptions even when government records chronicled widespread evictions and buildings riddled with code violations.

In the past four years, nearly three-quarters of the landlords who received permission to begin converting apartment buildings into condominiums did so through a vacancy exemption, not a vote by tenants -- saving $16 million in condominium conversion fees while families across the city lost their homes.

Basically, they quit making repairs to their apartment building, effectively rendering them uninhabitable. Some tenants went without heat or hot water for years. Once all, or close to all, the tenants had "vacated" the landlords could then convert their "vacant" apartment buildings to condos without paying any fees to the District. A nice deal for the developers, too bad for the tenants. See this to understand how it's done. Kudos to the WaPo for a great graphic.

Now, I'm not going to start a screed about big, bad developers taking advantage of poor folks and using all legal loopholes at their disposal to get their way. It's an old story and it won't stop because of one angry posting on a blog.

However, please do not insult my intelligence by saying you - the developer - weren't aware that your lawyer had told the city the building was "vacant" when it wasn't or that a "mistake" had been made in the paperwork. An example:

Brandywine Station

On Brandywine Street SE, David Tolson's company paid $6.1 million in 2005 for a series of apartment buildings that had been cited for hundreds of code violations. Only about 18 families were left in a complex of more than 100 units.

A manager for Tolson sent a letter to tenants saying the company "wants to vacate apartments" and offering buy-out payments. Once again, tenants resisted, saying the offers were sketchy. They also complained that repairs weren't being made, with rats still running through their apartments. Within months of Tolson's buying the complex, tenants began receiving eviction notices for nonpayment of rent. Records show that in several cases, Tolson settled with tenants, paying them to leave.

By 2006, most tenants had left, with one striking a deal to stay on as a renter. When Tolson applied for vacancy exemptions, he said the property had been vacant when he bought it.

Tolson sold $14.9 million in condominiums, saving nearly $750,000 on the conversion fee.

"I thought, 'That man is sitting back there laughing at us,' " said tenant Yvania Flakes, a data entry specialist, who negotiated a deal to remain as a renter. She has since moved to Virginia. "I was hearing stories every day from tenants about how if they didn't move out, they'd get evicted. [Tolson] managed to get everybody to run."

Tolson, who had received a vacancy exemption on an earlier property as well, countered that the Brandywine project has been a success, with the buildings cleaned up and turned into affordable housing. He acknowledged that telling the government the buildings were vacant when he bought them was "a mistake," but he said that the eviction notices were legitimate and that he made repairs.

OK. You were smart enough to:

  • Buy and finance the property
  • Get the financing necessary for the redevelopment
  • Design the new condominiums and select the materials for the constuction
  • Work through all the building permits to redevelop the property
  • Hire the contractors to redevelop the property
  • Manage the construction process and all its headaches
  • Placate the banks
  • Leverage the US tax code to improve the development's profitability
  • Deal with the District's real estate folks in platting and recording the condominiums
  • Draw up the condominium association papers
  • Market and sell the properties
  • Record the sales with the District

And apparently you knew what you were doing because Brandywine Station has delivered and most, if not all, of the condominiums have sold. But in all of that, you made one small "mistake" in the process that saved you $750,000.

Fine, you've admitted you made a mistake so there's an easy way to solve the problem: rectify your mistake and pay the District the $750,000 it's owed. As a District taxpayer, I thank you for stepping up and doing the right thing.

Since that's as likely as "the other white meat" flying, maybe the District's city council ought to make sure this abuse ends. Here's how you can contact them to encourage them to end all the developer "oversights" and "mistakes".


The Norwood Tenants' Blog said...

Thank you for sharing the Washington Post series "Forced out." It is important that perspective condo owners learn about how low to moderate income families have been forced out by any means necessary to make way for condos.

I am a tenant at 1417 N Street NW (the Norwood) which is located just one block from the Whole Foods on P St.

For the past three years, we have been dealing with building-wide bed bug infestations and a non working elevator to name just a few.

When we pressed the management company and owner to make repairs, we received a condo conversion proposal. We refused to discuss condos until problems in our building were fixed.

On average, the elevator in my building is out of service for months and weeks each year. For example, last summer the only elevator in our seven-story building was declared inoperable by the DC Elevator inspector. Management took 31 days to fix the elevator.

Tenants were feeling demoralized so to demonstrate solidarity and protest the broken elevator, we decided to serve lemonade in the lobby.

Management responded by sending eviction letters to tenants who were serving lemonade.

If you would like to read more about the tenants at 1417 N Street NE (the Norwood), please visit our blog at:

Keith said...

Yours is one of those stories that makes you wonder how some people can look at themselves in the mirror without flinching.