Chelsea Co-Op Tenants Face Doubled Rents

Rent-controlled tenants at four buildings in the Chelsea section of Manhattan may have their rents doubled if the state Division of Housing and Community Renewal approves their landlord’s hardship application for rent increases.The owner/sponsor of the four “Four Corners” buildings, 405 and 465 West 23rd St. and 410 and 470 West 24th St., has applied for the exemption from rent control on the grounds that he will not be able to make an 8.5 percent return on capital value for each apartment in the buildings unless the 93 rent-controlled tenants pay twice what they pay now. State law allows landlords “hardship” increases if they can prove they are not making this minimum profit.

The landlord converted the four buildings to a co-op in the mid-1980s and holds the shares allocated to the unsold apartments. The application contains about 100 pages of financial data which shows a purported deficit between the co-op expenses of each apartment and the rent. Many of the co-op costs are inflated and artificial, including payments on a $20 million mortgage that the owner/sponsor “gave” to the co-op and $10 million in “improvements,” which were inducements to help sell co-op apartments.

These four buildings could be a test case affecting thousands of rent-controlled and rent-stabilized tenants who live in converted buildings where the former owner/sponsor can come up with similar numbers and use them to claim hardship increases.