NYC Comptroller Scott Stringer. Image credit: Office of the New York City Comptroller
In contrast to the DOI Report, the Comptroller’s Report places personal accountability on City Officials rather than the indoctrinated procedure for deed-modifications. On August 1, 2016, New York City Comptroller Scott M. Stringer issued a Report on the removal of deed restrictions from Rivington House. The Report is the product of a five-month-long investigation conducted by the Comptroller’s Office into the City’s actions in facilitating the sale of the Rivington House—a non-profit nursing home located in Manhattan’s Lower East Side—to luxury condominium developers for a $72 million profit in February 2016.
The Comptroller’s Report was issued less than one month after the Department of Investigation issued its own report. For CityLand’s previous coverage on the DOI report, click here. In comparison to the DOI report, the Comptroller’s Report places less blame on the quality of the legal procedures used in modifying deeds of formerly City-owned property. Instead, the Comptroller’s Report finds that City officials poorly executed the formal, statutory procedures, and their actions impaired the public’s ability to participate and undermined the City’s best interests.
The Report detailed that the safeguards in place should have prevented the City from removing the deed restrictions, but the safeguards had not been implemented well. City Hall was notified in 2014 that the Department of Citywide Administrative Services (DCAS) was considering removing the restrictions about two years in advance. At that time, First Deputy Mayor Anthony Shorris determined that the property should be used as a healthcare facility, but City Hall did not notify DCAS of his opinion. DCAS provided weekly memorandums to First Deputy Mayor Shorris, and in 2015, two of those updates included reports on the status of the removal of the deed restrictions. However, First Deputy Mayor Shorris failed to read those memorandums. Additionally, DCAS based its decisions on an appraisal that undervalued the property by a little more than $25 million dollars. Therefore, DCAS had no reason to know that they should have denied the request to remove the restrictions.
The Mayor’s Office of Contract Services (MOCS) also failed to take appropriate measures. MOCS scheduled a public hearing for members of the public to discuss the proposed removal of the deed restrictions, but it only placed a one-day advertisement in the City Record, which described the property only by its Borough-Block-Lot number, rather than the address or name of the nursing home. MOCS made no attempt to contact people who had expressed interest in or concern over the property nor did MOCS make any serious attempt to notify the public. Only the prospective purchaser showed up for the meeting. Additionally, MOCS signed off on a “Mayoral Authorization Document” authorizing the removal of the deed restrictions, but it did so almost automatically, without performing its own review.
In December 2015, neighbors began contacting the Mayor’s Office regarding the fact that they had heard that Rivington House had been sold to a developer and that luxury condominiums were going to be installed. Not only did City Hall fail to take any action, apparently Mayor Bill de Blasio was not notified.
Meanwhile, throughout the entire deed-modification process, Allure Group’s Joel Landau, who had requested the removal of the deed restrictions, took steps to increase Allure Group’s profit and reduce tax burdens. For example, Landau indicated that the property would continue to be used as a health-care facility, while he negotiated with the City for the removal of the deed restrictions and simultaneously negotiated the re-sale of the property to a private developer for redevelopment into luxury condominiums.
The Comptroller’s Report made three recommendations to ensure that future deed-modification requests are handled in a way that will protect the best interests of the City and its residents going forward. First, the Report suggests that MOCS be more involved in the process. This would require that MOCS actually review requests for deed restriction removals by considering all facts involved, and review the appraisals. Ultimately, the Report suggested that First Deputy Mayor Shorris should be required to personally sign-off before any application for the modification of a deed is approved. Second, the Report suggests that DCAS make sure that the public has a meaningful opportunity for input. This means listing properties by names and addresses in the City Record, and also notifying others who have expressed an interest about the property in question. Third, the Report suggests that City Hall also needs to consider setting clear standards for the definition of the City’s “Best Interest,” so that DCAS can make an informed decision. The best-interest analysis should include a land use analysis, an assessment of the effects of the modification on the community, an analysis of whether the future use of the property is consistent with the City’s goals, and should provide for meaningful input from the community. According to the Comptroller’s Office, doing these things is necessary to prevent similar problems from occurring in the future.
Report of the New York City Comptroller on the Sale of Two Deed Restrictions Governing Property Located at 45 Rivington Street (Aug. 1, 2016).
By: Jessica Soultanian-Braunstein (Jessica is the CityLaw Fellow and a New York Law School Graduate, Class of 2015)
I have been taught that a deed restriction is an interest in real property. If so, sections 384-b-5, 197-c(10), and 197-d of the City Charter seem to say that the removal or modification of a deed restriction by the City is already subject to ULURP.
384-b-5. “Any application for the sale, lease (other than lease of office space), exchange or other disposition of real property of the city shall be subject to review and approval pursuant to sections one hundred ninety-seven-c and one hundred ninety-seven-d. Such review shall be limited to the land use impact and implications of the proposed transaction.”
There is probably a response that has to do with fee interest versus partial interest; however, I do not see that distinction in the City Charter.
Your article stated:
“Allure Group’s Joel Landau, who had requested the removal of the deed restrictions, took steps to increase Allure Group’s profit and reduce tax burdens. For example, Landau indicated that the property would continue to be used as a health-care facility, while he negotiated with the City for the removal of the deed restrictions and simultaneously negotiated the re-sale of the property to a private developer for redevelopment into luxury condominiums.”
In your professional opinion as an attorney, couldn’t these actions on Landau’s part (and the individuals at Allure Group who participated in these actions) be legally considered to be conspiracy to commit a fraud on the city? And if this is possible, and the city or the mayor refuses to bring charges, what other agencies on what other governmental levels (State of NY or Federal) could be brought into play to effect a lawsuit or lawsuits on this?
As an ex ten-year resident of Rivington House the former health care facility at 45 Rivington Street currently under suspicion for fraudulent business dealings, I think the New York City government and particularly the Comptrollers office should be ashamed of themselves for ruining a perfectly marvelous facility for people with HIV/AIDS and turning it into luxury condos. First of all I think the building should be given landmark status since it is one of the few remaining University Settlement Houses on the Lower East Side of Manhattan. I discovered through research that Eleanor Roosevelt taught English in this building to newly arrived immigrants when she was 19 years old! I am very fond of this facility and would like to see it restored to it’s former role in the community and given landmark status.
Thank you,
Richard Rosenberg