“I Cannot Arrest An LLC”

by Thomas Breen | Oct 4, 2019 7:46 am

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Posted to: City Hall, Housing, True Vote

The city has the legal power to take slumlords to court — if it can find them, behind the veil of limited liability corporations. That housing code enforcement conundrum emerged Thursday night over the course of a nearly two-hour public workshop about the concentration of large-scale landlords in the local affordable housing market. Held by the aldermanic City Services and Environmental Policy (CSEP) committee in the Aldermanic Chambers on the second floor of City Hall, the informational workshop was the first of two planned committee discussions of the topic, with the second scheduled to take place at CSEP’s next meeting on Nov. 14. Livable City Initiative (LCI) Deputy Director of Housing Code Enforcement Rafael Ramos, LCI Deputy Director of Neighborhood and Property Services Frank D’Amore, and Fair Rent Commissioner Otis Johnson told the alders throughout the meeting that the city already has a fair number of enforcement mechanisms in place to protect tenants and punish landlords who fail to maintain their properties. Those include housing code compliance orders and daily fines associated with the recently revamped residential licensing program, landlord-tenant complaint hearings and rent reduction orders that can be issued by the Fair Rent Commission, building condemnations and tenant relocations that result from the city identifying a property as structurally unsafe, and even arrest warrants for landlords who criminally endanger the lives of their tenants by violating local and state housing safety laws. Ramos said that each month his department issues around 25 arrest warrants for housing code violations. Those warrants are subsequently passed along to and adjudicated by the state court system. Ramos and D’Amore also said that, all too often, they struggle to issue said warrants because of how difficult it can be to figure exactly who owns any given property. Large-scale landlords frequently own properties through holding companies, or limited liability companies (LLCs), Ramos said, which protect individual owners from business liabilities and shield individual landlord names from public view. Although all business owners must register their LLCs with the Secretary of the State’s office, they can bury their names through such loopholes as listing a Delaware-based LLC as the Connecticut company’s official manager. Since Delaware doesn’t require businesses to make public the names of individual business managers, the actual people associated with a company can remain hidden from view. “When it comes to code enforcement,” Ramos said, “I cannot arrest an LLC. I have to have a name. I have to have a principal.” Business manager referrals to Delaware make it all but impossible for city officials to definitely identify a person responsible for a property-holding company, even if the city generally knows who that might be. “I know it’s you,” he said. “But I can’t arrest you.” “Landlords in general are crafty,” D’Amore added. “A lot of them hide behind LLCs.” In Connecticut, he said, businesses have to disclose information only about managers and “agents.” Simply owning a property does not trigger that disclosure requirement. Furthermore, he said, the state does not require that businesses disclose up-to-date contact information for their managers. A years-old city law that is still on the books calls for landlords to provide phone numbers and other contact information to the city assessor’s office, he said. But, due to limited city resources, that law has never been fully enforced. “It might be a question of lobbying at the state,” D’Amore suggested, in order to increase the transparency of local-landlord LLCs. “It’s a challenge for us constantly to find the actual person that owns the property.” Is it possible to license the property managers and not just the property owners? Prospect Hill/Newhallville Alder Steve Winter asked. Since large-scale property management companies are often majority owners (or business partners) of the more obscure LLCs that legally own those properties, perhaps a broadened licensing program could lead to more accountability? The city licenses properties, not property owners, Ramos clarified. All city housing records are organized by address, not landlord. Even if the city could license property management companies, D’Amore said, those change so frequently for any given property that the city would likely spend a disproportionate amount of time and energy chasing down the latest management company for a particular address. Johnson proposed a number of tenant-protection policies that he said he has been championing for years. The city should institute a “mandatory lease” policy, he said. So many tenants he meets and hears from have no written agreement at all with their landlords. The city should implement some kind of law around rent payment late fees, he said, which he has seen range from $50 to $350. And the city should require entrance and exit housing code inspections, so that landlords can’t blame tenants for problems with an apartment that existed well before that tenant moved in. “Rental housing is extremely unregulated,” he said. “Extremely unregulated.”

“We Have A Crisis” While the workshop did shine a light on some of the city’s housing code enforcement tools and the challenges associated with using them, it offered little insight on the topic ostensibly at the center of the hearing: The role, breadth, and influence of large-scale private landlords in the existing affordable housing market. The workshop stemmed from a communication submitted to the full Board of Alders by East Rock Alder Charles Decker, Hill Alder Ron Hurt, and Beaver Hills Alder Jill Marks calling for a public hearing about how much of the city’s existing low-income rental housing is owned by a relatively small set of large-scale private landlords, and about living conditions in those units. At the beginning of Thursday’s hearing, Decker reiterated his primary motivation for calling for such a meeting. The Affordable Housing Task Force‘s final report, he said, found that “large-scale, industrial landlords that often own units through LLCs and other opaque ownership vehicles” are steadily buying up more and more properties in the city that were previously, and could still be, homeowner-occupied residences. “It’s clear that we need a better understanding of the affordable rental market,” he said. And then he laid out a handful of questions he would like this workshop to address. Who are the largest landlords currently in New Haven? Are their holdings increasing? Do the data on the landlords include LLCs and other subsidiary organizations? How does the quality of the units owned by these industrial landlords compare to units in the same neighborhoods that are locally owned or owner-occupied? When units are found to be unsafe or of poor quality, what tools does the city have to address these problems and what further tools could help the city improve these units? Only the last question was truly address during Thursday’s hearing. The first four were touched upon by committee alders expressing long-simmering frustrations with negative consequences they associate with large-scale landlords in their neighborhoods. At nearly every turn, Ramos, Da’Amore, and Johnson cautioned against any kind of selective enforcement of housing code regulations against one kind of landlord vs. another. “We have these large company landlords,” Hill Alder Ron Hurt said. “They charge a great amount of money for rent, but are not doing the property or the tenants any justice by keeping up the property.” They take advantage of low-income tenants, he said, because the latter often have nowhere else to go and fear retribution or eviction if they speak out about dangerous conditions. “We have a crisis in New Haven,” he said. “And it must be addressed.” Newhallville Alder Delphine Clyburn agreed. She was the only alder Thursday night to reference any specific landlords by name, singling out Mandy Management, Ocean Management and Pike International as contributing to poor conditions in her neighborhood’s rental market. “You wouldn’t believe the mountain of money these landlords get from our government” through participation in Section 8 federal housing subsidies, she said, “and they’re not willing to do anything.” “I think we really have to go into their pockets,” she continued, “and let them know, ‘You are not getting this money.’” Ramos cautioned that he has no evidence that those particular players are any worse offenders than smaller-scale landlords when it comes to housing code violations or tenant complaints. He implored Clyburn not to target one landlord over another without that data. “I don’t think we can single out groups of landlords by how many units they own,” he said. “Whatever we impose on A, we have to impose on B.” He also pushed back on Hurt’s description of large-scale landlord rental holdings in the Hill as a “crisis.” “How can you say it’s a big crisis without the data?” he asked. So that’s what Hurt asked for. The number of housing code compliance orders sent out by LCI over the past year, as broken out by neighborhood. Initially, he asked for that info by landlord too. Ramos said that, based on the way the city keeps track of property violations, that latter request is simply not possible. Violations are tied to a particular address and that address’s unique landlord. With so many different shell companies masking the true names of landlords throughout this city, putting together a complete list of violations by landlord would be an extremely trying task. In a four-page written statement submitted as public testimony to the committee, local attorney Ben Trachten criticized the very premise of the workshop, arguing that its focus on select large-scale landlords and not on housing conditions throughout the city was narrow to the point of being discriminatory. The original letter from Decker, Hurt, and Marks calling for this public hearing singled out Mandy Management and Pike International by name. “It is no secret that Mandy Management and Pike International are owned by observant Jewish local families,” he wrote. “By initiating a workshop that singles out two Jewish businesses you guarant[ee] that the outcome is tainted by claims of anti-Semitism.” More importantly, he continued, in his extensive exposure to the New Haven housing market through his work as both a landlord attorney and as court-appointed conservator for some of the city’s most vulnerable citizens, he is not convinced at all that the big landlords are the source of dangerous housing conditions in New Haven. The fatal fire at 150 West St., for example, was owned by a single, out-of-state landlord. “Start over,” he wrote. “Perpetuating an inquiry that in any way stems from an anti-Semitic place is contrary to the values we all share. Next, figure out if there really is a problem by soliciting testimony from LCI inspectors (not the Director), the Housing Court Prosecutor, and the Housing Court Chief clerk. These people are on the front lines and know what’s going on in the community. If there is a problem, bring in all the housing market participants including public and private landlords for discussion. Focus on facts and not the emotional pleas of a minority of tenants that have problems. Ignore the media.” Click here to download Trachten’s full statement.

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posted by: alex on October 4, 2019 8:08am Thanks to the new slumlord protection law passed by State Representative Steve Stafstrom, Senator Gary Winfield, Senator Martin Looney, et al. (Public Act 19-181), it is a lot easier to hide behind these LLCs, especially financially. The law was signed by Lamont on July 1. “It might be a question of lobbying at the state,” D’Amore suggested, in order to increase the transparency of local-landlord LLCs. “It’s a challenge for us constantly to find the actual person that owns the property.” Thanks to CT Senate Democrats & Connecticut House Democrats, we actually have even LESS accountability and transparency for slumlords! We have less accountability than we did last year. State Democrats, with a near super majority, passed this new law with no transparency, no public testimony, and no debate. No legislator has responded with a single defense of the law in writing except Stafstrom, who represents LLCs like this in court. His explanation was that it helps mom and pop stores, but couldn’t give a single example of one with “nesting dolls” of LLCs like these slumlords. Other legislators have only offered to “talk over the phone” or “talk in person” about it. No thanks, respond in writing! Read more about the slumlord law Democrats don’t want you to know about: https://www.facebook.com/ataubes/posts/10156676500201200

posted by: BevHills730 on October 4, 2019 8:23am If reporting on Attorney Trachten’s comments on low income housing it might be worth his advocacy for school and community segregation in this paper’s comment section. It could be also noting his attacks and vicious descriptions on the poor in the comment section here.

posted by: dad101 on October 4, 2019 8:28am When if EVER is the CITY going to be held to the same standards they aspire to hold everyone else to? LCI does NOT inspect city owned apartments. They don’t fine them for their horrendous code violations! Church street was a perfect example of how the city selectively enforces.It was NEVER inspected like the local multi family homeowner is. Such OBVIOUS decay : city inspectors, fire dept, health dept, lci ...all drove past it for YEARS/decades without doing ANYTHING until it literally sent people to hospitals & court rooms in bulk.

Ok now TENANTS..you want to put caps on lat fees ?how about the city stop adding late fees to every single thing that have their hands in..there was even a song made about I dont have my rent but I am still going to the club…Tenants many not all don’t care about paying on time until their is a fee that will impact them..we use a 10% of your total rent because 25 or 50 dollars fee is nothing. It’s not a priority because the system takes so long to remove them they can be late or not pay at all for MONTHS before anything is done..Unlike a utility ,car repo or cell phone that they feel the impact quickly so they make more of an effort to pay. There is a HUGE difference between a landlord that owns 50+ units verse a landlord who owns four. The impact and their abilities are on completely different scales so to suggest they have to be addressed and identified the same is absurd. THe government doesnt address its own issues the same and they dont even hold themselves to the same or higher standard and the excuse is always how many units they are responsible for and the budget allotments for certain repairs ..well guess what when you have a tenant or two not paying rent on time or not at all and you have a few units your ability to make repairs is impacted . make tenants more responsible LEGALLY then you can enforce owners to be more responsible. When tenant doesnt clean stove and land lord is held responsible by LCI you think thats right?

posted by: Paul Wessel on October 4, 2019 8:39am I hope the next workshop includes lawyers from Legal Aid and Yale Law School versed in the field, as well as some legislators who can talk about what statutory and regulatory changes would be helpful. Would also be great to have someone knowledgeable about municipal best practices. This is not a problem unique to New Haven. The Alders too might consider in their budget setting capacity some of the institutional deficits in more aggressively enforcing existing and new policies.

posted by: alex on October 4, 2019 9:35am Maybe Senator Looney can testify why, given all the bills that could have helped New Haven, he chose to advance Public Act 19-181 to protect slumlords and other LLCs. As a member of the powerful and shadowy Screening Committee, he undoubtedly had to bless the legislation for it to pass.

posted by: BFLY on October 4, 2019 11:00am @ Alex You do know TH’s son is allegedly a slumlord amongst others and not just in New Haven:

1. 91 Rosette Street New Haven back when her late husband failed to notify 174 tenants of possible lead paint in their apartments and was fined $32000. This condition of this building displaced Seniors..2012 2. Presidential Gardens on Hazel/Dixwell/Shelton is looking pretty bad these days with previous complaints on security and living conditions…2014 and current. 3. Legion Woods is rat infested, with a ceiling collapsed from a leak that was reported and not fixed. There are other unattended concerns from unbearable conditions at the complex ..2018 4. Capitol Plaza Apartments Main Street Ansonia…major pipes burst. Also they found multiple safety code violations and condemned the building displacing 60 seniors. Jan 2019 (this was on the News but later hushed)...hmmm 5. Beechwood Gardens, which the Harps property managed that HUD property and ran it to ground until the Vesta Group took over in 2016. They also determined a woman stole $150000 from the tenants. 6. Conrad Drive look like ...nevermind those property owners abutting this property and next door are the ones I feel sorry for. Like you said before you do not own a property, so the pain of a slumlord next to your property you cannot speak on. So if the city has the power to take slumlords to court it should start with M Harp behind his veil of multiple LLC’s and LLP Abacus, Renaissance, Collaborative Renaissance and any other corporation registered at 300 Whalley Avenue Suite 3.

You get my point you want to blame the Senators instead of blaming the source like TH whom benefited from the slumlord activity.

posted by: alex on October 4, 2019 11:21am BFLY, Someone should take them to court… I support that. But it’ll be a lot harder thanks to our Senators’ new law, Public Act 19-181, which makes it harder to sue that web of LLCs and LLPs. Interesting how people attack Mayor Harp for her late husband and son’s business but it’s off-limits to talk about her opponent’s wife and her work.

posted by: BFLY on October 4, 2019 12:31pm @Alex You do realize this Public Act protects Matthew too.. You put your political agendas out with the intent to protect the mayor…but little research or adopt deliberate ignorance….there are articules out on the web especially written by NHI that you choose to ignore and post on the campaign page the attack on Mayor Harp… Telling the whole story will set one free.

posted by: BFLY on October 4, 2019 12:53pm Alex, The people campaign has a whopping 180 members to date comprised with non-New Haven residents. While NHI has a 11977 followers, whom follow this page daily and enjoy the articules written and can distinguish when someone is telling a one-sided story. Thank you to NHI team for telling the story whether good or bad. Elicker based his campaign on facts, ethics and transparency and that’s why he is going to win. People of New Haven are tired and now it’s time to heal. There are also two sides to every story people just do not believe what they hear.

posted by: Russia Exit Crimea on October 4, 2019 2:45pm The property on the corner of Ward and Davenport was neglected all summer. last Wednesday I called City Hall and by Tuesday there were two trucks and several guys cleaning it up. I think one of the trucks had LCI printed on it. I wish I wrote down the persons name, who answered the phone and solved the problem. She was a tremendous help. City Hall does have some caring employees.

posted by: NewHavenerToo on October 4, 2019 5:51pm The principals behind LLC’s registered in Ct can be found on this site: https://www.concord-sots.ct.gov

posted by: cellardoor on October 4, 2019 8:06pm Nothing could be more alienating and discouraging toward public education and participation than the acoustics and layout of the Aldermanic Chambers. A person with a merely mild hearing impairment can expect to hear about 40% of what the participants say in their testimony (who mumble into poorly functioning microphones with their backs turned to the audience). But maybe that is intentional?

posted by: Ben Trachten on October 4, 2019 11:40pm @Paul Wessel Yes, let’s look to Yale Law School for the answers. Forget that they are the most disconnected, elitist entity around; they have a monopoly on knowledge. Surely, they’ve thought deeply about these issues and their academic theory should trump fact and common sense. Let’s disregard experience and the testimony of the people on the front lines who deal with the issues like LCI and the Code enforcement prosecutor. Let’s go right to them for guidance. Great plan. And let’s let Legal Aide lead the discussion. I support their work but they’re one voice with an agenda. And we know what they advocate. And their new push into aggressively funded community organizing is a truly alarming development. In my opinion. I say this with all due respect. I know you mean well and the work of legal aid is important. @alex Public Act 19-181 lowers the evidentiary standard for veil piercing to a preponderance of the evidence from clear and convincing while adopting the instrumentality test exclusively. Is it fair to allow piercing when a company fails to file annual reports but is otherwise compliant? No. Many SMLLC’s have no idea that annual reports are necessary, paying the business entity tax is required, etc. they are otherwise compliant and shouldn’t be pierced absent fraud. This act makes Connecticut a competitive place to do business where companies can rely on statute for protection. Like many other states. Larger landlords are more likely to have insurance and broader coverages so veil piercing will never be required for casualty losses like fire, death, dismemberment and other PI cases. There’s no need to go after the individuals when a third party is paying the claim. Right? What am I missing? This bill is not the savior of slumlords. @BevHills Why do my prior comments about education (that you interpret to be offensive) make me permanently branded/tainted and irrelevant? What are you adding to the discussion? Aren’t we a “second chance society”???

posted by: BevHills730 on October 5, 2019 3:46am Ben, I haven’t seen many people commenting here advocate for school segregation and attack New Haven’s students in the way that you did. Weeks later you went on to stereotype and attack the poor, while rationalizing community segregation. It is precisely the poor who have most of the struggles with rising rent and negligent landlords. A tragically large percentage of our residents pay over half of their income to live in substandard housing. Your repeated attacks on the poor in this city are helpful for me in evaluating your advocacy for landlords and arguments that developers don’t have a responsibility in addressing this crisis. This context might or might not be helpful for others.

posted by: alex on October 5, 2019 7:18am Ben you’re missing a lot. First, I don’t know where you got the clear and convincing evidence standard getting lowered. The standard has always been preponderance of the evidence. Second, as you well know insurance companies don’t always pay out claims. Especially when it’s a slumlord who is finally being held accountable. Third, just because you think a slumlord shouldn’t be penalized “absent fraud,” doesn’t make it so. There are a lot of evils and injustices out there that don’t amount to fraud but that are still bad and require compensation. It’s also rich for you to talk about agendas and conflicts of interest. Sir you represent landlords all over town.

posted by: alex on October 5, 2019 7:40am NewHavenerToo, The problem is if CONCORD leads you to an LLC registered somewhere else. The “officers” of an LLC are allowed to be other…LLCs.

posted by: Ben Trachten on October 5, 2019 9:32am Alex Link

https://www.cga.ct.gov/asp/cgabillstatus/cgabillstatus.asp?selBillType=Bill&bill_num=HB07340 Preponderance of evidence is a lower standard. See prior iterations of the bill where clear and convincing was proposed. . Overall, this is not a substantial change to existing law. I represent many tenants too. The media doesn’t report on that stuff. It’s not juicy like development.

posted by: alex on October 5, 2019 12:29pm Ben, It’s troubling I have to explain this to you given that you’re a lawyer. The standard has always been preponderance of the evidence. Yes, other versions of this bad bill would have increased the standard. Other versions were even worse. That does not make this a good law. You may represent tenants but how much of your paycheck comes from it?

posted by: alex on October 5, 2019 12:32pm This bill abolished a doctrine that exists only to preserve justice and equity that has existed for hundreds of years. It also abolished a new doctrine, reverse veil piercing, which was only beginning to be used to make justice in situations where insolvent companies commit bad acts. This is a huge change in the law. It ties judges’ hands.

It protects ill-gotten assets.

It promotes corporate confusion and obfuscation.

It denies victims’ justice. Attorney Trachten, you’re just wrong. Plain wrong.

posted by: Jane2 on October 7, 2019 5:23pm I see there are a couple of lawyers commenting here so maybe they can tell us. Why can’t the state’s attorney charge an LLC? Does the law specifically say the LLC can’t be charged with a crime? They have the entity that owns the property, usually an LLC. Charge the LLC

posted by: Jane2 on October 7, 2019 5:26pm I see there are a couple of lawyers commenting here so maybe they can tell us. Why can’t the state’s attorney charge an LLC? Does the law specifically say the LLC can’t be charged with a crime? They have the entity that owns the property, usually an LLC.

posted by: Jane2 on October 8, 2019 10:45am I’m referring to this, from Ramos: “When it comes to code enforcement,” Ramos said, “I cannot arrest an LLC. I have to have a name. I have to have a principal.” Why can’t housing code prosecutors just summon the LLC itself?