Landlord to Pay Back Tenants $10M
Posted by Laura Wheeler on Mar 16, 2008 - 4:52:01 AM
HOLLYWOOD—A Los Angeles court has ordered a landlord to pay $10 million in civil penalties and restitution to his former tenants and to the city. The settlement stems from a 2006 civil suit that accused Darren Stern, the owner of Landmark Equity Management, of illegally forcing tenants to vacate rent-controlled apartments in order to raise rents. Stern has also been banned from the L.A. residential rental market for the next four and a half years. He must also bring his remaining properties up to code and is forever prohibited from engaging in tenant right violations.
LA City Attorney Rocky Delgadillo Courtesy of lacity.org
In addition to the civil suit, L.A. City Attorney, Rocky Delgadillo, filed criminal charges against Stern for over 30 code violations in three different buildings. Stern was convicted of the criminal charges in May 2007 and spent 150 days in jail.
“We will not tolerate cynical and illegal schemes to drive poor tenants out of their homes and on to the streets,” Delgadillo said in a press release. “When L.A. landlords break the law, they will be held to account for their actions.”
The City Attorney alleged that Darren Stern (also known as Henry Shalom) would purchase rent-controlled buildings only to later harass the tenants and fail to keep properties up to code in order to scare off those occupants. The vacant units could then be rented at a market-rate and the building sold for an inflated profit.
In order to preserve affordable housing, the Los Angeles City Council passed the Rent Stabilization Ordinance in 1978. The ordinance limits rent increases to 4 percent per year, it restricts terms of eviction and it requires the landlord to pay relocation fees when making renovations. For the most part, the ordinance does not apply to new tenants. If a landlord legally vacates a rent-controlled apartment, the rent can then be raised to market price. Unless the previous tenant left voluntarily or was evicted for non-payment or lease violation, the residence is still protected by the Rent Stabilization Ordinance.
Landmark Equity Management owned over 800 rent-controlled properties throughout Los Angeles. The Huntington Hotel was just one of the examples of neglect that the City Attorney cited against Landmark Equity. The County Health Department and the LAFD have cited the Huntington for numerous code violations dating back to 2003. The most recent infractions included extensive vermin infestations, detrimental plumbing, and a fire in 2005.
Some Landmark tenants from Hollywood and Sherman Oaks have posted their experiences on the website consumeraffairs.com. Many complained of faulty wiring and plumbing, unsanitary corridors, vermin, broken fixtures and appliances, broken mailboxes, and so on.
Darren Stern (aka Henry Shalom), might have learned these business practices from family members on the East coast. The Shalom clan operates several property rental companies in New York in exactly the same way Stern managed Landmark Equity Management. Bullied tenants of the Shalom family have formed the Shalom Tenants Alliance (STA) to help spread awareness and inform tenants of their rights. A STA spokesperson says, “We are all thrilled to see at least ONE Shalom go down, but there's still a whole rat's nest of Shaloms here in NYC.”
The STA representative says that the Manhattan District Attorney's office has been investigating the Shaloms for three years with no result. “The Manhattan District Attorney handles only criminal cases, and it appears the bar is very high when it comes to defining the Shaloms's behavior as criminal. For the most part, the Shaloms's practices seem to be ”˜civil matters.’ In NYC, ”˜civil matters’ pretty much mean ”˜you're on your own, and good luck going up against the landlord's army of lawyers.’" The STA are hopeful that the L.A. City Attorney’s successful cases against Henry Shalom/Darren Stern will shine a bright light on NYC's failure to protect or defend tenants against unscrupulous landlords.
Darren Stern has not been available to comment. The phone lines at Landmark Equity Management have been disconnected and Stern’s Lawyer, Steven Toscher, has also been unavailable for comment. However, in the last two years ten of Stern’s buildings have been brought into compliance and ten buildings have been sold.
Barbara Shultz of the Legal Aid Foundation of Los Angeles said in a press release, “We are encouraged by the City Attorney’s decision to prosecute a slumlord who owns many properties in Los Angeles. This case signals that mitigation of slums in Los Angeles is a priority for the City Attorney. We look forward to his enforcement of the significant settlement to improve the lives of tenants forced to live in deplorable conditions.”