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Owners pay for zombie tenants.

After matching death certificates to tenant files, the city has uncovered scams in which relatives of dead senior citizens continued to receive their rent subsidies.

But instead of going after the tenants who falsified the certification forms to claim the rent benefits on behalf of their zombie relatives, the city is seeking return of the funds from the building owners, who had been granted earlier property tax relief.

In one case, said Dan Margulies, executive director of the Community Housing Improvement Program (CHIP), a middle market owner's group, the owner only learned the senior citizen had died in 1992 after beginning a non-payment action for unpaid rent.

When the other relatives living in the apartment insisted she couldn't make the court appearances because she was in another state, it took the judge to find out the state was spectral, and not Connecticut.

"The relatives couldn't even pay the tenant's portion of a rent and they certainly can't pay the judgement," said Margulies.

So while the owner was able to obtain possession of the unit, he is out the rent. But to add insult to injury, SCRIE was notified and is now hounding trim for nearly $10,000 in subsidies - going back to 1992 - which they granted him on the basis of the relative's fraudulent actions. Margulies said the owner is appealing.

"Why should the owner suffer when the fraud resulted from the city's approval of the application?," he added.

It's the tenants who fill out the forms attesting that they need the financial assistance and listing the occupants of the apartment and their income, and the owners no longer have a part of the process.

In the past, the owners were asked to verify the information, but that hasn't been the case for at least a half dozen years.

Margulies thinks one way to fight the problem is to let owners know who is being listed as actually living in the apartment.

But it's exactly that expected knowledge of the owner about who is living in their apartment which had Judy Johnson, who heads up the Department for the Aging's (DFTA) SCRIE Unit, defending their practice of now trying to obtain refunds of the city pay-outs from the building owners, and not those who fraudulently filled out the forms.

She believes that owners should be proactive in notifying the unit if they believe the occupants are not eligible for SCRIE assistance, or if they know the eligible senior citizen has died, and SCRIE would then begin an appeal process to review the applications.

"There is a responsibility of the owner," she said. "They have 30 days to notify the city after the death of the tenants. The owner is in the best position to know who is residing in their units. "

Besides, she says, the city's "legal mechanism" to reclaim the already applied abatements is from the block and lot to which they were issued.

But the only punishment for the tenant is to revoke the Benefits when the tenant is ineligible, and Johnson says that becomes effective the first day of the first month following the date of death.

"There is a statement on the application itself that every applicant is required to sign, and it attests to the best of their knowledge the information is true, and it authorizes the city to contact other public agencies to get information to verify their eligibility ," she explained. "That's the extent to which the tenants would say, `I'm honest and true and heres my information.'"

But after talking with REW, Johnson admitted the SCRIE unit might need some legal backup to keep the tenants honest.

"In terms of punitive damages, we do not have a mechanism to make the owner community happy," she said. "There are a lot of things the legislation is silent about. The deceased tenant issue is also an issue because the statutes are silent about that, too. We would welcome some legislative visions and we are working on promulgating new policies."

The problem of the zombie tenants was brought to light last spring when Johnson had matches made of SCRIE applicants to the Dept. of Health's death certificates.

The matches were made going back to 1990 records and included not only those receiving SCRIE, but those who had applied for it, and also matched Social Security numbers.

In one fell swoop, SCRIE identified about 2,000 cases of ineligible tenants. Most of those, Johnson stressed, were legitimately dead tenants where the surviving tenant was also eligible for the SCRIE benefits, and they were recertified with no loss of benefits to the owner, and in some cases greater benefits to the tenant.

Often, she said, the Social Security number of the deceased tenant was used for the benefits, and that created some of those problems, including, Johnson thinks, instances in which owners have told Margulies the tenants are alive, and not dead as SCRIE claimed.

"People were generally honest, some just didn't pass along the information," she said. "There were a very, very few instances less than a handful - and we did investigate, and in a couple of instances there was inaccurate information the tenant had supplied to us."

In those cases, the SCRIE unit is going after building owners for the return of the property tax credits made after the tenant's death, and Johnson says it's up to the owners to regain possession of the apartments and any monies they are out to SCRIE.

That's just not right, said Margulies who complained, "The tenants were dead and the owners have been getting checks in those tenants' names from the occupants of those apartments, who have been getting a good deal. Relatives or adults have continued to sign the SCRIE forms in the tenant's name, and have benefitted from the ability not to pay rent increases. It is clear the SCRIE unit recertified these tenants from false applications."

In general, older citizens are eligible for SCRIE if the household income is less than $20,000 a year, no matter how many people reside in the unit.

Building owners are then provided with property tax credits equal to the rent dollars lost.

But because the rent stabilized tenants renew each time they renew their lease, and rent controlled tenants re-certify in the beginning of each even year, the SCRIE unit sometimes credits these amounts and then often debits them if the tenant is later found to be ineligible.

Statements Coming

Margulies has fielded many owner complaints, particularly when the owners paid their property tax bill to Finance and then two months later received a bill showing two years of debits and calling for interest due from the earliest date of debit.

When that happened last year, the fact pattern triggered a initial inclusion of the building on the tax lien sale list, to their owner's great consternation.

The ongoing credit and debit problem prompted an industry task force to be set up last year, and together with Finance officials and tax certiorari attorneys, the task force has helped SCRIE identify problems and rectify many.

New Accounting System

Because of the complaints, and on the advise of the task force, the Department of Finance has developed a SCRIE accounting program that will track credits and debits as they are approved by the SCRIE unit, and expects to soon begin providing owners with a regular statement.

Under the plan, owners would be sent a notice of approval or denial whenever a tenant renews their SCRIE benefits or the rent changes. Once the regular monthly transfer of credits has been made from SCRIE to Finance, the owner would receive a confirmation list that would identify the apartment, along with a batch number as a reference.

Finance expects to then send out quarterly round-up statements, and to make tracking easier. These will also contain the same reference batch numbers, so owners can check and balance their accounts.

One problem remains, however, because the SCRIE staff says most tenants do not send back the forms until they have renewed their lease. So even though the tenants are sent the forms approximately 60 days before the end of the lease, they don't mail them back to SCRIE until a month or so after the lease renewal date. Owners would like to be notified as soon as possible that the tenant has not been recertified, but Johnson says they won't make the follow-up mailing - which goes in duplicate to the owner - until two months after the renewal date.

She advises owners to call into the 24-hour SCRIE interactive voice response system at (212) 442-100O, which will allow both owners and tenants to check on the status of their application, which is logged in upon arrival. To ensure privacy, owners and tenants must use the docket number assigned to the case to obtain all information.

Because such technology has allowed the SCRIE Unit to do more with less personnel, they are continuing to make regular matches to the Department of Health, and expect to add other data banks to help prevent this fraudulent activity.

"Now we can present the fraudulent activity, and we are asking for more information than in the past," she said.
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Article Details
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Author:Weiss, Lois
Publication:Real Estate Weekly
Date:Feb 18, 1998
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