Legacy Lease
Patricia O’Grady moved to New York City in 1955 with the dream of becoming an actress. Along with three friends she rented a two-bedroom apartment on the top floor of a mixed-use building in Greenwich Village. As the years went by roommates came and went, but Patricia stayed put.
She studies with the legendary acting teacher Uta Hagen, and eventually landed some small roles in soap operas, along with some uncredited appearances in a few films. The work kept her busy. But she never earned much. Fortunately for Patricia, she didn’t need to.
In 1942 Franklin D. Roosevelt signed the Emergency Price Control Act. The American economy, thanks to wartime production needs, was booming, and the act was put into place to stave off inflation. In 1943 the Office of Price Administration froze rents in New York City at their March 1, 1943, levels. When the act expired in 1947 it was replaced by the Federal Housing and Rent Act. The new act exempted new construction, but existing buildings, like Patricia’s, were still subject to regulated rent controls.
New York regulations allow for a landlord to raise rents 7.5% every two years. When Adam Pomerantz purchased the building across the street from his Bagel shop, he knew there were still some units in the building subject to the regulation.
When Patricia and her friends moved into the apartment in 1955, they paid $16 a month for rent. When Pomerantz bought the building in 2002 her rent had risen to just $26.45 per month.
When Pomerantz asked his lawyer if this was legal, he was advised that it was, because of those rent control laws, but that he could raise her rent by $1.98 a month.
He did raise the rent and followed that up by asking Patricia if she would consider moving out. She replied, “No I would not, and please don’t ask me again Mr. Pomerantz.” The two quickly formed a friendship, and Pomerantz never raised the rent again. When Patricia was tragically struck by a car and killed in 2018, she was paying just $28.43 a month for her two-bedroom apartment in one of the most desirable areas, of one of the most expensive real estate markets in the world.
While Patricia's story is extraordinary and showcases the extreme end of what rent control and regulations can lead to, it also serves as a powerful reminder about the importance of routinely checking and ensuring that you are getting the best deal. Patricia, through no cunning negotiation or deliberate action, found herself in a situation where she was paying far below the market value for her apartment. This was due to a unique combination of laws and the passage of time. But the underlying lesson here can be applied to many areas of personal finance.
In our daily lives, there are expenses we incur that can easily go unchecked. Services and bills that we pay, from cell phone packages to internet services, insurance premiums to subscription services, often undergo changes in pricing structures or offer newer, more cost-effective plans. Over time, without us realizing, the costs can inch up, or better deals can emerge that we're unaware of. Patricia's rent went up at an extremely slow pace due to regulations, but how many of us can say the same about our various monthly bills?
The act of routinely checking and shopping around for better deals can lead to significant savings. It's not uncommon to find that your insurance company has a better rate available, or that by bundling services, you can save a chunk of change. Perhaps there's a newer cell phone plan that offers the same benefits at a reduced price or a promotional offer that you can take advantage of. The key is to not get too complacent and to periodically review these expenses.
Pomerantz’s interaction with Patricia led him to the surprising discovery that he was charging far below the market rate. Similarly, by taking a little time every year to assess your recurring expenses, you might discover you're paying more than you need to. As consumers, we have the power and the tools available to ensure we're getting the best bang for our buck.
Just as Patricia's situation highlights the importance of being aware of regulations and market values, it also sheds light on the financial benefits of periodically reviewing our outflows. In an ever-changing market with evolving offers and deals, it's crucial to ensure you aren't overpaying. Taking a few hours every year could lead to substantial savings, ensuring you're as astute with your finances as Patricia unintentionally was with her rent. Don't let complacency cost you; ensure you're always getting the best deal.