Screening Tenants, Even the French


Readers are doubtless familiar with the arrest of the head of the International Monetary Fund, Dominique Strauss-Kahn, for sexual assault on a housekeeper in a Manhattan hotel. Initially denied bail, Mr. Strauss-Kahn was eventually released on $1 million cash bail, with the condition that he be subject to house arrest. Because DSK, as he’s called in France, doesn’t have a house in the United States, he had to find one. He was about to become a renter.

DSK’s wife initially approached the Bristol Plaza, a very ritzy abode comprised of long-term rentals and “extended stay” guests—those who stay more than 30 days. The amenities are grand (“Daily maid service with fresh towels and quality linens!”). The price is steep (reported to be $13,000 per month for an apartment), but no matter—with a lease apparently in hand, the legal team headed confidently to court, prepared to spring their man to the Plaza. But unfortunately for DSK, the building’s residents were unwelcoming. The prospect of round-the-clock security details and swarming media hoards brought them out in force, complaining to the management. The deal was off.

So what happened here, and what lesson can less glamorous landlords take from this episode? Consider the very telling report in the New York Times:

“Mr. Taylor, one of Mr. Strauss-Kahn’s lawyers, said Mr. Strauss-Kahn could have insisted on staying in the Bristol Plaza, but his family decided to withdraw out of courtesy for tenants and the landlord, who he said had raised objections. (A spokesman for Howard Milstein, the chairman of Milstein Properties, which controls the building, said, “Howard is on the West Coast and not aware of this.)”

So it seems that a rental agreement was signed. How can it be that this landlord failed to appreciate the circumstances of the tenancy that it was about to create? Landlords in any state would be on solid ground to refuse to allow their properties to be turned into a private jail, even if the detainee isn’t notorious. The decision is especially curious when one realizes that the same hotel refused to house Bernard Madoff, another house-detainee, for fear of the same media circus and upset tenants. But sign it they did—and Howard, the man at the top, was on the West Coast, blissfully unaware.

Had DSK’s lawyers decided to insist on the deal, the Bristol might have had a hard time getting out from under this rental agreement. To legally void the contract, they’d need to show that they were misled, but management knew the circumstances (DSK’s wife rented two apartments, the second for use by the security detail), so they can hardly claim ignorance of the special arrangements surrounding this tenancy. DSK has enough legal troubles; he hardly needed a fight over a lease contract, so letting it go was clearly the smart thing to do. But a lesser luminary, disappointed at the loss of a fine place to stay, might have dug in. In exchange for agreeing to not move in, such a tenant might have insisted, for example, on the “benefit of his bargain”—the monetary value of the lost accommodations in case he was not able to procure similar digs.

Landlords, take note: Screen well, anticipate problem tenants and avoid them, and keep tabs on what’s happening at your properties.