Attorney General Settles with Developer for Concealing Prohibited Rent-Controlled Tenant Buyouts

New York Attorney General Eric Schneiderman speaking at New York Law School, March 18, 2014. Image credit: New York Law School

New York Attorney General Eric Schneiderman speaking at New York Law School, March 18, 2014. Image credit: New York Law School

Upper West Side developer must pay $540,000 dollars in settlement costs. On June 6, 2016 New York State Attorney General Eric Schneiderman announced reaching a settlement for $540,000 with 165 West 91st Street Holdings, LLC for the loss of two rent-controlled apartments in an Upper West Side building, while it was being converted into a condominium, as a result of prohibited agreements to buy-out tenancy rights. The LLC owns an apartment building at 165 West 91st Street in Manhattan.

Under the New York State Martin Act, a developer of a condominium must first submit an offering plan the Attorney General to make sure it contains all necessary disclosures to allow potential purchasers to make the best judgment. In addition, a tenant who occupies a unit at the time the plan is accepted for filing by the Attorney General has an exclusive right to purchase the unit they occupy for a period of ninety days. Under the plan submitted in this case, tenants in buildings cannot be evicted purely because the building is being converted.

The Attorney General’s Office’s investigation into the building located at 165 West 91st Street revealed that the developer entered into two prohibited buy-out agreements after being approached by tenants. The buy-outs were completed before these two tenants had a chance to exercise their exclusive right to purchase their units. As such, because the buy-outs were completed before the offering plan was accepted by the Attorney General, they were prohibited by law. Because the two tenants who accepted the prohibited buy-outs live in rent-controlled units, the buy-outs prematurely removed these two apartments from rent regulation. The developer for 165 West 91st Street attempted to conceal these buy-outs.

Under the settlement, the developer will compensate the City for the loss of the two rent-controlled units by depositing $490,000 into New York City’s Affordable Housing – AG Settlement Fund. The fund was established in June 2014 to help finance affordable housing for low-income. The developer will also pay New York State $50,000 in costs. A full copy of the agreement can be read here.

“With many struggling to find affordable housing, my office will not tolerate real estate developers who circumvent laws designed to protect rent-stabilized units,” Attorney General Schneiderman said. “I am pleased that this agreement will directly benefit hardworking New Yorkers by allowing for the creation of additional affordable housing units which will boost our communities.”

Assembly Member Daniel O’Donnell said, “I commend Attorney General Schneiderman’s settlement on behalf of two formerly rent controlled tenants. The loss of rent regulated housing in my district is striking — any and all attempts to bring units back into regulation are appreciated. Barring that, settlements like these are important to at least assist the tenants who have lost these units. The incentive to break the law for huge profits must be eliminated. The AG’s actions will hopefully send a strong message to owners that breaking the law does not pay.”

“A number of tenants from this building came to our office for help with tenant harassment,” said Council Member Helen Rosenthal. “Thank you Attorney General Schneiderman and your elite team for demonstrating that there will be a price to pay for property owners who blatantly disregard our housing laws. So many New Yorkers are in great need of affordable housing, and it’s appalling that some landlords will stop at no end to take back rent-regulated apartments. I hope this sends a clear message.”

By: Brian Kaszuba (Brian is the CityLand Editor and New York Law School Graduate, Class of 2004).

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