ANOTHER OWNER ALLEGEDLY SKIRTED LAW'S REQUIREMENTS
Newman Ferrara recently filed a lawsuit against the Lightstone Group, a Manhattan-based real estate "investor, developer, lender, operator, and owner," over alleged misconduct at Gantry Park Landing, an apartment building located in Long Island City, Queens.
The suit, filed on behalf of several of the building’s tenants, accuses Lightstone of skirting the requirements of New York’s 421-a Program -- which gives significant tax breaks to property owners if they agree to provide rent-stabilization protections to their tenants. As part of that process, landlords must subject their residential units to New York’s rent laws and must register the apartments’ initial rents -- the amount the tenants are paying -- with state regulators, including the New York State Division of Housing and Community Renewal. Future rent increases are then capped at a percentage off of that initial rent amount.
The complaint, filed with the Queens County Supreme Court, alleges that Lightstone illegally manipulated rents by registering a significantly higher sum than what the tenants were remitting, with the difference purportedly offset by “concessions” and “free” months of rent. This methodology allowed the landlord to take market-rate increases and to treat the apartments as if they were deregulated; all while garnering millions in tax benefits and assuring the government regulators that it was following the pertinent laws and rules.
For example, one tenant involved in the lawsuit had a registered rent of $3,525 per month, but was only paying $2,750 after the concessions were factored in. Under the program, Lightstone was only permitted to increase the rent by 3.25%, but, per the lawsuit, wrongfully increased the rent to $3,717 – an increase of over 30%.
In an article released by Crain’s, Lucas A. Ferrara, a senior partner at Newman Ferrara, commented about the litigation and was quoted as saying to the outlet, “Given the prevalence of all the cheating and the unabashed skirting of the requirements of the rent laws, our courts need to send a clear message that these kinds of shenanigans will not be tolerated.”
While popular in the real-estate industry, the 421-a Program has been widely criticized by lawmakers and tenant advocates as a landlord-friendly boondoggle that has done little to ease New York City’s housing affordability crisis. Lawsuits, like this one, will hopefully go some way towards righting that imbalance.
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Crain's coverage of the lawsuit can be found here: Long Island City landlord accused of 421-a violations (subscription required)
The Real Deal's coverage of the Crain's piece can be found here: Lightstone is latest target .... (subscription may be required)
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Our thanks to Myles Ganther for his assistance with this article.