Agreements Secure Unpaid Wages For More Than A Dozen Building Service Employees; Tenants To Get Legally-Required Rent-Stabilized Leases; $150,000 In Restitution Will Go To NYC Affordable Housing Fund

Schneiderman: Developers And Landlords Will Be Held To Account For Tax Breaks They Apply For And Receive

Attorney General Eric T. Schneiderman announced four settlements with a landlord and three developers who received lucrative tax incentives from New York City under the state’s “421-a” program, which is aimed at encouraging development, but who failed to comply with the program’s prevailing wage and rent-stabilization requirements. The settlements return more than $460,000 in unpaid wages to about a dozen building workers at two buildings. They require that nearly two dozen apartments in four buildings be added to the state’s rent regulation registry. They also provide more than $150,000 in restitution to New York City.

“Tax breaks offered to developers and landlords are not freebies. They come with legal obligations to New York taxpayers – ones that developers and landlords agree to abide by when they accept the tax incentives,” Attorney General Schneiderman said. “My office is dedicated to ensuring that everyone plays by the rules. In this case that means holding accountable those who accept lucrative tax exemptions and then ignore their responsibilities, including paying required wages to building service employees and providing rent-stabilized leases to New York families.”

These agreements are the first to come out of an ongoing investigation by the Attorney General’s Office into property developers and landlords who accept the incentives but fail to live up to legal requirements mandated by the program. Tax dollars recovered from the investigation will go to New York City’s newly established “Affordable Housing – AG Settlement Fund,” and be used by the city’s Department of Housing Preservation & Development to fund housing developments for low income families. New York State enacted Section 421-a of the Real Property Tax Law to spur housing development and affordable housing.

New York City Mayor Bill de Blasio said, “We need to get the most out of every dollar we spend, and it is vital that the people with whom we do business treat their workers fairly and deliver the affordable housing they promise. We won’t stand for anything less. We are deeply grateful to Attorney General Schneiderman for recouping back wages and protecting the affordability of dozens of apartments. We look forward to working together to build and preserve more affordable housing in every community."

New York City Department of Housing Preservation and Development Commissioner Vicki Been said, “I thank the Attorney General for his work and partnership on this issue. These property owners are receiving a public benefit and should be held accountable for complying with the program’s legal requirements. This settlement will ensure that building staff are properly paid and tenants receive the rent stabilization rights to which they are entitled. In addition, the money recovered will help fund affordable housing for low-income New Yorkers."

The four settlements announced today include:

• A $500,000 settlement with 150 Fourth Ave, LLC, which owns a 95-unit luxury condominium, The Arias, located at 150-158 Fourth Avenue, in Park Slope, Brooklyn.

Of the total settlement, $454,082 will go to about a dozen workers, including doormen and porters, to cover wage underpayments. The service workers are owed wages for work in which they were paid $8.50 to $11 an hour, far below the applicable prevailing wage rate, which started at over $16 per hour for a new employee. In addition during the time period in question, the workers did not receive benefits or paid vacation or sick time as required under the prevailing wage law.

The owners paid an additional $45,918 in restitution to the city fund for the tax benefits they received while they were out of compliance, between November 2010 and February 2014. In order to take a tax exemption under the 421-a program, buildings with more than fifty units are required to pay the prevailing wage rate to building service employees, or rent at least half of the building’s units at affordable rates. The Arias failed to offer affordable housing units and failed to pay prevailing wages. The prevailing wage is a rate higher than the minimum wage. It is set annually and required to be paid on certain government-related projects.

• A second settlement, with Tuhsur Development, LLC, in Queens, returns nearly $10,000 to three building service workers for prevailing wages they were not paid by the 63-36 99th Street building beginning in June 2011. The developer also paid $90,000 in restitution to the fund. The developer will further provide leases to three families living in the Rego Park building, who were renting without being offered the required leases from April of 2012 to July 2014.

Two additional agreements were reached with developers who took 421-a incentives and rented apartments in three buildings, but failed to provide tenants with rent stabilized leases, which offer affordability and security to tenants, as required under the 421-a program:

• On Staten Island: Montgomery Development Associates, LLC, will now provide rent regulated leases to families living in the 30-38 Montgomery Avenue building’s 11 units, and has paid $5,500 to the city fund. The developer of “Montgomery Gardens” began renting units in July 2011 but failed to register them as rent regulated units;
• In Queens: B & S Management, LLC, will provide rent regulated leases to eight families in two buildings located at 138-06 35th Avenue, in Flushing. The company began renting apartments in the 8-unit complex in July 2010 but failed to register those apartments under the program. The company has paid $10,000 in restitution to the city fund.

Rent regulated units must be registered with the New York State Division of Housing and Community Renewal.

32BJ SEIU President Héctor Figueroa said, “These settlements should send a message to other 421-a buildings that there are consequences if you don’t follow the law and pay the prevailing wage. We urge developers that are not in compliance to start paying the prevailing wage immediately. This will improve the lives of hundreds of New York residential workers and their families.”

Jose Casillas, a 46-year-old Queens father of three and concierge at The Arias who is among the workers who will be receiving back wages, said, “Getting this back pay will make a big difference for me and my family, especially paying for my daughter’s college tuition. The situation in our building has gotten much better in the last few months since we got our union contract and saw our pay go up to prevailing wage.”

A copy of the settlement agreements are available [ here, here, here and here].

The Attorney General thanks the city’s Department of Housing Preservation & Development, the New York State Division of Housing and Community Renewal and the Service Employees International Union 32BJ for their assistance in the investigation.

The investigation is being handled by Assistant Attorneys General Kevin Lynch, Section Chief Seth Kupferberg, Bureau Chief Terri Gerstein, all of the Attorney General’s Labor Bureau, and Executive Deputy Attorney General for Social Justice, Alvin Bragg. The investigation is also being handled by Assistant Attorneys General Elissa Rossi and Nicholas J. Minella, Special Counsel Jeffrey R. Rendin, Deputy Bureau Chief Andrew Meier, Bureau Chief Erica F. Buckley, of the Attorney General’s Real Estate Finance Bureau, and Executive Deputy Attorney for Economic Justice General Karla G. Sanchez.