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DISSOLVING A BOGUS CO-OP

A.G. Schneiderman Announces Settlement That Returns Manhattan Apartment Building To Rent Stabilization, Provides Tenants With Homeownership Opportunities

Landlord Operated Market-Rate Rental Building Despite Official Status As Co-Op Will Return Rental Units To Rent Stabilization And Explore Homeownership

Case Marks First Time Attorney General’s Office Has Used Dissolution Power Against A Housing Cooperative To Protect Tenants

Schneiderman: We Will Continue To Vigorously Fight To Protect The Rights Of Tenants And Promote Homeownership

Attorney General Eric T. Schneiderman today announced the settlement of a dissolution action against a cooperative housing corporation, Ft. George Apt. Corp., and its shareholders, the affiliated entities Fort George Property, LLC, Fort George Realty, LLC, and NY Tryon Realty LLC. The settlement resolves allegations that Ft. George Apt. Corp. exploited the rent stabilization exemption available to housing cooperatives – an exemption that is meant to promote homeownership by protecting individual homeowners, not landlords. Under the settlement, all tenants residing in the building will be entitled to rent-stabilized leases at affordable rents. Additionally, the developer can either restate the existing cooperative plan to provide an exclusive opportunity for tenants to purchase their apartment at a 25% discount from market prices, with access to first time homebuyer counseling, down payment assistance, and access to conventional financing at competitive rates, or the developer may convert the building to a limited-equity housing cooperative into the future.

“Today’s settlement is yet another example of my office fighting to protect tenants being improperly deprived of affordable housing.” Attorney General Schneiderman said. “This settlement not only provides rent stabilization protections to the tenants in this building, but promotes homeownership. My office is not afraid to use all of the legal tools available to ensure that New York tenants and homeowners alike are protected.”

NYS Homes and Community Renewal Commissioner/CEO James S. Rubin said: "Governor Cuomo has fought to strengthen the legal rights of rent regulated tenants and is determined to see those rights enforced. When a cooperative seeks to operate a rental building that should be in fact rent regulated, he is in effect denying tenant’s their rights. As a result of this litigation, the apartments at 121-131 Ft George Avenue will now be registered with HCR's Office of Rent Administration, and the tenants will enjoy the protections the law provides. Any tenant who thinks that that they are being deprived of a rent regulated lease should call the Governor’s Tenant Protection Unit and Office of Rent Administration at 718-739-6400."

Marta Bido, a long-term tenant of 121 Fort George Avenue, said, “After many years of dealing in a legal limbo concerning rent rates for our apartments, the Attorney General’s actions bring much relief and peace of mind to all tenants of this building and to working families all across our city. It also assures us that the law protects everyone, not just the few.”

Manhattan Borough President Gale A. Brewer said, “I am thrilled at the results of Attorney General Schneiderman’s lawsuit against the bogus cooperative at 121-131 Ft. George Avenue. Real estate and housing are complicated, cutthroat, big-money business in New York. When our laws are misused to deprive tenants of their rights, and to improperly remove apartments from rent regulation, we need the determined and creative legal work of officials like Attorney General Schneiderman to set things right. I am pleased that my office was able to play a part in bringing about this wonderful result.”

The Martin Act regulates the conversion of rental buildings to cooperative status – providing protections for tenants while promoting homeownership. After the conversion, however, newly leased apartments in a cooperative are exempt from providing rent-stabilized apartments, in order to promote homeownership.

The building, at 121-131 Ft. George Avenue, is a 44- unit apartment building in Washington Heights. Prior to its conversion from a residential rental building to a housing cooperative in 1987, all tenants in the building enjoyed rent stabilization or rent control protections. Soon after the conversion, however, the original developer stopped selling shares to homebuyers, and instead reacquired all of the shares that had been sold and began renting out all of the apartments at market rate. In January 2014, all shares of the housing cooperative were sold to Fort George Property, LLC, Fort George Realty, LLC, and NY Tryon Realty LLC, who immediately attempted to raise rents substantially on expiring leases.

In January of 2015, the Attorney General filed legal papers seeking to dissolve the corporation after receiving complaints from long-time tenants who were facing massive rent hikes. The Attorney General sought a temporary restraining order barring Fort George Property, LLC, Fort George Realty, LLC, and NY Tryon Realty LLC from evicting tenants or bringing eviction proceedings against any tenant for failure to pay any rent increases. The papers alleged that the housing cooperative was subject to dissolution for acting contrary to its corporate purpose – to sell shares to apartments to use as residences. It was also alleged that the cooperative was exploiting an unintended exemption from rent stabilization by operating under the guise of a cooperative, yet acting as a for-profit rental building.

The settlement reached today will protect tenants by returning all apartments to rent stabilization while providing an avenue for homeownership opportunities into the future. All apartments will immediately be subject to rent stabilization protections and the developer can either amend the existing cooperative plan and offer a 25% discount to tenants or seek to convert the building to a limited-equity housing cooperative – two options that will make the dream of first-time home ownership a reality. Tenants will also be connected with mortgage assistance groups who specialize in working with low-income tenants and first time homebuyers.

This case marks the first time the first time the Attorney General’s office has used dissolution powers to stop the abuse of rent stabilization exemptions that are meant to promote homeownership in housing cooperatives. The agreement comes on the heels of several Attorney General initiatives aimed at enforcing New York’s tenant-protection laws. Further information on the Attorney General’s work in this area can be found here and here.

State Senator Adriano Espaillat, the ranking member of the Senate’s Housing Committee, said, “The exploitation of tenants is a growing epidemic with heartbreaking consequences. Families are being cheated out of their homes and, in many cases, are unable to find new housing in today’s sky high market. I am proud to call Attorney General Schneiderman a partner in the fight to protect tenants, and I commend his successful effort to return 42 units to rent stabilization.”

State Assemblyman Guillermo Linares said,“I am pleased to join Attorney General Schneiderman in announcing this important settlement. His efforts to restore and protect housing here in my district are much appreciated by the residents of 121 Fort George, and by the people of Northern Manhattan generally who increasingly face malicious attempts by select landlords to exact higher payments.”

New York City Councilman Ydanis Rodriguez said, “Landlords need to know that they are held accountable to unscrupulous actions. Today, Attorney General Eric Schneiderman made it clear that when you take advantage of tenants, you will be prosecuted to the fullest extent of the law. I applaud the Attorney Generals actions in making clear that we will root out bad actors that abuse rent-stabilization laws, like NY Tryon Realty LLC., and ensure that Northern Manhattan, which has the highest concentration of rent stabilized apartments in New York City, maintains it affordability.”

The Attorney General wishes to thank the New York State Division of Housing and Community Renewal for its cooperation and assistance in this matter. The Attorney General also thanks the Office of the Manhattan Bureau President Gale Brewer for its cooperation on this matter.

The case was handled by Assistant Attorney General Richard Shore , Bureau Chief Erica F. Buckley, both of the Real Estate Finance Bureau, and Executive Deputy Attorney General for Economic Justice Karla G. Sanchez. Deputy Director of Intergovernmental Affairs Lilliam Perez assisted in bringing the matter to the Attorney General’s office.

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