Lawsuit Seeks To Dissolve For-Profit Housing Cooperative And Return Resident Apartments To Rent Stabilization

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

Last week, Attorney General Eric T. Schneiderman filed a lawsuit in New York Supreme Court seeking judicial dissolution of a housing cooperative that is meant to promote homeownership, but is instead acting exclusively as a rental building, depriving tenants of the protections they would otherwise be entitled to under rent stabilization law. The suit was filed against Ft. George Apt. Corp. and its shareholders, affiliated entities Fort George Property, LLC, Fort George Realty, LLC, and NY Tryon Realty LLC, and claims that the housing cooperative is nothing more than a residential rental building hiding behind the corporate form of a cooperative. The Attorney General’s lawsuit seeks to prevent any further irreparable harm from taking place against the tenants living at the building.

“Housing cooperatives are meant to promote homeownership, not provide an end-around rent stabilization protections,” Attorney General Schneiderman said. “Considering the serious affordable housing emergency across New York City, my office is committed to preserving those critical protections for tenants. Being a cooperative is a privilege, not a right, and when a corporation exists solely to deprive its residents of their legal rights, we will act to end such egregious abuses.”

"Once again, Attorney General Schneiderman is standing up for tenants," said Manhattan Borough President Gale A. Brewer. "121-131 Ft. George Avenue in Washington Heights has exactly the kind of affordable apartments policymakers must try to preserve. I'm proud to have played a role in helping return this 44-unit building to rent-regulated status."

“Affordable housing in New York City is vanishing by the day, making the enforcement of rent stabilization and rent control laws ever more important to the survival of working and middle class New Yorkers,” said Senator Adriano Espaillat (D-Manhattan/Bronx). “I want to commend Attorney General Eric Schneiderman for diligently working on behalf of the tenant to expose those who try to circumvent the law with no regard for the families who suffer.”

New York City Councilmember Ydanis Rodriguez (District 10) said, "New York City is in a housing crisis. Too many middle and working class families in my community are being pushed out because they can no longer afford the ever increasing rent. I applaud the Attorney General for cracking down on these bad actors in our community and helping us increase affordable here in Northern Manhattan."

121-131 Ft. George Avenue is a 44-unit building in Washington Heights. Prior to its conversion from a rental building to a housing cooperative in 1987, all tenants in the building enjoyed rent stabilization or rent control protections. Soon after the conversion to a housing cooperative, however, the original developer stopped selling shares for homeownership, and instead reacquired all of the shares that had been sold, renting out all of the apartments at market rate. For over a decade the building has been operated exclusively as a rental building without a single tenant-shareholder in occupancy.

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 began seeking massive rent increases from the long-time tenants. The Attorney General’s investigation found that rents on expiring leases were raised by an average of 25% or more.

The Attorney General alleges that the housing cooperative is subject to dissolution for acting contrary to its corporate purpose – to sell shares to tenant-shareholders for homeownership – while operating against public policy by exploiting an unintended exemption from rent stabilization. Upon dissolution of the housing cooperative, the Attorney General is asking that the court restore the building to rent stabilization so that the tenants will be afforded the protections they deserve.

The alleged conduct by Fort George Property, LLC, Fort George Realty, LLC, and NY Tryon Realty LLC- the controlling shareholders of the housing cooperative - is particularly offensive to public policy as there is a serious public emergency in housing in the city of New York and rent stabilization plays a critical role in preserving affordable housing for low-income working poor and middle class residents in New York City. Under the law, a corporation that acts outside the scope of its governing documents is liable to be dissolved, particularly where the conduct violates public policy.

The Attorney General commenced this action today via an ex parte application for an order to show cause, which also includes a temporary restraining order barring the respondents from evicting tenants and bringing eviction proceedings for any tenant’s failure to pay an improperly-raised rent.

The Attorney General thanks the Office of the Manhattan Bureau President Gale Brewer and the New York State Division of Housing & Community Renewal for its cooperation on this matter.

The case is being handled by Assistant Attorney General Richard Shore, Deputy Chief Andrew H. Meier, Bureau Chief Erica F. Buckley, all of the Real Estate Finance Bureau, as well as Executive Deputy Attorney General for Economic Justice Karla G. Sanchez.