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ADAM AMERICA HIT WITH 421a CLASS-ACTION LAWSUIT

Landlord accused of overcharging more than 100 tenants.

On March 1, 2022, Newman Ferrara LLP filed a class-action lawsuit against a building that is part of the Adam America Real Estate portfolio alleging,among other things, that the owner had violated a city law by overcharging tenants; all while reaping the tax benefits afforded by a local program. The case was filed on behalf of tenants at 595 Baltic Street, a building located in Boerum Hill, Brooklyn.

According to the complaint, this particular owner failed to follow requirements of the city’s 421a program where, in exchange for substantial real-estate tax abatements, rent-stabilized leases were to be offered to their tenants and the rents "charged and paid" were to be registered with the Division of Housing and Community Renewal (DHCR). Instead, the owner “hoodwinked” tenants and state agencies by offering concessions—in the form of one or more rent-free months—but failed to properly account for such adjustments.

By way of example, the rent for apartment 4D at 595 Baltic Street was registered at $6,000. However, the landlord had offered the tenants concessions which lowered the rent to less than $4,000 a month, on average, in the first year. This kind of scheme was used to deprive the tenants of the protections of rent stabilization. “It’s essentially treating a rent-stabilized unit as a free-market unit,” said Roger Sachar, a Newman Ferrara partner and lead counsel for tenants, “all while raking in $1.5 million in tax benefits, over the last two years alone, that were supposed to be conditioned following the rent regulations.”

Adam America is far from the only landlord to engage in such misconduct. According to a tenant advocacy group known as Housing Rights Initiative (HRI), tenants in approximately 1,500 421a-buildings have likely been cheated. With the DHCR doing little to enforce compliance, landlords’ abuse of the tax abatement program has largely gone unchecked. In the off chance they do get caught, penalties are scant. A landlord found to have violated the rules need only repay the excess and reset the rent, noted Sachar. But the owners get to keep their tax benefits and don’t face criminal charges.

“These guys wanted to have their cake and eat it too,” said senior partner, Lucas A. Ferrara, who is also an adjunct professor at New York Law School, “but not on our watch.” HRI has reportedly uncovered a plethora of cases involving purported violations of the 421a mandates, and Newman Ferrara plans to hold such property owners accountable, added Ferrara.

If you (or someone you know) believe your landlord is overcharging rent and/or otherwise engaging in questionable practices, please reach out to one of our attorneys, by calling 212.619.5400.

SOURCE (MAY REQUIRE SUBSCRIPTION) - https://therealdeal.com/2022/02/28/housing-rights-launches-new-suit-at-421a-scheme/

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