State AG Puts Kibosh On Sneaky NYC Landlord Who Abused Unintended Exemption From Rent Limitations By 'Disguising' 44-Unit Building As A Co-Op, Yet Operating It As A For-Profit, Market-Rate Rental Building, Screwing Tenants Out Of Rent Protections

From the Office of the New York State Attorney General:

• Attorney General Eric T. Schneiderman [] 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.
  
  
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  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 [] 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. ...

For the entire news release, see 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).