UPDATED July 14, 2022, 4:25 p.m.: The property tax break known as 421a may have lapsed, but the legal battles it has long inspired will continue.
In the latest salvo, Lower East Side tenant Charles Abbate claims landlord L+M Development Partners “hoodwinked” both him and state housing authorities by imposing a rent increase far beyond the legal limit on his regulated apartment at 180 Broome Street.
The complaint, filed in state Supreme Court this week, alleges that after receiving tax benefits under 421a in exchange for subjecting a portion of the building to regulation, L+M reported to the state a higher rent for Abbate’s unit than what he was actually charged. L+M’s goal, Abbate claims, was to eventually hike rents on his and at least 30 other units in the building to market rates.
Abbate is being represented by the law firm Newman Ferrara, which is seeking class-action status. L+M initially declined to comment, but after this story’s publication, a spokesperson provided a statement describing the lawsuit as “completely without merit.”
“The absurd suggestion that we covertly attempted to skirt the law in order to increase an apartment’s rent is both baseless and particularly insulting given our longstanding commitment to providing high-quality affordable housing,” the spokesperson said. “Needless to say, we intend to vigorously contest this suit.”
The lawsuit alleges that Abbate leased the apartment last spring for a net effective rent of $2,767, factoring in a two-month concession. When asked to renew his lease at the end of June, his monthly rent jumped to $3,319, he claims, a hike of 22 percent — far beyond the 1.5 percent limit for regulated units, including those under 421a, during the same period.
“[L+M] takes millions of dollars in tax credits that ostensibly require it to follow the rent regulations, but then surreptitiously manipulated the initial registered [rent] so as to enable it to treat the unit as a market rate unit in the future,” the complaint reads.
The 421a tax abatement for new multifamily development lapsed in June, but properties still receiving the benefit remain subject to its rules.
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The 263-unit building where Abbate lives, dubbed the Artisan, is part of L+M’s Essex Crossing mixed-use complex near the corner of Delancey and Essex streets. Half of the development’s 1,079 units are classified as affordable for households earning between 40 and 165 percent of the area median income.
Rents reported by landlords to the state’s Division of Housing and Community Renewal are used as a basis for future rent increases, which are set annually by the city’s Rent Guidelines Board in a process that both tenants and landlords regard as broken.
Last year, the body approved rent increases of up to 1.5 percent for one-year leases on regulated units beginning on or after Oct. 15, 2021. The board most recently approved a 3.25 percent rent increase for one-year leases on regulated units, effective Oct. 1.
Newman Ferrara brought a similar complaint against billionaire landlord John Catsimatidis in 2020 over a rent concession given to tenants at a Prospect Heights building to compensate for construction noise. At issue was whether it’s legal to offer concessions on units in 421a buildings but not to report the price tenants actually paid when the concessions were factored in.
A lower court judge sided with Catsimatidis. Newman Ferrara appealed the decision but lost unanimously at the Appellate Division, ending the case.
This article was updated to include a statement from L+M Development Partners.