David Lichtenstein’s Lightstone Group has been hit with the latest in a series of lawsuits alleging illegal rent increases at buildings receiving the 421a tax break.
The case was brought by tenants at Gantry Park Landing, an apartment building at 2-14 50th Avenue in Long Island City, Crain’s reported.
They say Midtown-based Lightstone excluded concessions from the base rents it reported to the state, allowing for greater rent hikes down the road. Rents at 421a buildings can only be increased by the percentages set by the Rent Guidelines Board while getting the property tax break.
Like many developers, Lightstone offered concessions at Gantry Park to attract tenants after the pandemic hit, then raised them when the market bounced back. The question before the court is whether the increase should be based on the actual initial rent, including any free months, or based on the rent without applying concessions.
Courts have delivered verdicts for and against landlords on that issue, which might not be resolved until a case reaches the Court of Appeals.
Lightstone allegedly raised some rents by more than 30 percent, according to the lawsuit. The rent-board approved increase was 3.25 percent.
One tenant signed a lease in 2021 paying $2,750 per month rent, on average. However, Lightstone registered the rent as $3,525 per month, the amount before concessions, the suit charged.
When it came time to renew, the landlord raised the rent to $3,717 per month.
Lucas Ferrara, senior partner at Newman Ferrara, which has filed a series of similar suits, told Crain’s that the court needs to “send a clear message that these kinds of shenanigans will not be tolerated.” Ferrara and his colleague Roger Sachar are representing the five named tenants challenging Lightstone.
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Watchdog groups are monitoring the issue closely. Aaron Carter, executive director of Housing Rights Initiative, told Crain’s, “When landlords cheat on affordable housing tax benefits, they are screwing both taxpayers and tenants.”
But courts have sometimes ruled in landlords’ favor on the matter. In other cases, landlords have settled suits against them.
— Christina Previte