The Real Deal New York

Owner of former Chelsea Highline Hotel sues HPD over tenant harassment solution

Landlord Gurdayal Kohly claims he's being punished for lessee's transgressions

April 26, 2016 02:30PM
By Rey Mashayekhi

565 West 23rd Street

565 West 23rd Street in West Chelsea

The property owner of the former Chelsea Highline Hotel is suing the city’s Department of Housing Preservation and Development, claiming he’s being punished by HPD for acts of tenant harassment that he “did not have knowledge of” at the single-room occupancy building.

Landlord Gurdayal Kohly of Nick & Duke LLC filed suit April 14 against HPD in U.S. District Court for the Southern District of New York, with the goal of preventing “the taking of up to 15,000 square feet of [Kohly’s] fee interest” in the four-story property at 565 West 23rd Street in Chelsea.

Kohly purchased the property and three adjacent lots in 1979, at which time it was under a 45-year triple net ground lease, according to the complaint. In 2007, the leasehold was assigned to MJG Holdings LLC – an entity led by gentlemen’s club proprietor Glen Bernardi, who wanted to turn the building’s ground floor into an “adult club,” according to an HPD complaint against Bernardi from 2009.

MJG’s involvement in the property resulted in “numerous acts of [tenant] harassment” against existing single-room occupancy dwellers at the 68-unit property, including “threats of physical harm, verbal abuse” and “forcing tenants to relocate,” according to HPD’s complaint against Bernardi. The agency eventually denied MJG’s application for a required Certificate of No Harassment at the building in 2009

While Kohly claims that “at no time” did he “have knowledge of, condone or commit the acts of tenant harassment,” he’s now being forced to pay for those acts by HPD – with 50 percent of the property “now subject to a permanent and uncompensated taking of the property” by the agency under city zoning regulations, according to his lawsuit.

Kohly stands to lose roughly 15,000 square feet of the Chelsea building “in perpetuity” at the hands of HPD, according to the complaint, despite “not [being] provided an opportunity to be heard or noticed as a party” during HPD’s investigation of the tenant harassment allegations.

The HPD’s “cure for harassment” at the property consists of a permanently affordable housing development built by Clinton Housing Development Company alongside developer Skybox/Chelsea LLC, which is led by investors John Leitersdorf and John Jacobsen and now controls the hotel’s ground lease. According to a permit application filed with the Department of Buildings earlier this month, the developers will build 19 new units spanning more than 15,000 square feet of residential space — in line with Kohly’s assertion that he stands to lose 15,000 square feet of the property due to HPD’s actions.

The landlord claims the city’s “taking” of the property is “unconstitutional,” per the lawsuit, citing “deprivation of property through a regulatory taking without just compensation” and “deprivation of property without due process,” under the U.S. and New York state constitutions.

Kohly also seeks a “preliminary and permanent injunction” against HPD’s measures on the property and claims the agency “violated its internal procedure by failing to provide notice … regarding the alleged acts of harassment and/or any hearing.”

The landlord is seeking damages exceeding $75,000, which will be determined at trial.

An attorney for Kohly declined to comment on the matter. Neither HPD nor the city’s Law Department would comment.

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