The Real Deal New York

Public enemy No. 1 for developers

Real estate lawyer Adam Leitman Bailey has gone up against some of the city's biggest builders and in the process emerged as one of the most controversial figures in the industry

June 01, 2010
By Candace Taylor


Adam Leitman Bailey
No one ever accused Adam Leitman Bailey of having low self-esteem. “I think we may be the best real estate law firm of our time,” he says on a recent Monday morning, in a corner office at 120 Broadway plastered with framed newspaper clippings about his eponymous firm. At a table across the room, a summer intern uses a pen to edit the last chapter of his book, “The Insider’s Guide to Buying a Home and Making Money in Real Estate,” which is currently being shopped to editors.

Forty-year-old Bailey is constantly in motion. “I have more energy than any human I’ve ever met,” he says, toggling between the three computer screens on his desk.

The phone rings.

In the rapid-fire staccato that developers all over the city have come to dread, Bailey tells a client: “I needed that engineer’s report yesterday… I think you’re going to lose your case now. Good luck with that.”

He hangs up. “Tough love,” he says. “We treat every case like the end of the world. Like if you lose, you’ll be put to death.”

Perhaps unsurprisingly, Bailey’s no-holds-barred approach has recently made him one of the most controversial figures in New York City real estate. Ten years ago, he was a landlord-tenant attorney working as a solo practitioner. But by the time the market crashed in September 2008, he’d built up a scrappy real estate firm well-positioned to handle the flood of panicked condo buyers looking to escape their pricey sales contracts.

“We saw this as a way to be like Robin Hood and do justice for these people who weren’t able to buy their apartments,” Bailey said.

Employing a blend of hard-nosed aggression and unbridled self-promotion, Bailey set about representing buyers at high-profile buildings like the Brompton on the Upper East Side and the Financial District’s 20 Pine, often creating a media spectacle in the process. Developers responded with loathing.

“For a while, he struck fear in the hearts of every developer when he became involved in a case,” said Stuart Saft, chair of Dewey & LeBoeuf’s global real estate department and a frequent adversary of Bailey’s.

He also became a contentious figure in the legal community because of his unconventional tactics, like courting journalists and organizing groups of residents to band together against developers, a practice viewed as unsavory if not unethical.

And he was among the first to seize on the little-known federal Interstate Land Sales Full Disclosure Act, or ILSA, to spring New York buyers from their contracts — a controversial stance in the legal community.

“He upset a lot of people with his theories about that,” said Saft, who represents a number of city developers. “I think people in the industry do feel ILSA is irrelevant. Developers in New York feel these are just lawyers being opportunistic, trying to find federal statutes that they can utilize to get people out of contracts.”

Bailey’s embrace of ILSA and other out-of-the-box methods has earned him a reputation as an “ambulance chaser” in some quarters. And for all his bluster, some question whether Bailey is as effective as he claims to be.

“People who paid him totally wasted their money,” said one 20 Pine resident — not a client of Bailey’s — who asked to remain anonymous. “He did nothing to change anything that was done to this building.”

But allies and critics alike agree that he’s an incredibly astute lawyer who will stop at nothing to defend his clients’ interests.

“Adam is a force of nature,” said Steven Rosefsky, the founder of real estate firm ACRE Properties and one of Bailey’s longtime clients.

A pit bull is born

“Adam is not like your typical lawyer,” said Brian Owens, the owner of Crave Ceviche in Turtle Bay. Bailey’s firm represented the restaurant after it was damaged by the deadly March 2008 crane collapse, helping it win a seven-figure settlement.

“He’s like a pit bull,” said Owens, who picked Bailey over seven or eight of the city’s top firms. “Most lawyers at the top of their game are older, more reserved, maybe not as flashy. Adam is in your face, loud.”

He means that as a compliment. “With the situation that I had, I needed it,” he said.

“He’s brilliant,” said Saft, who went up against him at Manhattan House. “Unfortunately that means he’s frequently a pain in the ass.”

Bailey said his all-consuming drive to succeed comes from growing up poor.

Born in Bayside, his first memory is the Queens courtroom where his parents’ divorce proceedings took place, he said.

“They made you go in and say who you wanted to live with,” said Bailey, who was five at the time.

His mother, a teacher, lost her job in the Ocean Hill-Brownsville school district (in a round of layoffs that led to the famous teachers’ strikes) and after the divorce moved her children to California in search of work.

“It took her two or three years to find a job,” recalled Bailey. In the meantime, the family struggled to make ends meet. “We were hungry,” he said. They hopped from apartment to apartment; another early memory was running away from a landlord who was trying to collect the rent.

“I didn’t go to kindergarten, we moved so many times,” he said.

When Bailey was 14, he returned to the East Coast with his mother and stepfather, settling in the middle-class enclave of New Milford, NJ. Money was still tight and Bailey had a rocky relationship with his stepfather, but he was a gifted student and discovered a talent for cross-country, making First Team All League his junior year.

But the summer after his junior year, he was riding in a friend’s car when they slammed into a wall, sending Bailey’s head through a window. He broke both arms and went into a coma, spending six weeks in the hospital. He also struggled with memory loss, and it was unclear if he’d return to his previous level of brain function, or be able to attend college. He eventually recovered and headed to Rutgers, then law school at Syracuse.

Soon after getting out of the hospital, Bailey started running again, and somehow managed to make First Team All League again his senior year. Today, his firm pays for a full year of college tuition for a New Milford High School graduate each year.

Bailey credits the experience with helping him develop his outsize self-confidence.

Despite graduating with honors from law school, his aggressive personality made it hard to find a job.

“I’m sure I don’t interview well,” said Bailey, who is well aware of his hyperactive demeanor. “I wouldn’t hire myself.”

At first, he got job offers only from personal injury firms, which he refused to consider, he said. Instead, he did odd jobs before landing a job at Manhattan firm Wincig & Wincig. He then moved to the landlord-tenant firm now known as Borah, Goldstein, Altschuler, Nahins and Goidel.

In January 2000, a landlord offered him free office space, so Bailey decided to hang his shingle.

Master self-promoter

Bailey freely admits that he’s “aggressive, overreaching and irrepressible.” He said he views himself as a legal “gladiator” and he’ll use any weapon at his disposal, including techniques that give other lawyers the heebie-jeebies.

In early 2008, he formed a non-profit organization called Save Harlem, solely to become the lead plaintiff in the lawsuit he was filing against a commercial landlord on 125th Street, Kimco Realty Corporation. Then he organized rallies and made sure politicians and reporters were there.

Bailey said he keeps most of his clients out of the headlines, admitting that some people refuse to work with him for fear of ending up in the newspaper. But he’s not afraid to use the media if need be.

“It’s a much cheaper and faster way of getting a resolution and getting the truth,” he said. “[People] do not want to come home and have their kids ask them, ‘Daddy, why are they calling you the devil in the newspaper?’”

Since his days in landlord-tenant court, Bailey has grown his firm into a transactional and litigation real estate practice with more than 20 attorneys — no small feat for a 40-year-old, said legal recruiter Michael Lord. He even hired, among others, his former boss, real estate appellate specialist Jeffrey Metz.

“He’s built his firm from essentially nothing,” Lord said. “It’s a very impressive feat. I’ve seen other firms add partners, but I haven’t seen it go from point A to point B quite like [Bailey's has], at least in the real estate field.”

It helps that he’s a talented self-promoter, as anyone who’s visited his office can tell you: The name “Adam Leitman Bailey” is emblazoned on navy blue coffee mugs, umbrellas, tote bags and water bottles, all handed out by the armload to anyone who sets foot in the door as well as mailed to press outlets (including The Real Deal).

Clients of the crash

After Lehman Brothers collapsed in the fall of 2008, Bailey said he was inundated with requests for representation from clients looking to get out of condo contracts.

Now located in plush offices in the same building as the attorney general, his firm was one of only a few that specialized in real estate litigation.

“Because he has this very specific fingernails-in the-dirt experience with landlord-tenant, he’s established a real niche,” Rosefsky said.

At one point, Bailey said, he was representing between 150 and 200 buyers at approximately 20 projects throughout the city, including the Brompton and Clement Clarke in Chelsea.

“Everyone who didn’t like the property they were buying was coming to us,” Bailey said.

The construction boom in the city had also generated tenant lawsuits at condo conversions like Manhattan House, where Bailey represented tenants unhappy with construction conditions. At troubled condo 20 Pine, around 50 residents hired Bailey when they said the developer hadn’t completed the building’s common areas.

He set about tackling the cases the way he always does — guns blazing. But now he was on a much larger stage, representing the buyers of multimillion-dollar condos and going after the biggest developers in the country. His headline-grabbing style drew the ire of developers, who felt he was trying to profit off their misfortune.

“He’s seen as an ambulance chaser,” said one industry source who asked to remain anonymous. “People should not be able to get out of their contracts for reasons that relate specifically to the market going down. I find it to be very unfair.”

It’s not just developers who question Bailey’s methods. Other attorneys have criticized him for using publicity as a way to generate business.

“My impression is that he’s more of a flamethrower,” said one attorney. “He’s smart enough to build groundswells, and then [use them to] sign up more clients.”

Bailey has also been criticized by other attorneys for encouraging groups of residents to join forces to negotiate with developers, often putting ads on tenants’ websites and StreetEasy forums.

These kinds of solicitations are an ethical “gray area,” attorneys said, since lawyers aren’t supposed to actively recruit clients. And encouraging clients to band together — as opposed to being asked to represent fully formed groups — is viewed as similarly ambiguous. On the one hand, it’s a way to save clients money, but there can be conflicts of interests for attorneys because some buyers may want to settle, while others want to push the case forward.

Still, Bailey is often effective at bringing developers to the negotiating table, said Saft.

“He will get brought into a project and the next thing you know, you’ll get a call from a reporter,” said Saft, who represented the sponsors of Manhattan House. “That’s been very effective in creating fear among developers and sponsors that it’s just going to be a land war. They have a lot of money tied up in these projects, and they don’t want to get involved in protracted litigation or adverse publicity.”

Saft said he respects Bailey’s straightforward style, which he said helps the parties get down to negotiations.

At Manhattan House, for example, Saft said, a “construction protocol” and compromises like rent abatements for tenants were agreed to quickly.

“We managed in a couple of weeks to unwind a lot of litigation between the sponsor and the tenants. We were able to pretty much work everything out,” he said.

Things don’t always go so smoothly. While Bailey claims that “90 percent plus” of his cases are wins, critics wonder how effective he really is.

“There are other [attorneys] who have been more successful in a quieter fashion,” said one lawyer who did closings at the Brompton.

At 20 Pine, developer Africa Israel, headed by Lev Leviev, put in an additional $21 million to complete renovations after Bailey started representing buyers there. But the company had already started the process when Bailey came on board, claimed one 20 Pine resident, who said Bailey’s presence aggravated tensions between residents and the developer.

“He was riling up everyone under false pretenses,” the resident said. “He took money from everyone when it wasn’t necessary.”

Many building residents were first-time homebuyers, and didn’t know the difference between the homeowners association, which Bailey helped create, and the condo board.

“He led you to believe that if anything was wrong in your apartment, and you didn’t hire him,” the building would not take care of repairs, the resident said. “They were scare tactics.”

When asked about 20 Pine, Bailey said his firm is at least partially responsible for the influx of capital into the building: “Up until the day I was hired, they didn’t have the money, the building was a mess, and construction wasn’t happening. What a coincidence; a month after I was hired, [the developer] was pouring in money.”

A particularly difficult fight was at the Brompton, which was developed by Stephen Ross’s Related Companies. Bailey was retained in the spring of 2009 by a group of around 20 buyers who wanted to get out of their contracts.

Patrizia Salvatore and her husband Steven were in that group. They had signed a contract to buy at the Brompton in 2007, but when it came time to close, Patrizia had lost her job and her husband’s income had diminished, putting the three-bedroom apartment out of reach.

“We really couldn’t afford to live there anymore,” she told The Real Deal. After meeting with other buyers in the building, she said, the group decided to retain Bailey to file ILSA suits.

Related fought back, saying the claims were baseless. A company spokesperson, Joanna Rose, declined to comment for this article, but told The Real Deal in 2009: “This lawsuit is simply another in his string of lawsuits, asserting the very same frivolous claims that have been asserted by Mr. Bailey before for other clients, all in an attempt to extract the price concessions that he has apparently promised his clients, which he has been unsuccessful at obtaining. We will not be a party to such actions.”

Rose also accused Bailey of exaggerating the size of the group. She said he had only 12 cases.

Salvatore explained that the group dwindled over time as buyers began to think that Related wasn’t going to budge, with some members borrowing money from family members to close. As the group got smaller, Salvatore said Bailey’s legal fees got larger, eventually costing the Salvatores $5,000 to $10,000 a month. After six months, “I couldn’t continue to pay the legal bills,” she said. “I felt like I was throwing good money after bad.” Ultimately, she and her husband walked away from their six-figure deposit. They’re now renting Downtown.

To his credit, Salvatore said, Bailey never promised he’d be able to get them discounts. “He always did tell us that Related was tough,” she said. “He said that from the beginning.”

Moreover, he did explain that ILSA was “something that has never been done before,” she said.

Related has said five members of Bailey’s group eventually closed, and four walked away. It’s unclear whether Bailey helped them secure discounts, though one attorney who’s handled closings in the building said there “absolutely” were.

Bailey said he has two ongoing ILSA cases at the Brompton, but he declined to comment on the cases that have already concluded because of confidentiality agreements.

The ILSA question

 

Enacted in 1968, ILSA was intended to prevent developers from scamming would-be purchasers by requiring land developers to register subdivisions of 100 or more lots with the U.S. Department of Housing and Urban Development and providing each purchaser with a disclosure document.

So far, the New York cases that have been decided have come down in favor of the developer.

In January, a judge ruled that Harlem’s Fifth on the Park was exempt from the law because it had sold only 90 apartments when it received a temporary certificate of occupancy from the city. Two months later, a judge ruled that One Hunters Point in Long Island City also was exempt.

Bailey’s two Brompton ILSA cases haven’t yet been tested. He said his cases are much stronger than those for Fifth on the Park and One Hunters Point, since the Brompton clearly has sold more than 100 units. And even those who dispute Bailey’s ILSA theories say his arguments are creative and well-crafted.

“Bailey comes out with really ingenious points,” Saft said. “I don’t necessarily agree with the positions he takes, but they are very original and very brilliant.”

Bailey said he worries about being typecast as a firm that only gets buyers out of their contracts. “We do hundreds of evictions a year, but those are never in the paper.”

But he refuses to apologize for his methods; public opinion, to him, is beside the point.

“My job is not to make peace with the world,” he said. “It’s to advocate for a client and make sure they win. … That’s why they keep coming back.”

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