Bronx landlords sue city for J-51 mess-up, seek $250M in damages

Two Bronx landlords claim the city’s failure to approve their applications for the J-51 tax exemption has resulted in millions of dollars in lost sales and financing.

Rent-stabilized landlords Finkelstein Timberger East Real Estate and the Morgan Group, through a few dozen shell companies, sued the City of New York late last month. They allege those delays “forced” Morgan Group to sell a dozen properties for a $10 million haircut and denied Finkelstein $6 million in loans that are now being withheld by lenders. 

The suit is Finkelstein Timberger’s second attempt in two years to compel the city to approve his applications. In 2022, the landlord claimed that the Department of Finance agreed to expedite approvals and then failed to.

The disputes date back to 2005.

According to the complaint, Finkelstein and Morgan had started renovations on close to three dozen multifamily buildings in the Bronx. They hoped to qualify for J-51, the city program which incentivizes landlords to upgrade buildings by extending a tax exemption on any increase in appraised value that the improvements cause.

The fixed-up properties include 1226 Sherman Avenue and  230 East 167th Street in Concourse, 104 West 190th Street in University Heights and 2300 Grand Concourse in Fordham.

The city’s Housing Authority approved their applications, the owners claim, but the city’s Department of Finance failed to okay the exemptions. As a result, their tax assessments were “excessive,” the suit reads.

Finkelstein and Morgan then asked for a review of their tax assessments, and in 2019, the finance department retroactively increased the assessed values of the owners’ buildings, taking into consideration the physical improvements. 

Still, the agency did not apply the earned exemptions. Instead, it charged the owners for years of back taxes, totaling $2.5 million.

In February 2022, Finkelstein sued the Department of Finance, claiming his lenders had demanded more money in escrow to cover the arrears and withheld about $6 million in loans that would only be released when the J-51 exemption took effect.

The parties settled: The city agreed to expedite Finkelstein’s dozen applications, but ultimately, it approved only five.

In the recent suit, Finkelstein and the Morgan Group now claim that their “false tax bills” also forced Morgan to offload nine properties at 14 percent below market value, according to a PincusCo analysis.

The landlords’ lenders have continued to withhold loans. On some buildings, lenders have siphoned all revenues to cover expenses, including property taxes, debt service and utilities.

If their applications aren’t approved, the owners claim they will be unable to generate enough income to keep their buildings. They are seeking $250 million in damages, in addition to the approvals of their J-51 applications.

The city’s Department of Finance did not respond to a request for comment.